Risk on in FX, But USD Selloff Limited

Boris Schlossberg BKTraders and Prop Traders Edge

Market Drivers December 3, 2018
Euro pops on double dose of good news
UK PMI beats
Nikkei 1.00% Dax 2.67%
Oil $53/bbl
Gold $1231/oz.
Bitcoin $4041

Europe and Asia:
GBP UK PMI 53.1 vs. 52.0

North America:
USD ISM Manufcaturing 10:00

FX Markets saw a pop in risk appetite at the start of week’s trade, but the rally in the majors faded by London morning dealing with both euro and cable well off the session highs, while Aussie and kiwi held on to most of their gains.

The gap opening was sparked by news that US and China reached a temporary truce in their trade war with both sides agreeing to halt any additional tariffs for the time being as they continue to negotiate. Still, after the initial euphoria sentiment settled down a bit as many analysts pointed out that both parties merely pushed the issue off on the calendar and remained far apart on substantive matters. The best that can be said about the G-20 summit was that it did not exacerbate the tensions further, but it remains to be seen if global trade will pick up at start of 2019.

In Europe, the EC and Italy appeared to be moving towards a more conciliatory position on the budget with some headlines suggesting that Italian would scale back their deficit plans closer to the 2% target allowed by EU. Yet nothing substantive has yet been announced so EURUSD gave back its early gains and traded back below the 1.1350 level by morning session.

In UK, the early buying also dissipated in cable with the pair dropping towards 1.2750 after trading as high as 1.2825. UK PMI Manufacturing was a bright spot coming in at 53.1 but traders ignored the news as Brexit woes continued to dog the pair on reports that as many as one-third of PM May’s party may vote against her deal on December 11.

In North America today the market will get a look at ISM Manufacturing data which could surprise to the upside given the beat in Chicago PMI on Friday, but the true focus will be on FedSpeak with a slew of members making remarks in a variety of venues. Most important of all will be Vice Chair Clarida who is scheduled to be interviewed by Bloomberg at 11:30 GMT. If he continues to suggest that Fed is close to the neutral rate then anti dollars could see another boost in demand as the day proceeds

Author

Boris Schlossberg

BKTraders and Prop Traders Edge

Boris Schlossberg was key speaker at the FXstreet.com International Traders Conferences 2010. Mr. Boris Schlossberg is a leading foreign exchange expert with more than 20 years of financial market experience.

EUR/USD holds firm above 1.1900 as US NFP looms

EUR/USD holds its upbeat momentum above 1.1900 in the European trading hours on Wednesday, helped by a broadly weaker US Dollar. Markets could turn cautious later in the day as the delayed US employment report for January will takes center stage.

GBP/USD remains above nine-day EMA near 1.3650

GBP/USD recovers its recent losses from the previous session, trading around 1.3680 during the European hours on Wednesday. The technical analysis of the daily chart indicates a sustained bullish bias, as the pair trades within an ascending channel pattern.

Gold sticks to gains near $5,050 as focus shifts to US NFP

Gold holds moderate gains near the $5,050 level in the European session on Wednesday, reversing a part of the previous day's modest losses amid dovish US Federal Reserve-inspired US Dollar weakness. This, in turn, is seen as a key factor acting as a tailwind for the non-yielding yellow metal ahead of the critical US NFP release.

US Nonfarm Payrolls expected to show modest job gains in January

The United States Bureau of Labor Statistics will release the delayed Nonfarm Payrolls data for January on Wednesday at 13:30 GMT. Investors expect NFP to rise by 70K following the 50K increase recorded in December.

S&P 500 at 7,000 is a valuation test, not a liquidity problem

The rebound from last week’s drawdown never quite shook the sense that it was being supported by borrowed conviction. The S&P 500 once again tested near the 7,000 level (6,986 as the high watermark) and failed, despite a macro backdrop that would normally be interpreted as supportive of risk.

Bitcoin price slips below $67,000 ahead of US Nonfarm Payrolls data

Bitcoin price extends losses, and trades below the lower consolidating boundary at $67,300 at the time of writing. A firm close below this level could trigger a deeper correction for BTC. Despite the weakness in price action, institutional demand shows signs of support, recording mild inflows in ETFs so far this week.