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By: Andria Pichidi
FX News Today
- Wall Street kicked off Q4 on bearish footing with the Dow dropping 1.2% to 26,570.
- The weaker than expected ISM manufacturing index to 47.8, a second straight month in contraction, rekindled recession worries.
- Yields are still above Monday’s close, after weak demand in yesterday’s auctions triggered a sharp rise in long yields.
- South Korean indices were hit by reports that North Korea fired what seemed a submarine based ballistic missile of its eastern coast, added to the negative risk backdrop after the S&P closed at a one months low.
- US futures are trying to move higher, GER30 and UK100 futures are in negative territory.
- Brexit: UK Prime Minister Johnson, admitted that customs checks would be the “reality” of Brexit, even though he dismissed an apparent leak of his government’s detailed plans for the post-Brexit Irish border — which involve customs checks on both sides of the border — as being inaccurate.
- Gilts outperformed and UK yields declined yesterday after hopes of a breakthrough on the Brexit front were crashed and political headlines will remain the main driver for UK markets
- The BoE lays the ground for a rate cut even without a no-deal Brexit scenario.
Charts of the day
- GBPUSD pulled back from earlier highs, as Bloomberg, cited a Buzzfeed tweet saying according to an EU Commission spokesman, the earlier report that the EU was considering a time-limited Irish backstop, was not true. Cable fell to 1.2260 from earlier highs near 1.2340.
- EURUSD bounced to 1.0908 highs into the N.Y. open. The Euro has printed 5-straight session of lower daily highs and lows, a bearish signal, and a failure to trade above Monday’s 1.0948 highs today will likely embolden EUR bears going forward. Fundamentally, the US economy remains head and shoulders above Europe’s, while a dovish ECB and interest rate differentials solidly in favor of the Dollar, we look for further EURUSD losses going forward.
Main Macro Events Today
- ADP Non-Farm Employment Change (USD, GMT 12:15) – The ADP is expected to report a 145k increase in private payrolls for September following the better than expected 195k increase in August. Risk is for a weaker headline print after the miss in the September ISM, that included a decline in the employment sub-component. Friday’s September nonfarm payroll report is now crucial for the markets’ expectations on the FOMC, as another 25 bp rate cut is again being priced in with greater than a 50-50 probability.
Support and Resistance levels
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