October 10th has been on the radar for a while. The day the US and China sit down for formal talks on trade. But before the actual event, we had rumours of the Chinese willing to do a deal, followed by rumours of a lower level meeting breaking down and subsequent denial.

All of this was enough to see some rollercoaster moves in both equities and FX. Thursday started on a positive note following the moves higher in equities on Wednesday.

However, the rumour about talks breaking down saw equity futures dive with the DJ down 100 points and USDJPY drop from 107.45 to 107.04.

EURUSD which had spent much of yesterday grinding slowly higher, would break above 1.1000 and take out some stops above 1.1025.

Then the rumour was denied and back came equity futures and USDJPY rallies to 107.77. With the change in risk perception, we see AUD, NZD and CAD all strengthen. And all this before the official talks even began.

As the US day got going EUR sits at 1.1030, USDJPY at 107.45 and GBPUSD at 1.2235.

XAU is $1,510 and equity futures indicate a slightly lower open.

However the open sees a marginal rally and the USD adds some gains with USDJPY up to 107.70 and EUR and GBP both slipping lower.

XAU now makes new lows on the day down to $1,497. President Trump says he will meet the Chinese Vice Premier on Friday. Immediately the DJ jumps 160 points, and USDJPY prints at 107.85.

Next headline – Irish and British PMs say there is a possible pathway to a Brexit deal. GBP jumps from 1.2225 to 1.2295. USDCAD finally breaks 1.3300 and hits stops down to 1.3273.

Europe wraps up for the day and EURUSD slips back toward 1.1000 but GBPUSD makes new highs, now up to 1.2390! The DJ is now up 250 points. XAU touches $1,492.

All is well with the world! Or is it…? The DJ gives up half of its gains in short order, back to +120. GBP keeps going though, making a high of 1.2469.

As the day ends, the only comments on the trade negotiations are the one line from President Trump that talks are ‘going very well’.

The DJ ends higher by 150 points and USDJPY ends at 107.95. EURUSD is 1.1005 and GBP 1.2440. XAU closes at $1,494. All in all, a day of positivity, but as we all know, it’s the outcome that counts and much could still happen on both the Brexit and trade war front.

Today’s biggest mover in FX has been GBP. The joint statement from Ireland and the UK filled the markets with renewed optimism for a Brexit agreement and saw the Pound rally strongly.

As you can see from this hourly chart. Several recent lows a few points either side of 1.2200 have given us some short-term support and today we have blown through yesterday’s high of 1.2290 and last week’s high of 1.2413.

Next on the radar is the 1.2503 high from the end of September. After that, we have a double top at 1.2580 as major resistance. The direction will be determined by the next Brexit headline, but it’s good to take a look at the important levels when we experience moves like we did today.

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David Hannigan
Author

A graduate of the Cass Business School, Dave's career began with Credit Suisse as an Equity Options Trader on the London Stock Exchange, before moving into the world of FX with Chemical Bank and Citibank. 1994 saw him join National Australia Bank, first as a Senior Dealer, then Senior Vice President and Chief Dealer.

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