Trump-Xi meeting in the market’s focus

USD reigns supreme in the FX market

As expected in yesterday’s report, the USD continued to strengthen in the FX market yesterday. Fundamentally, the market’s hawkish expectations for the Fed to tighten its monetary policy continue to provide support for the USD, yet today we turn our attention towards the Trump-Xi meeting. Despite no major agreements expected to be announced, nevertheless a possible improvement of the US-Sino relationships could provide support for riskier assets such as the Aussie in the FX market.

US equities edge lower

US stock markets edged lower yesterday as uniformly Dow Jones, S&P 500 and Nasdaq ended their day in the reds. On a fundamental level the market expectations for the Fed to tighten its monetary policy turned equity investors more cautious thus weighing of US equity prices. Also rising US bond yields and oil prices yesterday tended to drive US equity prices lower. The market cautiousness may be maintained weighing on US equities, yet if the Trump-Xi meeting bears fruit, we may see the market’s mood turning more positive.

Oil prices correct higher

Oil prices were on the rise yesterday yet we consider it as a correction from last week’s losses. US oil inventories increased, yet the oil market’s focus remains on developments in the Middle East. It should be noted that Iran was reported to be open to diplomacy to resolve the conflict and further diplomatic progress could weigh on oil prices, while a possible disappointment from the diplomatic process could lift oil prices.

Gold’s price edges lower

Gold’s price edged lower as the USD gained in the FX market yesterday, practically enhancing the validity of the negative correlation of the two trading instruments. Also, a rise of US bond yields tended to weigh on gold’s price. Nevertheless, we highlight the resilience of the precious metal’s price given its relative stability in the current month, which was somewhat unexpected as fundamentals tend to weigh on gold’s price. 

Other highlights for today

Today we get Switzerland’s SNB, Sweden’s Riksbank and Norway’s Norgesbank interest rate decisions, while the Fed’s Williams, Barkin, Hammack and Paulson, BoE’s Dhingra and Breeden speak. We also get Germany’s Ifo indicators for September, UK’s CBI distributive trades for September, the US weekly initial jobless claims figure and new Home Sales for August, Canada’s Business barometer for September and retail sales for July.

Charts to keep an eye out

AUD/USD tumbled yesterday breaking the 0.7085 (R1) support line, now turned to resistance. We maintain a bearish outlook for the pair and intend to keep it as long as the downward trendline guiding it remains intact. The RSI indicator has dropped nearing the reading of 30, signalling an intensifying bearish market sentiment for AUD/USD. Should the bears remain in charge over the pair, we may see AUD/USD breaking the 0.6960 (S1) support line and start aiming for the 0.6830 (S2) support level. Should the bulls take over, we may see AUD/USD initially breaking the prementioned downward trendline and continue higher to break also the 0.7085 (R1) resistance level and start aiming for the 0.7280 (R2) resistance level.

WTI’s price edged higher yesterday just short before reaching the 87.55 (S1) support line. We view the upward movement as a correction higher on a technical level at the current stage and intend to maintain our bearish outlook for WTI’s price as long as the downward trendline guiding it remains unbroken. Should the bears maintain control over WTI’s direction, we may see it breaking the 87.55 (S1) support line and start aiming for the 82.00 (S2) support level. Should the bulls take over, we may see WTI’s price breaking the 94.30 (R1) resistance line clearly, opening the way for the 101.00 (R2) resistance level.

Calendar follows

AUD/USD daily chart

Support: 0.6960 (S1), 0.6830 (S2), 0.6665 (S3).

Resistance: 0.7085 (R1), 0.7280 (R2), 0.7455 (R3).

WTI daily chart 

• Support: 87.55 (S1), 82.00 (S2), 76.00 (S3).
• Resistance: 94.30 (R1), 101.00 (R2), 108.85 (R3).