As we start a new month, we have the same market drivers as August. Brexit and US-China trade wars will once again take centre stage. And we already had some fireworks with new, although expected, tariffs from the US, which came into effect on Sunday. 

In Hong Kong, it’s been reported that leader Carrie Lam will withdraw the extradition bill that originally sparked the mass protests. And back in my homeland, Boris Johnson saw a defector walk across the floor of the houses of parliament to join the Liberal Democrats, but also 21 of his senior colleagues voted against allowing a ‘no-deal’ Brexit, which saw their immediate expulsion from the Conservative party. 

As such, he no longer has a working majority, and called for a general election, prior to the looming Brexit date of Oct 31st. Chaos. 

GBPUSD dipped as low as 1.1960, although bounced to 1.2170 as the US day begins. 

Cryptocurrencies had a bright start to the week, with BTC rallying from $9,400 up to $10,780. Even ETH managed a boost from $164 to a high near $183. The catalyst for the euphoria appears to be the launch of a BTC ‘limited ETF’ by SolidX and VanEck that is not technically an ETF. The limited part is due to SEC rule 144A, that they can only offer securities to specialised institutions, not retail investors.

As the US day gets going, equity futures are higher largely due to the improvement in the HK situation, the DJ futures showing a gain of 200 points. 

EURUSD rallied from 1.0975 to 1.1020 on the back of stronger-than-expected European PMIs as well as a general short squeeze after weak US Manufacturing PMI. 

However, the original low for the year at 1.1027 remains intact. XAU has slipped back to $1,535 from an earlier high of $1,550. US trade data comes and goes with the trade balance narrowing to $54 bio, not quite as good as expected. 

However there is little effect on the markets. And what ensued was for the most part, a quiet day. EURUSD the aforementioned level at 1.1027 but only to 1.1038. 

Despite all the happenings in the UK, GBPUSD rallied to 1.2230, the thinking being that not allowing a ‘no-deal Brexit’ is a positive, regardless of the political fall out. 

Equities remained stable all day, the DJ closing +227 points. XAU had a strong rally from $1,535 to $1,558 as the US 10Y yield dropped back to 1.46%. Expect more of the same as Brexit and trade wars dominate. Hopefully for the people of HK, the situation has improved and will no longer be a concern for markets.

Looking to keep the crypto crowd happy today. Another look at BTC on a 2H chart. I’ve commented for the past 6 weeks about BTC’s resilience sub $10,000 and just when it looked like it was about to test support at $9,058, we suddenly head higher once more. 

Lot of theories as to the reason – I’ve highlighted what I believe to be the main driver at the beginning of the commentary. If this rally is to get legs, first we need to hurdle the $11,000 level and then somewhere around the $11,300 area, so to break that trend line from June’s high. 

My concern is that the pattern off that high looks similar to last year’s retreat from $20,000 i.e. a series of lower highs. Beyond there $12,310 is the next resistance. So plenty of work to do, but we’ve seen $1,500 in three days so you never know.

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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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