Good morning traders.
On Friday I wrote that it was all about whether Presidents Trump and Xi could find a way to kiss and make up. Well, it ´looks´ like they did.
While it might have been more of a peck on the cheek than a full blown smacker, a kiss is a kiss and there were plenty of smiles to go with it.
Sure, they´re still working through some issues but they are talking – or at least they´ve agreed to a further 90 days of counselling.
Joking aside, whether or not anything has really changed is entirely another matter.
A trade war truce is not a bad G20 outcome and probably better than many expected. However, all that matters to the markets is that trade tensions ´appear´ to have eased just as Powell appears to have backed off the rate pedal. As these 2 concerns combined are a big deal and as appearance is everything – my guess is that risk on will get a boost from it.
From a macro perspective what does this mean for eurusd.
In isolation if there is less of a need for dollar safe haven flows as all´s well in the equities world, this should be euro positive as the USD backs off. But Italy debt (which I´m just hearing might be coming to an amicable solution) and Brexit concerns remain so its not that simple.
We also have a heavy data calendar this week. Carney, Draghi and Powell plus a host of other Fed members are out on the wires this week and we have the Non Farm Payroll numbers on Friday.
However, my instinct is that the inverse head and shoulders now has a better chance of coming to fruition.
1.1450s – 60s will be a big test in my opinion. If we get a clean break up through this level and a daily close, 1.16s is on the cards. Failure at the level and we´re back lower to probably test 1.12.
But …. and you know what´s coming next, I´ll be agnostic at all times and trade what I see on the charts.
It´s always good to have a view as to what you expect to unfold but if things don´t pan out – be quick to reassess!
The Daily Chart
The levels remain the same as we´ve been watching for the past few weeks. 1.1450 is key to what happens.
The Hourly Chart
Today´s S & R levels are clear. Trade accordingly.
Tomorrow I´ll put together a piece on how I use the USDx (USD index) to help me frame my trades and pick out the ones that look most likely to succeed.
Have a good day, week and last month of the year.