Dollar bulls feasted on reports, stating that US President Trump has met with notable inflation Hawk, Kevin Warsh, for the Fed Chair position. Previously, the candidate has expressed his criticisms of the Fed’s balance sheet, as well as declaring his views on increased focus on productivity. The greenback saw a bid as reports were digested with the DXY breaking back through 93.00, recovering losses on the day.

GBP/USD traded back below the highs printed on September 14, where markets saw a hawkish BoE rhetoric post decision. Offers come in the wake of source comments, on Wednesday from Brussels, stating that UK PM May ‘took dictation’ from the European Commission when she announced her intentions to pay a Brexit divorce bill, during her speech in Florence. Carney’s rhetoric in the 20th Anniversary of Independence from the BoE was largely rebuffed by markets, with a lack of monetary policy commentary. GBP continued to suffer on Friday however, as the UK GDP miss saw EUR/GBP lookback toward 0.8850 and GBP/USD testing Thursday’s lows.

Global elections dictated the start of the week, where EUR suffered following the weekend results despite Chancellor Merkel being set for a fourth term. Merkel’s CDU/CSU performed weaker than expected and has now undertaken coalition discussions.
Further weight was put on EUR as, EURUSD was heavily offered as markets were led by Trump’s Tax plans. USD strength has been the theme of the week, with some marginal position flattening toward the end of the week. Fed Chair Yellen did not fail to deliver on Wednesday, as much of the anticipation of further opening up December was evident.

NZD was also heavy following their election results, and in line with Germany, despite a victory for the National Party, a majority was also not secured. This places the next government at the hands of New Zealand First Party’s leader and effective ‘kingmaker’ Winston Peters, who is all too familiar with this obligation having supported both the National Party and main opposition Labour in past governments.

The Canadian data has struggled following the unexpected rate hike earlier this month, with comments on Wednesday spurring further Loonie unwinding, as BoC Governor Poloz stated that an appropriate path for rates is very difficult to know because of a number of unknowns around inflation outlook. Friday’s Canadian GDP fell to flat, completing a week of gains, where USD/CAD rose from 1.2330 to highs of 1.2490.

RISK ALERT!!! Voting underway in Catalonia amid violent scenes


Dollar Index Daily

Our analysis on the Dollar worked out perfectly. Double bottom at MS2 followed by a higher high (relative to the high of the double bottom) and price finding resistance at MM3 (which was last week's WR2). Now we know what we do with double bottoms - the good old hammock, 123 pattern as Wayne calls it. We expect price to come back down to the role reversal of the double bottom or find support between the 38.2% and 61.8% fib and then move higher. As you can see I have price coming down to the 50% fib and then moving up to the 138.2% fib extension. Therefore, technically speaking, I am expecting Dollar weakness initially and then Dollar strength as we head into October. I will use this information when analyzing Dollar pars and look to sell fundamentally weaker currencies against a fundamentally stronger Dollar. One caveat is that price did not break above resistance at last month's MM3 and so therefore I will manage my risk accordingly. Something else to be aware of is the drop we could see in EURUSD, EURCHF and EURJPY (in fact all Euro pairs) at market open due to what's happening in Spain at the moment.

US10Y Daily

What a beautiful drop for September as traders prepare for the Fed's balance sheet normalization coming up in October. We broke right through MS1 (target from MR1) and fell just shy of MS2. Price is definitely at support currently - which is also the bottom of the range. Bears are going to want to see a break out below last month's MS2 for bearishness to continue. Resistance eyed at the red zone highlighted at last month's MM1 where price dropped late Friday before markets closed. If we break that resistance then range strategy tells us price is headed back up to last month's MPP or MM3. We look to October pivot points for further analysis and keep an eye on price action for continued lower lows and lower highs. Despite yields moving higher Yen has failed to weaken - the NK225 was trading in a range all of last week. We keep our eye on Yen pairs for a break of the current ranges to the upside for confirmation of a continuation in the Q4 trade and until then wait patiently for the market to move inline with our fundamental bias based on seasonality.

S&P 500 Daily

How awesome is this chart - price came off MM2 at the start of September and reached MM4 on the last day of the month. Aren't pivot points awesome. Price has made a higher high, 21 is above the 55 - technically speaking, we expect bullishness to continue and risk on sentiment to remain. We could see markets in risk off at market open due to what's happening in Spain.

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