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Forex Signals US Session Brief, Nov 26 – The Sentiment Remains Mildly Positive on Trade Deal Hopes

The sentiment improved in financial markets yesterday. In fact, the sign of that we saw last week after Donald Trump’s comments that the Phase One deal is very close. It wasn’t a big surprise, but considering the elevated tensions regarding Hong Kong, and the passing of the human rights bill in the US Senate, which China doesn’t like and which increased fears that the deal might be postponed, it had some positive impact in financial markets. Today, we heard such comments again, which are keeping risk assets up.

Stock markets and commodity Dollars are slowly crawling higher, while safe havens are crashing lower, especially GOLD . The GBP also retreated lower today, because of the Kantar poll, which showed a narrowing lead for Conservative, although they still keep a comfortable lead. RBA’s Lowe delivered a speech early this morning,  offering some contradictory signals. He said that the lower bound for interest rates is at 0.25%, which might be a sign that they will continue with rate cuts, but he also added that there’s no chance for a QE programme. So, the sentiment remains positive now, despite China top diplomat says strongly condemns US bill on HK human rights.

The European Session

  • No QE From RBA’s Lowe – RBA governor, Philip Lowe was speaking in Sydney this morning, saying that Australia unlikely to get to the point where it needs QE. QE would only be considered should cash rate reach 0.25%. QE is “not on our agenda” at this point. There may come a point when QE would help but I “don’t expect us to get there”. Still expects economy to move in the right direction, albeit gradually. Need evidence that economy is moving away from employment, inflation goals. Then only RBA would consider buying bonds as QE measure.
  • Comments on Oil From IEA Chief – The IEA chief, Fatih Birol said today that US shale production growth to slow down this year and next, mainly due to financial difficulties. But there will still be “lots of oil in the market”. It is up to OPEC countries to decide next week, but pressure is strong from non-OPEC countries. He hopes OPEC will make the right decision for themselves and the global economy, which is still very fragile.
  • China’s PM Feels Pessimistic on the Economy – Chinese premier, Li Keqiang, was commenting this morning via state media. External uncertainties and challenges are to rise according to him. China’s economy is facing greater uncertainties. China is to face more challenges in 2021-2025, but will try to keep economy operating within a reasonable range.
  • No More rate Cuts for FED’s Kaplan – The FED has cut interest rates three times in the last three meetings as the global and the US economy softened considerably in the last several months. Markets are not expecting any more cuts right now, but if the economic weakness continues, then we can’t rule out another cut. Dallas FED president Robert Kaplan confirmed this jut a while ago. Here are some of his comments:
    • Monetary policy is in the right place right now
    • We now have a more normally shaped yield curve
    • Economy needs more than just monetary policy
    • Would need to see material change in the outlook to move rates
    • We’ve got a good chance to grow 2% next year
    • But Q4 this year is going to be weak

The US Session

  • US Richmond Manufacturing Index – The US Richmond manufacturing index has been pretty volatile recently. This index turned negative in July, resurfaced again in August, fell in negative territory again in September and last month it climbed to 8 points. This month, the US Richmond manufacturing index was expected to cool off again to 6 points, but missed expectations, coming at -1 point.
  • Phase One Deal Close for White House Conway  – White House official Conway was speaking on Fox earlier on, saying that “we’re getting really close” to China deal. Earlier in the same interview, Conway said there were still some sticking points remaining. She cities IP them, tech transfers and trade imbalances as issues of concern.
  • US CB Consumer Confidence – The US CB consumer confidence report was released a short while ago. Expectations were for a slight improvement from last month, but the sentiment weakened further to 15.5 points. October was revised higher to 126.1 points from 125.9 previously. Present situation also weakened to 166.9 points, from 172.3 points prior. Although, expectations improved to 97.9 points, from 94.9 in October.  Slightly disappointing report ahead of the Christmas period, but at least expectations for the coming month increased.

Trades in Sight

Bullish [[USD/JPY]

  • The trend has turned bullish this week
  • The retrace lower is complete
  • Fundamentals point further up

The retrace down is complete for USD/JPY

USD/JPY has turned bullish in the last two weeks, as the sentiment improved. Trump’s comments that the Phase One deal is very close, which were repeated by another White House official today, helped improve the sentiment in financial markets and safe havens have been suffering in the last two days. As a result, USD/JPY has turned bullish and has climbed around 100 pips. We saw a retrace lower today, but it turned bullish again after forming a doji candlestick, which is a bullish reversing signal.

In Conclusion

The sentiment has been pretty positive today and safe havens, such as Gold and the JPY have been sliding lower. But, Gold just reversed higher in the last hour, climbing more than $10. There’s no apparent reason for this from what I can see, so it’s probably just some cash flow into Gold right now.

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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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