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Dollar Firm after Breaking Key Resistance Against Euro

Dollar stays firm in rather quiet pre-weekend trading today. EUR/USD’s break of 1.0926 support is a clear sign of greenback’s strength. Yet, we’d still prefer to seen more buying in other Dollar pairs to confirm. For the week, European majors are generally the weakest as led by Sterling. Dollar and commodity currencies are mixed.

Technically, as long as 1.0967 minor resistance holds, EUR/USD is extending medium term down trend to 1.0813 fibonacci level next. EUR/JPY is pressing 117.55 minor support. Break will confirm completion of rebound from 115.86 low and bring retest of this low. EUR/AUD is now eyeing 1.6128 minor support. Break will indicate completion of rebound from 1.5905 and bring retest of this support. GBP/JPY is also eyeing 132.17 minor support and break will bring retest of 126.54 low.

In Asia, Nikkei is down -1.24%. Hong Kong HSI is down -0.27%. China Shanghai SSE is up 0.05%. Singapore Strait Times is down -0.27%. Japan 10-year JGB yield is up 0.009 at -0.238. Overnight, DOW dropped -0.30%. S&P 500 dropped -0.24%. NASDAQ dropped -0.58%. 10-year yield dropped -0.047 to 1.685.

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US-China trade negotiation said to resume on Oct 10-11

It’s reported that US-China trade negotiations will resume on October 10-11 in Washington. Chinese Vice Premier Liu He will lead a delegation representing Beijing. US President Donald Trump had previously delayed a planned tariffs escalation, raising tariffs on USD 250B in Chinese imports to 30%, from October 1 to October 15. Whether such increase would be imposed would be the main reflection on the progress at the upcoming meeting.

Yesterday, Chinese Ministry of Commerce spokesman Gao Feng confirmed that China has resumed its purchase of US agricultural products. Also, tariffs on those orders will be exempted. He noted that both sides are maintaining “close communication”. And, “China’s stance has always been consistent and clear, hoping the US side will meet China half way.”

Fed Clarida: Inflation expectations reside in price stability range

Fed Vice Chair Richard Clarida said in a speech that price inflation appeared “less responsive to resource slack” in recent decades. A “flatter Phillips curve permits the Federal Reserve to support employment more aggressively during downturns”. But it also increases the cost of “reversing unwelcome increase in long-run inflation expectations.

He added that a “flatter Phillips curve makes it all the more important that inflation expectations remain anchored at levels consistent with our 2 percent inflation objective”. For now, based on the evidence reviewed, he judged that US inflation expectations “do reside in a range that I consider consistent with our price stability mandate”.

Fed Barkin particularly concerned with recent roller coaster

Richmond Fed President Thomas Barkin said in a speech that the economy is giving “conflicting signals. The strength of the labor market might be saying “hold” or even “raise rates”. But low inflation and the bond market might be saying “lower rates.” He also pointed out that there are risks on “both on both sides”. Additional easing could “overstimulate inflation, distort labor markets or fuel an asset price bubble.”. Not easing could undermine Fed’s credibility” and leave policymakers “behind the curve”.

Barkin also talked about several headwinds. There is a “great deal of uncertainty” around trade and politics, which matters for business confidence. He’s “particularly concerned” about the “roller coaster” recently. “Between Brexit, the ongoing negotiations with China, tensions in the Middle East and the political headlines—to name just a few—it’s been tough for businesses to feel like they’re on solid ground.”

EU Juncker: Doing everything possible to get a Brexit agreement

In an interview with German newspaper Augsburger Allgemeine, European Commission Jean-Claude Juncker said he and chief Brexit negotiator Michel Barnier are “doing everything possible to get an agreement” on Brexit. He warned that “if we don’t succeed in the end, the responsibility would lie exclusively on the British side.”

Juncker also said that disorderly Brexit could greatly complicate negotiations on future relationship. He said: “We will want to and need to seal a free trade agreement. But that won’t happen just like that, as some in Britain imagine. Some of the trade deals we sealed in my term of office took many years to reach.”

On the data front

UK Gfk consumer confidence improved to -12 in September, up from -14, beat expectation of -14. Japan Tokyo core CPI slowed to 0.5% yoy, down from 0.7% yoy and missed expectation of 0.6% yoy. That’s also the lowest level in 16 months.

Looking ahead, Eurozone confidence indicators will be the major focus in European session. Later in the day, US will release durable goods orders, personal income and spending, and U of Michigan consumer sentiment.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.0897; (P) 1.0932; (R1) 1.0955; More…

EUR/USD’s break of 1.0926 low suggests resumption of larger down trend from 1.2555. Intraday bias is now on the downside for 1.0813 fibonacci level next. On the upside, break of 1.0967 minor resistance will turn intraday bias neutral and bring consolidations. But recovery should be limited by 1.1109 resistance to bring fall resumption.

In the bigger picture, down trend from 1.2555 (2018 high) is in progress. Prior rejection of 55 week EMA also maintained bearishness. Further fall should be seen to 78.6% retracement of 1.0339 to 1.2555 at 1.0813. Decisive break there will target 1.0339 (2017 low). On the upside, break of 1.1412 resistance is needed to indicate medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

Economic Indicators Update

23:01GBPGfK Consumer Confidence Sep-12-14-14
23:30JPYTokyo Core CPI Y/Y Sep0.50%0.60%0.70%
6:45EURFrench Consumer Spending M/M Aug-0.10%0.40%
6:45EURFrench CPI M/M Aug P0.50%
9:00EURBusiness Climate Sep0.110.11
9:00EURConsumer Confidence Sep-7-6.5
9:00EURServices Sentiment Sep9.19.3
9:00EURIndustrial Sentiment Sep-5.9-5.9
12:30USDDurable Goods Orders M/M Aug-1.20%2.00%
12:30USDDurable Goods Orders Ex-Transport M/M Aug0.30%-0.40%
12:30USDPersonal Income M/M Aug0.40%0.10%
12:30USDPersonal Spending M/M Aug0.30%0.60%
12:30USDPCE price index M/M Aug0.20%
12:30USDPCE Price index Y/Y Aug1.4
12:30USDCore PCE Price Index M/M Aug0.20%0.20%
12:30USDCore PCE Price Index Y/Y Aug1.80%1.60%
14:00USDMichigan Consumer Sentiment Sep9292

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