Mixed signals on the likely US-China Phase One trade deal kept the investors on the edge in the Asian session on Wednesday. The recent reports cited a threat to the Phase One trade agreement and therefore, the risk sentiment somewhat soured, with US Treasury yields back in the red. The Wall Street futures also witnessed caution trading, as the Asian equity markets pared early gains.
Meanwhile, the US dollar retreated from multi-day tops across its main competitors, tracking the pullback in the Treasury yields. The US yields rallied hard on Tuesday following a big beat on the US ISM Non-Manufacturing PMI release and trade optimism. Most majors attempted a recovery, as the USD bulls took a breather. However, the gains were limited by receding optimism on the US-China trade deal.
The USD/JPY pair flirted with the 109-handle following a drop from near 109.20 region despite weaker Japanese Services PMI data and dovish BOJ minutes. Meanwhile, the Aussie stuck to its range below 0.6900 levels while the Kiwi briefly dropped to 0.6365 lows after New Zealand’s Unemployment Rate ticked higher in Q3 and fanned Reserve Bank of New Zealand (RBNZ) rate cut hopes. Also, the commodity currency, USD/CAD traded better bid, as the Canadian dollar was hit by the renewed selling in oil prices. Both crude benchmarks turned lower amid a big build in the US API Crude Stocks and risk-aversion. Meanwhile, the gold bulls licked their wounds below 1490 levels after the steep decline seen a day before.
Ahead of the European, both the European currencies, the EUR/USD and Cable are trading almost unchanged on the day, with the Fiber hovering around 1.1075 region while the latter trades in the familiar range below the 1.29 handle, as markets await the key German Factory data and Brexit updates.
Main Topics in Asia
US-China trade updates
Beijing has doubled down on demands that may threaten trade agreement with the US – Nikkei
Phase One China trade deal to be "possibly" signed in Iowa – Fox News
Other key headlines
New Zealand Jobless Rate ticks higher to 4.2% in Q3
Fed’s Kaplan: Fed policy is currently where it needs to be
Fed’s Kashkari: US interest rates are now modestly accommodative
BOJ Minutes: Appropriate to persistently continue with easing
Japan’s services sector shrinks for first time since 2016
UK small manufacturers gloomiest since Brexit referendum - CBI
BI Survey: Indonesia's retail sales rise 0.7% y/y in September
Key Focus Ahead
The EUR macro calendar today is likely to be dominated by the Eurozone and German Services PMI readings that will drop in around 0900 GMT. Also, the ECB-speak and Eurozone Retail Sales will offer some trading incentives to the market, as all eyes remain focused on US-China trade-related developments and UK political drama heading into the December 12 general election. The UK docket remains data-empty after the release of the PMI report earlier this week.
In the NA session, the speeches by the US Federal Reserve (Fed) officials Evans and Williams will be closely eyed, in absence of relevant first-tier macro news from the US. The Canadian traders will watch out for the Ivey PMI and EIA weekly Crude Stocks data due for release at 1500 GMT and 1530 GMT respectively.
When are the German Factory Orders and how could they affect EUR/USD?
EUR/USD is already operating on slippery grounds, having charted a bearish reversal candlestick pattern over the last two days. A weaker-than-expected factory orders data will likely yield a convincing break below 1.1073, opening the doors for a deeper drop to 1.0966.
GBP/USD under pressure amid UK’s political plays, trade in focus
Despite increasing odds for the Tory leader to win the December month snap election, GBP/USD witnesses downside pressure as pessimism surrounding the US-China trade deal keeps the greenback strength intact.
DXY: U.S. dollar Index forms a potential inverted head and shoulder price pattern
The current data reveals a potential complete head and shoulder price pattern which could occur if the right shoulder is completed. This could drive the U.S. dollar down to around 97.55 before making its way back up to 97.90 and 98.40
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