Catalonia Declares its independence and markets are preparing FOMC today
S&P futures are again modestly in the green as European shares hold steady ahead of a meeting of the Catalan regional parliament and a declaration of independence by Catalan leader Puigdemont, while Asian shares rise the second day. The dollar declined for the 3rd day, its losses accelerating across the board amid growing concerns that Trump’s tax reform is once again dead.
Asia stocks advanced as traders in Japan and South Korea returned from holidays, pushing the regional benchmark to a three-week high amid a broad weakness in the dollar. All eyes were on Europe however, and Spain in particular, where Catalan made a declaration of independence that risks an ironclad backlash from Madrid. The common currency gained for the third day. It is Spain’s biggest political crisis since an attempted military coup in 1981. Madrid’s IBEX stocks index dropped 0.5% early on and it is now down almost 9% since May, though a sharp rise in the euro has also taken a toll.
Despite the Spain jitters, the euro remained resilient, rising to a one-week high as data showed German exports had surged in August. Traders were also still upbeat on the currency after one of the European Central Bank’s German policymakers called for an end to its stimulus.
In commodities, Crude oil prices edged slightly higher, supported by OPEC comments signaling the possibility of continued action to restore market balance in the long-term. But gains were seen as limited as oil production platforms in the Gulf of Mexico started returning to service after the latest U.S. hurricane forced the shutdown of more than 90 percent of crude output in the area. Brent crude inched up 1 cent to $55.80 a barrel. U.S. crude added 2 cents to $49.60. Gold prices hit their highest in more than a week, though gains were capped as expectations of another U.S. interest rate hike this year limited appetite. Spot gold added 0.2% to $1,286.52 an ounce.
In currencies, the highlight data of the day came from the UK, as sterling was initially propped up by the higher than expected Manufacturing data. Cable tested 1.32 following the data, however, clearly running into offers around this key level. UK Manufacturing Output MM (Aug) 0.4% vs. Exp. 0.2% (Prev. 0.5%, Rev. 0.4%) Manufacturing Output YY (Aug) 2.8% vs. Exp. 1.9% (Prev. 1.9%, Rev. 2.7%) Goods Trade Balance GBP (Aug) 14.24B vs. Exp. -11.20B (Prev. -11.58B, Rev. -12.83B) Goods Trade Bal. Non-EU (Aug) -5.83B vs. Exp. -3.60B (Prev. -3.84B, Rev. -5.34B). The Norwegian Krone took a hit in early European trade, as the nation’s CPI report missed across the board, albeit marginally so. EUR/NOK broke out the week’s early range and spiked through Friday’s highs.
Looking at the day, the markets are waiting for the FOMC today, which will give a significant key to raising rate in December
The Dollar was weaker across the board, with the movement gaining traction after China set the yuan’s fixing stronger for the first time in seven days. Monday’s sell-off in Turkish assets seemed to have little follow-through with emerging-market currencies all trading higher and Treasuries steady. Spanish bonds and the euro’s overnight volatility showed little signs of stress ahead of a crucial meeting of the Catalan regional parliament.
GBPUSD – A strong bounce from the 40-Level on the RSI has given a respite for the currency pair as the histogram on the MACD is pointing towards a consolidation as it prints at the 0. Breaking above the 55-DMA, the pair is poised to test the 25-DMA at 1.3320
USDJPY – The RSI has been stuck at the 60-Level with the end very close at hand. The needle is starting to dip below the mentioned Level which points towards the pair losing the momentum of the time being.
EURUSD – The pair seems to be on the upside today as it tries to move back into the 1.1820-territory as it currently trades at the 1.1810s. The Resistance is found at 1.1840 which corresponds to the area between the 25- and 55-DMAs. MACD is showing a decelerating downward pressure as the bounce from the RSI indicates the same.
AUDUSD – The AUDUSD pair is looking at the 200-DMA at 0.7715 as RSI and MACD both point to the possibility of the pair reaching and breaking below that level. Gold has still a role to play in the pair as a rally could very much reverse the downward trend.
USDCAD – The upward momentum that the pair has been realizing for the past month or so, might be finally waning as the 60-RSI-Level has acted as a resistance and is trying to break below the 55-DMA at 1.2470.
Dow Jones – The index continues to move higher as the RSI shows it breaking above the 60-Level which might point to a break out very soon, which might send the index towards the 23000 breaking once again it’s all-time highs.
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