UK 30 Year Gilt yields fall to lowest since September 04. GBPUSD test 200EMA

Down on the day

  • Down around 2 bps on the day

UK 10-year gilt yields fall to lowest level since Sep 09 at 0.510%, down 2bps on the day. 

GBPUSD falling back down to test the 200EMA on the hourly chart as Brexit risk weighs on the GBP and no sign of a no-confidence vote from Corbyn. 

Down on the day



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AUDJPY buyers approach first target at 73.20

Risk on 

The news earlier was a positive boost for the AUDJPY which saw buyers immediately enter. The first target is 73.20 and price is currently at 73.04 after spiking up to 73.15 on UK Supreme Court Ruling.

Risk on 



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GBPUSD ahead of UK Supreme Court announcement at 09:30 GMT

200EMA in play 

200EMA in play 

Price is sat under the 200EMA and there is a key pivot point below at 1.2382. 

Brexit

The short expectation is this:

Boris loses: GBP rallies (up to 100EMA) as first target

Boris wins: GBP falls (down to 1.2382 pivot point) as first target

The difficulty with this is as a trade is that Brexit politics are, in the words of Winston Churchill which he made in a radio broadcast in October 1939:


  " a riddle, wrapped in a mystery, inside an enigma"

So, I cannot get a proper handle on what the moves are going to be here aside from the very first snap reaction . There may be a new sentiment that emerges from this, so we will watch and learn.

However, for now, it is the time of the Judges where, 'every man did as he saw fit'. I'm on the sidelines for this - how about you?



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EURUSD corrects after London session tumble

Tests the Friday low at the start of the NY session

The EURUSD tumbled lower after weaker than expected PMI data today. The fall took the price below trend line support and also below lows from last week (and a low from September 11 as wel at 1.0957, 1.09894 and 1.09846. The momentum low reached to 1.09656 before bottoming and corrrecting higher. 

Tests the Friday low at the start of the NY session

The price has rebounded after a second look at the day's lows stalled just ahead of the earlier low (see 5 minute chart below).

The correction higher has take the price to the 50% retracement of the move down today at 1.0995 and the 100 bar MA on the 5 minuted chart.  The rally has been able to keep under that lid so far. Stay below keeps the sellers in play and more in control. Move above, and the day's waters are more muddy.  PS. the swing low from last Friday.



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Will haven allure be enough to keep the franc attractive amid wealth tax?

The SNB tweaking its sight deposits rate threshold yesterday sees lenders start planning to charge wealthy clients for deposits

EUR/CHF D1 20-09

  • Credit Suisse will charge rich clients for Swiss franc deposits

It is being reported (⬆️) that Credit Suisse is looking to start charging for franc deposits after the SNB decision yesterday, following the footsteps of UBS who already said that it would introduce negative rates for clients holding more than 2 million francs in their accounts.

Essentially, the move is to try and mitigate the costs of deepening negative rates but at the same time it could hurt flows into the Swiss economy if big money funds aren't willing to pay the price for storing their money in the country.

The question that needs to be answered here is "are deeper negative rates going to push flows away from the franc?".

I reckon that is one markets need to balance out amid the global backdrop that is continuing to favour more defensive/safer assets. The franc is among one of those alongside the yen and gold to name a few of the obvious ones.

I reckon something between 0.1% to 0.4% would be a small price to pay if you look at the big picture and consider how global economic developments would be headed.

I mean it's not to say that there are many other attractive alternatives if you look across asset classes these days. Over ~$17 trillion worth of debt are negative yielding anyway.

The only fear is that the SNB may cut rates further and you'd be punished even more for keeping deposits in the country. But as mentioned, it could be a small price to pay in the long-run if you bank on the fact that the franc will appreciate amid haven demand.



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Dollar sluggish ahead of European markets open

The pound continues its good form after the breakout overnight

WCRS 20-09

Markets are steadily grinding towards the end of the week with the dollar holding slightly weaker against European currencies as well as the yen today.

EUR/USD trades within a 20 pips range still but is near the upper extreme ahead of European trading while the pound is continuing its run higher after cable broke above key resistance levels around the 1.2500 handle in overnight trading.

The yen is holding firmer amid weaker Treasury yields, with 10-year yields down by ~2 bps to 1.765% currently. Equities are looking more flat so overall risk sentiment remains more measured in my view.

Just be reminded that the yen and franc both gained yesterday after respective central banks left monetary policy unchanged so the "bend until it breaks" play is still part and parcel of what's weighing into sentiment currently.

Other major currencies aren't really doing much as they trade mixed against the dollar, which in itself is a bit sluggish ever since the FOMC meeting.

