Forex Signals US Session Brief, Sep 27 – Markets Try to Close the Week on A Positive Tone
Skerdian Meta • 4 min read
The risk sentiment has been turning on and off during the last few weeks. Yesterday, the sentiment improved after positive comments from the Chinese Foreign and Commerce Ministries and stock markets turned bullish. But, risk currencies such as commodity Dollars declined. Although, that was partly due to some USD strength we saw in the US session. That strength continued today as well during the Asian session and early European session.
The Euro made some new lows today, after some more soft economic figures from France and Germany this morning. GBP/USD made another bearish move this morning as well, which came after Bank of England member Sunders hinted about a rate cut coming up from the BOE soon. Saunders is usually a hawk, so his shift into a dove had a decent impact on the GBP. But the situation reversed as the European session progressed and the sentiment turned positive again. Now, all risk assets such as risk currencies and stock markets are climbing, while the safe havens are declining, so it seems like markets are set to close the week on a positive footing.
The European Session
- French Consumer Spending and Inflation – Consumer spending turned positive in France in July after posting a 0.1% decline in June. Spending was expected to post a 0.3% increase for August, but today’s report showed that it remained flat at 0.0% that month. CPI inflation alo turned positive in July after declining in June. But it was expected to come in negative today at -0.2%, while the actual number came at -0.3%.
- German Import Prices – Import prices turned negative in May and they have remained negative in the following months leading to July, as crude Oil slipped lower. Import prices were expected to remain negative again in August and show a 0.3% decline, but they fell further by 0.6%.
- BOE Saunders Turn Dovish – The BOE member Saunders who is a hawk, made some dovish comments today, sending the GBP lower. He said that rates could go either way after Brexit. Brexit uncertainties are a slow puncture for the UK economy. Deferring monetary policy changes until after Brexit could lead to inappropriate policy. BoE’s next move could ‘quite plausibly’ be a cut even if no-deal Brexit is avoided.
- Eurozone Consumer Confidence – Eurozone final consumer confidence for September remained negative, although it improved slightly to -6.5 against -6.8 expected. Economic confidence also declined to 101.7 points from 103 expected, business climate indicator moved to -0.22 points against -0.11 expected. Industrial confidence came at -8.8 points vs -6.0 expected, only services confidence increased to 9.5 points from 9.3 expected.
- UK PM Johnson Speaking – The British Prime Minister Boris Johnson commented earlier today, saying that he is not exploiting division in the UK. Too much abuse of lawmakers. Can use words like surrender to describe Brexit delay act. But he’s not daunted and is going to get a deal. Will obey the law when asked if looking for ways to get around Benn Act.
The US Session
- US Durable Goods Orders – Durable goods orders and personal spending will be released soon from the US. Headline durable goods orders are expected to decline by 0.1%. Durable goods orders posted a 0.2% increase for August, against a 1.1% decline expected. Core orders increased by 0.5% against 0.2% expected. Capital goods orders non-defense, excluding aircraft turned negative at -0.2% versus 0.0% expected. The last negative month was April. This is a reflection of business spending.
- US Personal Spending – Personal spending for August came at 0.1% against 0.3% expected. The previous month stood at 0.6% which was revised lower to 0.5%. Real personal spending increased by 0.1% against 0.2% expected. July was revised lower as well, from 0.4% to 0.3%. Personal income increased by 0.4% last month as expected.
- US PCE Price Index – Personal consumption expenditure PCE deflator remained flat at 0.0 % MoM against 0.1% expected. PCE deflator YoY also remained unchanged at 1.4% against 1.4% expected. Core PCE missed expectations, coming at 0.1% for August against 0.2% expected. Core PCE YoY wasn’t affected by the miss in August though, as it remained unchanged at 1.8% against 1.8% expected.
- ECBG’s Lane Speaking – ECB’s Lane said just a while ago that the recent decision to cut rates was not a dramatic policy move but a re-calibration. Important that bank respond to significant deviation of inflation from target. Labor market and consumption remain strong in Europe, but manufacturing in an ‘asymmetric’ slowdown. Current outlook for Europe is ‘intermediate’ with growth expected to continue but risks tilted to the downside. Tiering is to protect credit transmission, not bank earnings or any particular class of depositors.
Trades in Sight
- The trend is bearish
- The pullback higher is complete
- The 50 SMA provided resistance
- The previous candlestick points down
EUR/USD ended the pullback at the 20 SMA
A while ago we decided to go short on EUR/USD. This pair has been bearish for the last several weeks as the ECB turned dovish in the last meeting, cutting interest rates and re-introducing QE. Yesterday this pair broke below the support at 1.0920 which opens the door for further declines now. We saw a retrace higher during the European session, but the retrace ended at the 50 SMA (yellow) which provided decent resistance. The price formed an upside-down hammer candlestick which is a reversing signal and the reversal has already started now.
The sentiment has turned positive in financial markets again today. Risk currencies have been climbing in the last several hours, while safe havens such as Gold and the JPY have been declining, which means that this isn’t just some USD weakness. Stock markets are also on the climb.