Good morning traders.
Nothing much to say yesterday hence there was no morning briefing. As mentioned in the past while we remain ´stuck´in limbo I will post when I think there is something worth saying or when I can see any decent levels to trade.
While we are still tight ranging we had somewhat of a decent move late yesterday to dip under the 1.13 level. This gives us more to play with as we have broken out of the extremely restricted trading of the past 3 days.
On the macro front the big deal right now is whether the Fed will cut rates this year and if so by how much. President Trump continues to believe the Fed ” hasn’t got a clue” and makes his feelings well known via social media. We have seen in the past 6 months that some of this verbal onslaught has weighed on Chair Powell who has moderated his position substantially already from rate hikes to wait and see. Whether he will now go full circle and kick off a rate cut cycle is anyone’s guess but we will find out whats on his mind next week. The market prior to the US CPI´s out yesterday was forecasting by year end:
- 25 bps of cuts – 97.9%
- 50 bps of cuts – 83.1%
- 75 bps of cuts – 47.1%
Yesterday’s US CPIs came in generally softer than expected therefore adding to the bets of a more loosening bias from the Fed next week. This however didn’t stop the USdx strengthening. Something doesn’t seen quite right here. We could be simply positioning and stop running or the market may be wrong footed re rate cuts. We will have to wait till next week as I have said above.
Meanwhile on the euro monetary policy front while Draghi was taken as a bit on the hawkish side last week sources out at the weekend have weighed in by commenting that the ECB is equally ready to take easing action should conditions prove that’s what is required.
So we have both the Fed and the ECB in apparent dovish mode. Where this leaves the eurusd is one of the reasons we have poor trading opportunities as the pair struggles to find a footing and instead meanders in a very tight range with low volatility.
On the Brexit front trade concerns worsened slightly as Boris Johnson seems to be moving ahead in the Conservative leadership race and next PM role. He is thought more hawkish on Brexit than his rivals and more likely to embrace a no deal exit. On top of this the House of Commons yesterday lost a vote on whether the House could take charge of the Brexit issue and thereby block a no deal scenario. The proponents of this narrowly lost the vote which adds more tension to the October deadline.
We also had Tariff man Trump talking about now slapping tariffs on the Nord Stream 2 pipeline from Russia to Germany. It appears we cant get through a day without Trump mentioning (threatening ?) tariffs on someone or something.
Whether Trump and Xi will meet at the G20 at the end of the month is also causing concern as if they dont it pushes back further the hope of getting any sort of trade deal concluded.
None of this makes for a certain economic picture so risk is off – but not by much!
For today we have nothing much on the data slate and all eyes will be on US Retail sales tomorrow out at 14.30 CET.
The Daily Chart
The daily is still bounded at the top by the 200 DMA and is having difficulty breaking the 1.1350 level. We will probably have to wait until next weeks Fed meeting to find out whether it has legs or whether those legs are to be taken from under it :).
The Hour Chart
Levels as per.
S1 & R1 and pretty clear and are really the only ones I can give you that look attractive enough to set for model strategy purposes. However, my gut feel is that we will trade within the two barring any sudden headlines so I would be watching out for scalp opportunities (perhaps at the 1.1280 level) as the days structure forms to capture a few pips here and there.
Its where we are at at the moment. Conditions are far from ideal and whilst I suggest scalping I am not suggesting taking trades for the sake of it. Unless you are comfortable with mapping out the price action structure as it evolves and taking short term positions intraday, stay away. Remember if there is nothing to trade – dont trade. Staying in cash is a good trade in itself sometimes.
Ok thats all – have a good one and if there’s anything to add for tomorrow – I´ll be back with a morning briefing. If not have a great weekend :).