Wednesday began with a bout of USD strength although it’s hard to pinpoint why. Maybe the continued nervousness over a US / China trade deal has traders favouring the USD (except against JPY). EURUSD dips down to 1.1053, GBPUSD to 1.2888 and AUDUSD to 0.6800.

Meanwhile, USDCAD, which I alluded to in yesterday’s technical piece, breaks resistance at 1.3280 and spikes to 1.3315. The exception would be USDJPY which fell to 108.35 as JPY crosses were sold on the back of generally negative risk sentiment. Stocks in Asia all closed lower with the ASX 200 leading the way down 1.35%. Shares in Europe followed suit with the UK’s FTSE down 1% before the US open.

So what would the US day hold? Once again Trump impeachment proceedings remain top of most trader’s ‘to watch’ list although ultimately the effect on the market would be negligible. US equity futures had been under pressure but stabilised after better-than-expected results from both Target and Lowes.

Canadian CPI data posted very much as expected but was enough to have USDCAD heading back towards 1.3280. As equities opened, we get a rather sudden reversal of overnight moves. Equities themselves didn’t appear to be the catalyst as the DJ opened down 60 points so maybe a square up ahead of the FOMC minutes to be released later in the day.

EURUSD jumps back to 1.1080, GBPUSD to 1.2920 and USDJPY up to 108.73. All quiet up till the FOMC minutes? Well, it should have been, but CNBC announces a report that suggests no phase one trade deal this year.

DJ drops to -200 points, USDJPY down to 108.40, USDCAD up to 1.3327 and AUDUSD to 0.6792. Seems like ‘a report’ or ‘headline’ almost every day one way or another about this trade deal.

The market is chopping itself up reacting to each headline. The FOMC minutes come and go. Nothing we didn’t already know giving the overall impression that the recent rate cuts should be enough ‘to support the outlook of moderate growth’.

Equities have a bounce with the DJ now down 150 points. AUD, NZD and CAD all strengthen a little as USDJPY trades back above 108.60.

By the time the bell rings on Wall Street, the DJ is down ‘only’ 114 points and the FX markets have familiar levels about them EURUSD ends the day 1.1072, USDJPY 108.60 and GBPUSD 1.2920. XAU ends at $1,473.

Today, I thought I’d turn my attention back to EURUSD just to highlight how well it has been trading technically. Certainly not the most volatile of currency pairs over the past week or so, but it’s certainly respecting the levels highlighted on this 1-hour chart.

We know the strong support at 1.0990-1.1000 held well and then initial resistance at 1.1055 first capped and then broke to act as support. The next level of resistance at 1.1092 has only been tested once, so continue to trade in this higher range. Maybe Friday’s ECB meeting minutes will give us some fresh direction.

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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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