Markets keeping an eye on The US, British and Japanese central bank meetings this week as well as the NFP report on Friday

The Dollar Index(USD/DXY) extended gains to 3 months highs boosted by better-than-expected third quarter GDP data. In Spain, Catalonia’s parliament voted in favor of independence which pushed the Euro to lows last seen in mid-July.

Markets keeping an eye on The US, British and Japanese central bank meetings this week as well as the NFP report on Friday

NFP report

The Dollar Index(USD/DXY) extended gains to 3 months highs boosted by better-than-expected third quarter GDP data. In Spain, Catalonia’s parliament voted in favor of independence which pushed the Euro to lows last seen in mid-July. The prospects of a dovish hike by the Bank of England at their policy meeting later this week pushed Sterling to fresh 3 week lows.
In the US, Real Q3 GDP (
annualised) rose to 3.0% against a median forecast rise of 2.6%.
US Advance Q3 GDP Price Index printed at 2.2% against market consensus 1.7%.
The revised University of Michigan Consumer Sentiment Index was 100.7 against a forecast 100.8.

Wall Street Stocks advanced with the S&P 500 up 0.63% to another record close.

Global treasury prices rose and yields dropped. The yield on the US Ten Year bond was lower by 5 basis points to 2.41%. Germany’s Ten Year Bund yield dropped 3 basis points to 0.38%. The Japanese Ten Year JGB yield was unchanged at 0.06%.

USD/DXY – closed up 0.17% to 94.808, 3 months highs.
EUR/USD – extended losses post a dovish ECB and strong US data to 1.1608 (1.1652 Friday)
GBP/USD – falls to 1.3130 from 1.3160 Friday.
USD/JPY – slips off highs to 113.70 (113.95 Friday)
AUD/USD – finishes with mild gains at 0.7677 (0.7662 Friday).

 

Outlook: The Dollar Index (USD/DXY) had its best weekly gain of 2017 buoyed by a strong third quarter GDP reading. However, Friday’s Dollar gains were not broad-based. The Euro and Sterling, which have a combined weight of 69.5% in the Dollar Index, pushed it higher. The Yen, Aussie, Kiwi and Canadian Dollar all closed higher against the Greenback. While US yields initially climbed after the release of the GDP data, they slipped at the close. Reports from Trump sources that the President favours Jerome Powell to lead the Fed pushed US bond yields lower. Powell is considered more dovish than hawkish, very much like Janet Yellen. The yield on the Ten Year US Bond pushed up to 2.48% from 2.46% post GDP, before falling to 2.41% at the close following the Powell news.

 

Events and economic data releases today:

Germany September Retail Sales (GMT 7 am, Oct 30/Local Time 6 pm, Oct 30): forecast for monthly retail sales: 0.5% from -0.2%; forecast for annualised retail sales: 3.5% from 3.0%
Spain Q3 GDP (GMT 8 am, Oct 30/Local Time 7 pm, Oct 30): forecast for quarterly Q3 GDP: 0.8% from 0.9%;
forecast for annualised Q3 GDP: 3.2% from 3.1%

UK Net Lending to Individuals: (GMT 9.30 am, Oct 30/Local Time 8.30 pm, Oct 30: forecast: GBP 5.5 billion from GBP 5.6 billion
Euro Zone Economic SentimentIndicator, Industrial Confidence
and Services Sentiment Index: (GMT 10 am, Oct 30/Local Time 9 pm, Oct 30): forecast for Economic Sentiment Indicator: 113.4 from 113.0; forecast for Industrial Confidence: 7.0 from 6.6; forecast for Services Sentiment Index: 15.0 from 15.3.
US Core PCE Price Index and Personal Spending (GMT 12.30 pm, Oct 30/Local Time 11.30 pm, Oct 30): forecast for Core PCE Price Index: 0.1% from 0.1%; forecast for Personal Spending: 0.8% from 0.1%.

 

Trading View: Further short term gains for the Dollar will be limited ahead of this week’s busy events and data calendar which culminates with US Payrolls on Friday. The Bank of Japan and FOMC policy meetings are on Tuesday and Wednesday. The Bank of England has it’s policy meeting on Thursday. Australian Retail Sales are due out on Friday. The Fed Chair nomination is a key event and political developments in the US, Europe and China will impact markets.

 

EUR/USD – slumped to fresh 3 month lows to 1.15744 before rallying to close at 1.1610. Immediate support for the Euro lies at 1.1575. The Euro has immediate resistance at 1.1650. Spain’s political problems remain an issue and will weigh on the Single Currency. And the speculative market is still long. Look to sell any rallies back to 1.1650 with today's like range 1.1580-1.1650.

EUR/USD

USD/JPY – struggled to maintain it’s gains and closed with mild losses to 113.70 from 113.95 Friday morning. The Dollar traded to an overnight high of 114.45 before slipping. USD/JPY closed just above the overnight low of 113.64. With the US Ten Year yield down 5 basis points, the Dollar will have difficulty regaining 114.00. USD/JPY has immediate support at 113.60 and then 113.40. Immediate resistance can be found at 114.00/10 and then 114.40. Likely range 113.50-114.00.

USD/JPY

AUD/USD – rallied to close up at 0.7677 from 0.7662 Friday. The Aussie initially fell to 0.76247 lows overnight following the release of US GDP data. AUD/USD then rallied at the close as US yields dropped on reports that Trump favours Jerome Powell as the new Fed chair. There could be political pressure on the Australian Dollar as a result of the citizenship crisis. AUD/USD has immediate resistance at 0.7680 and then at 0.7700. Immediate support can be found at 0.7620/25. Likely range today 0.7620-0.7680. Look to sell rallies.

AUD/USD

 

GBP/USD – fell to three week lows trading to 1.3070 overnight before bouncing to settle at 1.3128. Sterling will continue to be weighed on by Brexit negotiation worries plus expectations of a dovish BOE hike. The BOE is expected to lift interest rates for the first time in a decade at their meeting later on this week. Traders will scrutinise the MPC’s vote with anything other than a unanimous vote will indicate any further tightening unlikely. Immediate resistance for the Pound lies at 1.3150/60. GBP/USD has immediate support at 1.3100 and then 1.3070. Likely range today 1.3080-1.3150.

GBP/USD

 

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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.

 

HIGH RISK WARNING:

Trading Foreign Exchange (Forex) and Contracts for Differences (CFD’s) is highly speculative, carries a high level of risk and may not be suitable for all investors. You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin.

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