Welcome to Friday’s analysis and the familiar themes of Brexit, trade negotiations and Trump impeachment enquiries. Late day news on Thursday that trade negotiations with China would restart on October 10th, set a positive tone for the last day of the week.

Equities in Europe all moved higher and USDJPY would rally from 107.70 to 108.18. USD showed early strength against both the EUR and GBP hitting 1.0905 and 1.2272 respectively.

But buying against the JPY would ultimately bring both back higher. The better risk sentiment also saw gains for AUD, NZD and CAD, while XAU would lose much of its lustre, sliding as low as $1,487 at one point. For crypto, it was another day of weakness with BTC slipping to $7,850 and ETH to $161.

But then the day turns. A report suggesting the White House is considering formally limiting investment in China hits the news wires and stocks immediately drop.

The DJ drops 140 points from +115 to -25 in a heartbeat. USDJPY falls from 108.15 to 107.85 and XAU bounces to $1,498. As with all these ‘reports’, the market stops to consider the likelihood of such an action just two weeks before restarting trade negotiations.

There is no official rebuttal of the story but USDJPY jumps back to 108.10 as the DJ rallies back to, +60. Then a new headline – White House deliberates block on all US investments in China.

Back down we go. To cut a long story short, the DJ ends -70 points and USDJPY holds around 107.90. EURUSD having taken out some short-term stops above 1.0950 settles back to 1.0940.

GBPUSD is unable to hold above 1.2300 as some negative headlines emerge about PM Boris Johnson’s relationship with an American businesswoman. Something for the gossip columns or a little more substance? We shall see but it was enough for GBPUSD to close around 1.2290.

Gold ended higher on the day at $1497.50 but even with the negative risk sentiment, couldn’t rally back over $1,500.

For crypto, the week finishes with enough of a rally to get BTC back over $8,000 and ETH to $169. One more day for this month to go and then it’s Q4!

EURUSD had a double bottom at 1.0927 which finally broke last week, trading down to 1.0905. However, we closed the week at 1.0940, which rather negated that break and has us scratching our heads from a technical perspective.

While EURUSD is still in a well-defined down channel, the failure to break further through the aforementioned double bottom at 1.0927 also thwarted any attempt to move through the bottom of the channel.

This daily chart refreshes our memory with some of the major levels in both directions. The next strong level of support comes in at 1.0840.

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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