Another relatively light economic calendar ahead, so we’ll focus on GBP/USD for today’s watchlist as today’s fresh momentum from Brexit developments and negative risk sentiment may have legs into the next session.
Intermarket Snapshot
| Equity Markets | Bond Yields | Commodities & Crypto |
| DAX: 12060.05 +0.39% FTSE: 7191.15 +0.50% S&P 500: 2943.58 -0.29% DJIA: 26488.90 -0.32% |
US 10-yr 1.543% +0.029 Bund 10-YR -0.578% +0.009 UK 10-YR: 0.458% +0.014 JPN 10-YR: -0.225% -0.023 |
Oil: 53.61 +1.51% Gold: 1506.70 -0.41% Bitcoin: 8142.75 +3.54% Etherium: 176.52 +3.79% |
Fresh Market Headlines & Economic Data:
- Johnson Tells Merkel Deal ‘Essentially Impossible’: Brexit Update
- U.S. Small business optimism declines but remains historically high
- US producer prices post the biggest decline in eight months in September
- Canadian housing starts was 223,507 units in September 2019, compared to 218,782 units in August 2019
- The value of building permits issued by Canadian municipalities rose 6.1% to $9.0B in Aug.
- China services sector growth falls to seven-month low: Caixin PMI
- Trump administration reportedly considering limits on pension investments in Chinese stocks
- Nations must unite to halt global economic slowdown, says new IMF head
- UK publishes update to no-deal Brexit plans, seeking to reassure businesses and voters
- German factories feed unexpected rise in industrial output
- French trade balance remained stable in August, following the deterioration in July
- In August 2019 the monthly growth rate of sales in Italy decreased by 0.6% in both value and volume.
- Australian Business confidence dips again: NAB
- Australian Job ads stabilise after Aug decline: ANZ
- New Zealand Government’s $7.5b surplus is the biggest since 2008 GFC
Upcoming Potential Catalysts on the Forex Calendar:
- Fed Evan’s speaks in Chicago at 6:35 pm GMT
- Fed’s Powell speaks at NABE conference at 6:50 pm GMT
- Australia Consumer sentiment at 12:30 am GMT (Oct. 9)
- Japan Machine tool orders at 7:00 am GMT (Oct. 9)
- U.S. Job openings at 3:00 pm GMT (Oct. 9)
What to Watch: GBP/USD
On the one hour chart of Cable, we can see a fresh breakdown of the rising lows pattern, sparked by a combination of negative Brexit comments from British PM Johnson to German Chancelor Merkel (Brexit deal is essentially impossible ever) and global risk off sentiment that could be bringing in some buyers into the Greenback during the morning London session.
Again, the economic calendar is looking pretty light, so the momentum may continue if geopolitical risks like the U.S.-China trade war and no-deal Brexit fears continue to push traders into risk aversion mode.
If you’re a bear on this pair with the current trend lower, then shorting at current levels up to the broken rising “lows” pattern makes sense, but with the stochastic indicating potentially oversold conditions short-term as the pair tests the recent swing low, waiting for a bounce higher is a prudent strategy after a strong move. Keep in mind the daily ATR is roughly 100 pips, so if there is a bounce, it’s likely sellers may start to dip their toes back in around 1.2250 up to the 1.2350 handle. If this area holds, this looks like a play that can turn into a longer-term position with high max profitability if the no-Brexit deal scenario continues to gain steam.
If you’re a bull on this pair, it’s definitely a hard argument to make for a long position, but if we get a positive catalyst in the Brexit story, the pound can easily swing higher. That’s an extremely low probability event at this point given the blame game the U.K. and EU is currently playing, but you never know when it comes to Brexit as catalysts have been popping up out of nowhere to move Sterling over the course of the year. And since a positive turn around in Brexit is the least expected outcome, the potential rally could be huge so you’ve always got to keep it in the back of your mind until we finally get to the end of the Brexit story.