Gold jumps to 1312 after North Korea declarations
The Euro extended its slump in the wake of Germany’s poor election result for the ruling conservative alliance. Markets spun into risk off mode after North Korea’s foreign minister described Donald Trump’s Twitter message as a “declaration of war”. Trump tweeted that North Korean Kim Jong Un won’t be around much longer if they acted on their threats. The Dollar slipped against the Yen and Swiss Franc but climbed against its other Rivals.
Global stocks dipped and Treasuries rose.
Germany’s IFO Business Climate Index fell to 115.2 against a forecast of 116.00 and previous 115.9
The US Dallas Fed Manufacturing Business Index rose to 21.3 against a forecast of 11.5.
New Zealand’ Trade Balance resulted in a larger deficit of -NZD 1235 million against a forecast of -NZD 825 million and a previous surplus of +NZD 98 million.
The US DOW fell 0.24% while the S&P 500 slipped 0.03%.
Global Treasuries rose, the yield on the US Ten Year note fell 3 basis points to 2.22%. Germany’s Ten Year Bund yield ended down 5 basis points to 0.40%.
Brent Crude Oil prices soared almost 4% to US$ 59.20 (US$ 56.80 yesterday). Turkey threatened to shut down all oil shipments from Kurdistan through its territory.
USD/DXY – closed up 0.35% to 92.644 (92.144 yesterday)
EUR-USD – extended slump, finishing at 1.1848 from 1.1948 yesterday.
USD/JPY – slipped to 111.70 at the close from 112.00 yesterday
GBP/USD – mild losses to 1.3470 (1.3485 yesterday)
AUD/USD – closed mildly lower to 0.7936 from 0.7963 yesterday.
Outlook: While the ongoing threats between North Korea and the US have pressured risk sentiment, the US Dollar is still bid. Apart from the Yen and Swiss Franc, the Dollar’s rise was pretty broad-based. The Euro’s fall accelerated. In his speech yesterday to the European Parliament’s Economic and Monetary Affairs Committee, Mario Draghi suggested he is in no hurry to remove monetary accommodation. In Fed speak yesterday, hawkish comments by New York President Bill Dudley was offset by dovish comments from Chicago’s President Charles Evans. Both FOMC members stayed true to their bents. Yellen, Kashkari, Brainard, and Mester will be speaking next.
Germany’s election result saw Angela Merkel losing around 10% of her support. In France, the Republican party kept it’s majority of seats which make it difficult for President Macron’s centrist party to push through reforms.
Events and economic data out today:
BOJ Monetary Policy Meeting Minutes (GMT 11.50 pm, Sept 25/Local Time 9.50 am, Sept 26)
New Zealand ANZ Business Confidence Index (GMT 12 am, Sept 26/Local Time 10 am, Sept 26): previous reading was 18.3
US CB Consumer Confidence Index and New Home Sales (GMT 2 pm, Sept 26/Local Time 12 am, Sept 27): forecast Consumer Confidence: 119.9 from 122.9
forecast New Home Sales: 585 million from 575 million
FOMC Member Loretta Mester speech (GMT 1.30 pm, Sept 26/Local Time 11.30 pm, Sept 27)
FOMC Member Lael Brainard speech (GMT 2.30 pm, Sept 26/Local Time 12.30 am, Sept 27)
Federal Reserve Chair Janet Yellen speech (GMT 4.45 pm, Sept 26/Local Time 2.45 am, Sept 27)
Trading View: Expect the Dollar to consolidate its gains within recently established ranges as markets await further political developments and central bank speak. The bias for the Dollar is higher. The Euro’s fall could accelerate further should the political landscape in Europe worsen. The Single Currency has risen almost 13% against the Dollar this year up until the weekend. EUR/USD is also almost 60% of the weight in the USD/DXY (Dollar Index).
USD/DXY – The chart below (courtesy of Investing.Com) shows that the USD/DXY is attempting to climb towards 94.00 if we can maintain current levels around 92.60, and above 92.00. Much would depend on where the Euro heads, which may well be further south.
EUR/USD – EUR/USD broke through the immediate support level of 1.1870 and traded to an overnight low 1.1832. Current resistance lies at that 1.1870/80 area. There is good support found at 1.1830. A breakthrough 1.1830 could see 1.1770/80, last traded in late August before the Euro broke up through that. Likely range today 1.1830-1.1880. Keep selling rallies.
USD/JPY – slipped to close down 0.20% to 111.70 from 112.00. Yesterday Japanese Prime Minister Abe announced a snap election which would most probably be held on October 22. Abe will dissolve Parliament on Thursday. Geopolitical fears are high once again following North Korea’s response to Donald Trump’s Tweet. The Dollar only managed a 20 pip drop. The Yen also gained at the expense of the Euro as EUR/JPY selling accelerated. Immediate resistance lies at 112.00 for USD/JPY. There is immediate support found at 111.50 (overnight low 111.47). The political uncertainty that Japan faces could weigh on the Yen which would keep its overall range pretty much intact. Likely range today 111.40-111.90.
AUD/USD – The Aussie has held well in spite of all the other action in the markets, trading in a relatively tight range of 0.7926-0.7974. The stronger US Dollar should eventually weigh on the Aussie and see it drift lower. The Greenback also rose against the Asian currencies. USD/CNH (offshore Dollar against Chinese Yuan) rose to close up at 6.6100 from 6.5800 yesterday. A weaker New Zealand Dollar should also pressurise the Aussie. Likely range today 0.7920/70. Sell rallies
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