EURUSD approaches key support at 1.0990 -1.1000 but holds for now.

Tuesday began with focus turning to events in Hong Kong as clashes between protesters and police escalate. Police have warned that the rule of law has been pushed to the ‘brink of total collapse’. Markets are unsure how to react with little affect on FX or equities – the Hang Seng actually closed 0.52% higher on the day. However the potential reaction from China and any subsequent international response is cause for concern. Something to watch over the coming days. For FX markets the start to Tuesday was highlighted by a general USD strengthening. EURUSD traded down to 1.1003 as a weak German ZEW Current Conditions reading weighed on the single currency. GBPUSD gave back some of yesterday’s gains, heading as low as 1.2816 at one point. Gains in both Asian and European equity markets were enough to take USDJPY up to 109.29.

The US day begins with equity futures pointing to a slightly higher open and indeed that’s exactly what we got. But for FX, other than GBPUSD having one push to 1.2850 it was a quiet US morning. All eyes and ears were set for President Trump’s speech at 12pm EST. Prior to Trump’s speech we get a YouGov poll from the UK suggesting that the Conservatives would get 42% of the vote at the General Election and Labour would get only 28% – a far wider margin than we have seen prior. GBPUSD jumps from 1.2845 to 1.2875. The President’s speech at the Economic Club of NY was fairly predicable. Plenty of self acclaim and some not so subtle digs at the Federal Reserve. His Fed bashing helps to weaken the USD a few spreads with USDJPY down to 108.95 and EURUSD briefly up to 1.1020. Equities turn negative and XAU jumps up to $1,460. If the market was hoping for fireworks and some affirmation of the progress in trade talks, they didn’t get them. In the end the DJ closes flat on the day as the S&P and Nasdaq both eek out minimal gains. EURUSD finishes at 1.1010, USDJPY at 108.95 and GBPUSD at 1.2850. XAU closes just off its highs at $1,458.50. Once again, not the most exciting of days. Maybe tomorrows testimony from Fed Chairman Powell will liven things up and there is US CPI data prior to that at 8.30am EST.

For today’s technical piece, everyone’s favourite  – EURUSD. We saw a slow and gradual drift lower for the single currency and although we failed to touch 1.1000, the bounce has been muted. As you can see from the hourly chart we have a band of support 1.0990-1.1000 made up of some previous highs and the most recent low. While the current direction is most certainly lower, the momentum is slow, so keep an eye on this band of support. A break lower might see an acceleration in the sell-off, but for now respect this level.

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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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