Markets are still in search for fresh direction and there's still no clear lead as to what that may be with equities erasing overnight gains on faltering trade optimism while the bonds stay fixated on the repo/funding issue - something I will post about in the next hour.



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Canada August ADP employment +49.3K vs +73.7K prior (revised to 30.2K)

August Canadian employment survey from ADP

ADP canada data

  • Prior was +73.7K (revised to +30.2K)

  • Trade/transport and utilities +17.9K

  • Education and healthcare +15.2K

  • Manufacturing +4.5K

  • Natural resources and mining -5.1K

There have been big revisions in the prior for the past two months, both downward after strong headlines. If you zoom out, the past two months have been solid but the year as a whole is just ok. 




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OECD sees global economy slipping towards weakest growth in a decade

OECD cuts forecasts to the global economy, warns of entrenched uncertainty

Global

  • 2019 global GDP growth at 2.9% (previously 3.2%)

  • 2020 global GDP growth at 3.0% (previously 3.4%)

  • 2019 US GDP growth at 2.4% (previously 2.8%)

  • 2020 US GDP growth at 2.0% (previously 2.3%)

  • 2019 China GDP growth at 6.1% (previously 6.2%)

  • 2020 China GDP growth at 5.7% (previously 6.0%)

  • 2019 Eurozone GDP growth at 1.1% (previously 1.2%)

  • 2020 Eurozone GDP growth at 1.0% (previously 1.4%)

  • 2019 Japan GDP growth at 1.0% (previously 0.7%)

  • 2020 Japan GDP growth at 0.6% (unchanged)

  • 2019 UK GDP growth at 1.0% (previously 1.2%)

  • 2020 UK GDP growth at 0.9% (previously 1.0%)

Those are quite the amount of downgrades relative to its May forecast.

OECD says that trade tensions are the main cause for a more fragile and uncertain outlook to the global economy. Noting that intensifying trade conflicts and governments not doing enough to prevent damage will hurt global growth momentum going into next year.

The 2.9% forecast for global growth this year is the weakest projection since the financial crisis, almost a decade ago.



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GBPUSD keeps above it's 100 hour MA, but below the 100 day MA too.

GBPUSD corrects lower after run above 100 day MA runs out of steam

The GBPUSD moved above its 100 day moving average yesterday for the 1st time since May 2019. That moving average currently comes in around the 1.2497 level. Today, the price moved below that moving average level early in the Asian session. It had one test but stayed below it as traders leaned with a bearish bias.

GBPUSD corrects lower after run above 100 day MA runs out of steam

The price action in the London session took the pair close to its 38.2% retracement of the last trend move higher from the low from last Thursday at the 1.2433 level (at 1.2433). The rising 100 hour moving average is also currently near that level (blue line in the chart above). 

Recall from yesterday's trading that the 100 hour moving average stalled the fall before turning around and rising sharply into the New York afternoon session (and above that 100 day moving average - see chart above)).  Staying above the 100 hour MA,  keeps the bulls more in control, while a break below should solicit stops and more selling pressure. The 200 hour moving average (green line in the chart above) would be the next target at 1.2382 area.  

We currently trade at 1.24696 and near New York session highs despite the better than expected housing data (12 year highs for both housing starts and building permits). The 1.2475 level was a swing high going back to Friday and would be the next minor target to the topside. The 100 day moving average is more important at 1.24972.

Although the buyers continue to hold a little more control off the hourly chart, the daily chart's 100 day moving average up at 1.24972 is also a key barometer going forward.  Staying below keeps the sellers more in control from that perspective.  

Traders have to respect each technical bias and trading so far today is doing just that. Look for the break and momentum either above the 100 day moving average or below the 100 hour moving average to tilt that traders respect in the direction of the break.



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Cable falls to session low amid softer inflation data, firmer dollar

GBP/USD touches a low of 1.2439 on the day

GBP/USD H1 18-09

Price is closing in on a test of the 100-hour MA (red line) once again, this time @ 1.2130. It's a bit of a tricky one for cable now as buyers still hold near-term control but the double-top just above 1.2500 presents a technical setup for potential shorts.

That said, all will hinge on the Fed decision later today.

For now, the softer UK inflation data earlier is triggering some downside in the pound and extended dollar strength on the session has helped to see the pair slip to a low of 1.2439.

That said, unless price starts breaking below key near-term levels in the form of the 100-hour MA @ 1.2130 and the 200-hour MA (blue line) @ 1.2380, then buyers are very much still "in the game" as we await the Fed.



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