Zak Mir, technical analyst for ShareProphets.com, was joined by Alessio Rastani, independent market trader for LeadingTrader.com, on the Tip TV Finance Show on the 19th October to discuss an overview of forex, focusing on the EUR/USD, as well as China CPI and Fed rate hike bets.
EUR/USD: 10-yr bond yield spread back in focus ahead of ECB
Mir highlighted FX Street, who noted that US-German 10-yr yield spread currently at 148 basis points, with the rise in yield spread could cap gains in the EUR/USD. They continued that the ECB is widely expected to hint at a possible cut in deposit rate and/or increase in QE. The EUR/USD outlook is positive above 1.1330, meanwhile, a daily close below 1.1330 would be bearish despite the fact at 1.1250 there is rising trend line support. Mir added that with QE mark 2 hanging over Europe, keep an eye on the screens for a Draghi announcement. Rastani believed that the EURUSD is messy, whilst he expressed that over the long term he is bearish on the EUR, but for now sell the rallies. Mir noted the sentiment where AUD/USD and NZD/USD were the pairs to keep an eye on.
Rate hike in December?
Rastani believed that the Fed seem to make big decisions around December, and he outlined that there is a 60/70% probability that the Federal Reserve will raise rates towards Christmas. He concluded that you never know what to expect from the Fed.
China economy should be making markets more worried
Mir highlighted Elliott, who expressed that with economic growth planned to grow at about 7% per annum, Q3 GDP came in suspiciously close at 6.9%, up 1.8% quarter on quarter and the slowest pace since Q1 2009. She continued that President Xi arrives in London tonight and seriously big red carpets have been laid out to match the red flags. Rastani added that the whole China situation should worry markets more, with strong evidence that the Chinese economy is not doing as well as data suggests and limited evidence of a stronger stock market.
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