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Forex Signals US Session Brief, October 29 – Market Sentiment Improves As a Farewell to Angela Merkel

Today, the economic calendar is pretty light and the price action has been quite slow during the Asian session. During the European session, the markets started moving but the moves have been pretty small. One thing we can observe today is that the market sentiment has improved somewhat. Last week we saw two bearish gaps in the stock markets and stocks closed the week on a bearish foot. But today, we are seeing a bullish reversal in stocks, although it doesn’t mean that the decline in stocks is over yet.

GOLD is also down on the day, while USD/JPY has gained more than 50 pips. This tells us that the markets are feeling a little more confident today. The situation regarding Brexit, the Italian budget for next year, or any other matter is still the same. So, the only explanation is Merkel’s farewell. Her CDU Party and the coalition partner SPD have lost considerable support as the weekend elections in Hesse showed. This raises questions for next general elections in Germany. But, Merkel has anticipated a possible loss in those elections and she has decided not to re-run as the leader of the CDU Party.

That has improved the market sentiment a little in the European session since Merkel’s candidature in the next elections would probably be disastrous for the coalition and would leave Germany in a political mess. But now that Merkel is leaving, the coalition parties might pull another victory and keep the status quo, hence the improvement in the sentiment.

The European Session

Brexit Deal is Still the Most Likely Outcome for Moscovici – These were the comments from EU’s Foreign Affairs Commissioner Pierre Moscovici. But, the talks have been frozen in the last two weeks. Today, Theresa May will try to get the budget approved and then we will start hearing Brexit comments again.

Stocks Feel Better As S&P Keeps Italy Stable – Rating agency S&P decided to leave Italy’s ratings unchanged over the weekend but the outlook was revised to negative. The market seems a bit relieved because of that, similar to what we saw last week when Moody’s changed the negative rating for Italy to neutral. Stocks retraced higher but they resumed the downtrend again. Today stocks are climbing higher as well.

UK Net Lending to Individuals – Net lending to individuals rose by 4.7 billion pounds against 4.1 billion expected. Last month was also revised higher to 4.3 billion from 4.0 billion previously.

Angela Merkel Makes the Final Decision to Leave – Angela Merkel, who is in her fourth term as German Chancellor, has decided to step down as the leader of the CDU party after her party and the partner SPD took another hit on Hesse elections this week. The sentiment improved on these rumors and Merkel’s confirmation.

The US Session

US Core Price Index – The core price index grew by 0.2% last month, against 0.1% expected and up from 0.0% in the previous month. The yearly number remained unchanged at 2.0% though.

US Personal Spending – Personal spending increased by 0.4% as expected. Although, the previous month was revised higher to 0.5% from 0.3% previously.

US Personal Income – The growth in personal income was half of what was expected. It came at 0.2% against 0.4% expected, although the numbers from the previous month were revised higher here as well, from 0.3% to 0.4%.

Cryptocurrencies Make a Move at Last – Cryptocurrencies have finally made a move today. Bitcoin is 3% down while Litecoin is nearly 10% down. South Korea’s NXC Corporation has bought Bitstamp co-founder Nejc Kordic, but this should have been good news for cryptocurrencies.

Trades in Sight

Bearish EUR/CHF

  1. The trend turned bearish last week
  2. The retrace up is complete
  3. The 100 SMA is providing resistance
  4. The sentiment is turning negative again

The 100 SMA stopped the climb once again today

We sold EUR/CHF a while ago. The sentiment has been mildly positive today and EUR/CHF has moved up as safe haven currencies lost ground. But, the sentiment is turning negative again right now so we decided to go short on this pair. The 100 SMA provided resistance again today and stochastic indicator became overbought, which meant that the retrace higher was over. The candlestick below the 100 SMA formed an upside-down hammer which is a reversing signal and the 200 SMA (purple), so the picture look bearish now for EUR/CHF.

In Conclusion

The sentiment is turning negative again now, so we are keeping a close eye on the stock markets, trying to pick a trade in DAX or the S&P. By the way, the clock has moved back by one hour in Europe which means that the US session has already started, so let’s look for more trade opportunities.

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Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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