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Trump predicts ‘great deal’ with China on trade

Daily Currency Update

The United States Dollar Index is testing new highs at 96.91 not seen since mid-August. This price action follows US President Trump saying he expects a 'great deal' with China. The market is expected to be calmer today in comparison with yesterday’s trading session, where major equity markets had very high volatility following a Bloomberg story that Trump would announce tariffs on the remaining USD 257bn worth of Chinese imports.

In the economic calendar, the USD Consumer Confidence Index (OCT) is expected at 136 at 10:00 am later today. For the Greenback, the USD Change in Non-farm Payrolls (OCT) is expected at 193,000, and the USD Unemployment rate (Oct) is expected at 3.7% this Friday. Any significant difference with the actual numbers can imply higher volatility for the US dollar in its crosses.

The US index is expected to move close to the resistance of 96.98 seen in August and it is also expected to have a support of 96.60, depending on economic data.

Key Movers

Empty Canadian economic data and relative thin US economic data seems unlikely to provide any meaningful catalyst in the USD/CAD pair. Furthermore, bearish traders of the Loonie are unaffected with weakness in oil prices.

The market will be waiting for the Gross Domestic Product in Canada announcement expected at 2.4% tomorrow at 8:30 am ET. Also, this Friday, November 2, the CAD Unemployment Rate (OCT) is expected at 5.9% and the CAD Net Change in Employment (OCT) is expected at 12,500.

From a technical perspective, the USD/CAD pair is currently trading at 1.3119. We continue to expect support to hold on moves approaching 1.3115 while now any upward push will likely meet resistance around 1.3200.

EUR/USD continues trading with a bearish pressure in the Tuesday session. Currently, the pair is trading at 1.1372, but it was down 0.23% on the day. On the release front, the economy in the eurozone continues to worry policymakers. Economic performance has softened in the third quarter, as Preliminary Flash GDP dipped to 0.2%, down from a 0.4% gain in the second quarter. On an annualized basis, Q3 growth was 1.7%, down from 2.2% in the second quarter. The reason for this slowdown can be attributed to the crisis over the Italian budget, which was rejected by the European Commission since it breached EU regulations over debt limits.

Furthermore, the economic calendar showed more data for the eurozone: the EUR German Unemployment Change in October at -11,000 vs -12,000 reading, the EUR German Unemployment Claims Rate in October at 5.1% vs 5.1% reading, and the EUR Italian Gross Domestic Product (YoY) (3Q P) at 0.8% vs 1.0%.

From a technical perspective, the EUR/USD pair is expected to trade between 1.1300 and 1.1425 in the next hours.

Choppy stock markets are not helping the Pound which usually has benefitted from positive risk sentiment, however, the main problems are complicated Brexit politics, which aren’t getting any easier. Beyond Brexit, the monetary policy offers another headwind; bets on Bank of England tightening by the end of 2019 have decreased according to a Bloomberg article.

In the economic calendar, this Thursday will be very interesting for the Cable. The forecasts are as follows: GBP Bank of England Bank Rate (NOV 1) at 0.75% and GBP BOE Asset Purchase Target (NOV) at 435 billion. There will also be the GBP Bank of England Inflation Report and Carney will speak at the press conference in London.

From a technical perspective, the cable might move in a range of 1.2740 and 1.2800 in the next hours.

The Housing Industry Association New Home Sales showed an increase of 1.1% in September, a positive number after seeing a decline in the past two months. The release of Building Approvals were at 3.3% vs. 3.8% (MoM) and -14.1% vs. -9% (YoY) last night.

Tonight, the 3rd quarter of the AUD Consumer Prices Index will be released. Westpac remains of the view that Wednesday’s 3Q CPI print is unlikely to shift market expectations of RBA policy significantly. They expect both headline and core inflation to remain at or below the bottom of the target band. Also, a surprise to the downside for inflation, as it will have little bearing on market pricing, but an upside surprise will be potentially significant. Westpac sees RBA remaining on hold throughout the remainder of 2018, during 2019 and in 2020

From a technical perspective, the AUD/USD pair is currently trading at 0.7114. We continue to expect support to hold on and the pair to approach 0.7051, while any upward push will likely meet resistance at around 0.7160.

The New Zealand Dollar is stronger this morning when valued against the U.S. Dollar on the back of an ongoing China-US economic spat that is continuing to fester. The NZD/USD reached an overnight high of 0.6559.

On the data front this week in New Zealand, there is not much of note, with building permits (MoM), business confidence, and activity outlook statistics being released tonight, followed by consumer confidence statistics on Thursday.

From a technical perspective, the NZD/USD pair is currently trading at 0.6550. We continue to expect support to hold on and the pair to approach 0.6515, while any upward push will likely meet resistance at around 0.6569.

Expected Ranges

  • USD/CAD: 1.3115 - 1.3200 ▲
  • EUR/USD: 1.1300 - 1.1425 ▼
  • GBP/USD: 1.2740 - 1.2800 ▼
  • AUD/USD: 0.7051 - 0.7160 ▲
  • NZD/USD: 0.6515 - 0.6569 ▲