Euro down after the German election and reaches 1.1896
Election results in both Germany and New Zealand over the weekend saw both the Euro and Kiwi fall 0.4% in early trade. Angela Merkel won her fourth term in office but faces an uneasy task of forming the government with such partners as the far-right, anti-immigration AFD party. New Zealand’s National Party won the general election with 46.1% of the votes however this is not enough to form a government.
The Dollar closed mixed on Friday, with the USD/DXY (Dollar Index) little-changed.
Sterling slumped on Friday as Prime Minister’s Theresa May failed to give any concrete details on upcoming Brexit negotiations.
Economic data releases on Friday saw a slight improvement in French, German and Euro Zone Manufacturing and Services Flash PMI’s.
Canadian Core CPI slipped to 0.1% from a forecast 0.2% while Retail Sales rose to 0.4% from a previous 0.1%.
Global Stocks finished lower on Friday on North Korea worries.
USD/DXY – finished little-changed on Friday at 92.144 from 92.174.
EUR/USD – falls 0.4% to 1.1895 from Friday’s 1.1948 NY close, stabilising currently at 1.1924.
GBP/USD – closed lower at 1.3485 from 1.3582, settling at 1.3515 this morning
NZD/USD – dropped to a low of 0.7294 from Friday’s NY close of 0.7338. The Kiwi is currently trading at 0.7312.
AUD/USD – closed up in NY at 0.7965 from Friday opening of 0.7933, currently at 0.7955.
Outlook: The political atmosphere in Europe faces an uncertain period with the German election results. In Spain, the separatist movement is gaining support. Italy faces elections early next year while in France, current President Macron’s support is waning. Even in New Zealand, the make-up of a new government is unknown with the final result not likely to be announced until a few weeks. We have highlighted that the uncertain political environment in Europe and other parts of the world (like New Zealand) will favor the US Dollar. This should see the Greenback rally further and correct it’s 9% fall so far this year.
The week ahead sees Federal Reserve heads speaking with Dudley and Evans later on. Mario Draghi is due to speak later on in Brussels. Fed Chair Janet Yellen speaks on Wednesday.
Events and Economic data releases for today:
Japan Flash Manufacturing PMI: (GMT 12.30 am, Sept 25/Local Time 10.30 am, Sept 25) forecast: 53.54 from 54.2
Japan Leading Economic Indicator: (GMT 5 am, Sept 25/Local Time 2 pm, Sept 25) previous LEI reading was 105
Bank Of Japan Governor Haruhiko Kuroda is due to speak in a meeting with business leaders in Osaka: (GMT 6.35 am, Sept 25/Local Time 3.35 pm, Sept 25)
Germany IFO Business Climate: (GMT 8 am, Sept 25/Local Time 6 pm, Sept 25) forecast: 116 from 115.9
FOMC Member William Dudley is due to speak at a Community College in Syracuse, NY: (GMT 1.30 pm, Sept 25/Local Time 10.30 pm, Sept 25)
US Dallas Fed Manufacturing Business Index: (GMT 2 pm, Sept 25/Local Time 11 pm, Sept 25): previous reading was 17
ECB President Mario Draghi speech to European Parliament Economic and Monetary Affairs Committee in Brussels (GMT 2 pm, Sept 25/Local time 11 pm, Sept 25)
FOMC Member Charles Evans speaks to Economics Club of Grand Rapids, Michigan: (GMT 5.40 pm, Sept 25/Local Time 2.40 am, Sept 26)
Trading View: Political events, Fed and other central bank speak will direct the markets this week with economic data pretty light. Meantime the speculative market positioning saw Euro longs and Sterling shorts pared. It’s no surprise given the fall in EUR/GBP. Speculators added to their Australian Dollar longs while paring them in the New Zealand Dollar.
EUR/USD – expect the Euro to test the 1.1860/70 lows seen last week. This morning EUR/USD bounced off 1.1890 before settling at 1.1925. Immediate resistance can now be found at 1.1930/40. Further resistance lies at 1.1960. There is short term support at 1.1895. Immediate support can be found 1.1880 with strong support at 1.1860.
Euro correction down to 1.1780. Sell rallies.
GBP/USD – slumped on Friday back to 1.3485 from 1.3585 Friday morning. Markets were unimpressed with Theresa May’s closely watched speech in Italy. May was unable to provide details on how the UK would secure proper access to the European Union’s lucrative single market. Prefer to sell rallies.
NZD/USD – The Kiwi dropped in early trade after the New Zealand general election saw neither of the two ruling parties generating enough seats to gain a majority in parliament. This forces a round of coalition building that could last until at least Oct 7. This uncertainty could affect the NZ economy and weigh on the Kiwi looking ahead. NZD/USD has immediate resistance at 0.7340. There is immediate support found at 0.7280 which was Friday’s lows. Likely range 0.7250-0.7320. Sell rallies.
AUD/USD – The Aussie Dollar closed slightly higher in featureless trading on Friday. The drop in the Euro and Kiwi had little impact on the Aussie… so far. AUD/USD should drift lower with immediate resistance found at 0.7980 (overnight high was 0.7986). Immediate support lies at 0.7920/30. likely range 0.7910/70.
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***Information contained in this newsletter are gathered from third parties and should not be regarded in any way as trade advice or recommendations by CM Trading. CM Trading does not recommend or advise traders or investors in their decision making, but merely provides information from the market for its clients as additional information is made available as per the events occurring in the financial markets.
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