A new week with old themes very much at the forefront. A quiet Asian session would turn livelier during European hours courtesy of GBPUSD. First up, a test of the downside as political deadlock continues on the Brexit front.

GBPUSD falls as low as 1.2235 before better-than-expected Manufacturing and GDP data sees a sharp squeeze up to 1.2385 before settling around 1.2360 ahead of the US open.

GBP aside, other currencies were content to drift in tight ranges although AUD, NZD, and CAD would be at their highs as the North American day got underway. AUD sat at 0.6870, NZD at 0.6443 and CAD at 1.3155. US equity futures pointed to a mildly positive open.

The US session sees stocks open marginally higher and the continuation of the ‘risk-on’ theme. EURUSD jumps to 1.1060 driven by EURJPY buying while USDJPY moves to 107.05.

GBP has a brief move down to 1.2320 on news that the speaker of the House of Commons will either step down at the next general election or on October 31st, whichever comes first. However the dip is short-lived, and we are back to 1.2350.

The remainder of the day is a muted affair which can be best described as a slow grind higher for the USD as EUR, GBP AUD and CAD all slip from their best levels. USDJPY moves to the day’s highs around 107.25.

The move higher in the US 10Y yield to 1.65% explains the USD strength during the afternoon. XAU suffers as a result dipping briefly below $1,500. Equities have a quiet day by recent standards and much like Friday, the DJ closes marginally higher with the Nasdaq and S&P both fractionally lower.

Even crypto failed to excite with BTC spending the day around $10,300, although ETH did have one unexplained pop to $188 before settling back to $181.

GBP aside, not the most exciting start to the week. Although with the general ‘risk-on’ mood in the FX markets we have seen some JPY crosses edge higher. One to keep an eye on is AUDJPY.

We are approaching almost 400 points off our recent lower on Aug.26 of 69.98, but have a strong resistance line at 73.93 to get through for this trend to continue. Break above there and we could see an attempt at resistance caused by multiple highs above 76.00.

Bit of a big-picture view, but given how AUD is affected by all things China, worth keeping an eye on.

David Hannigan

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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