Trade Deal Talk Boosts Risk Appetite, Weighing On USD

Dollar Down

The first European trading session of the week saw the US Dollar extending its recent decline. This came as optimism around a US/China trade deal increased, with the Index trading 96.48 last.

The market has reacted to news of the US scaling back its demands around Chinese industrial subsidies. And investors have interpreted this as an indication that a deal is coming in the next four weeks as Trump had recently highlighted. On the data front today, we have a quiet US data sheet. Therefore, moves are likely to be limited while the market awaits tier one European data tomorrow.

EUR Shrugs Off Domestic Concerns For Now

EURUSD continues to enjoy a much-needed rally on the back of this current spate of USD weakness. While concerns remain regarding the health of the eurozone economy, for now, USD weakness continues to be the main driver of price action. EURUSD is now trading 1.1310, just short of last week’s highs.

Momentum Down in GBP

GBPUSD is in the green today also, though momentum has really dried up over recent sessions as confusion over Brexit reigns supreme. News that the UK’s Brexit deadline has been extended to Octoberhas failed to provide the boost that bulls were hoping for. GBPUSD still sits toward the lower end of the 1.30 – 1.33 range.

Equities on The Up

Equities continue to stride higher as risk appetite remains buoyant, with SPX500 making solid progressback towards all-time highs. Currently sitting at 2908.33, just below last week’s high, price remains well above the 2895.92 support broken last week. The UK100 remain supported in the near term too, though price is down slightly today, trading 7438.1 last as GBP strengthens.

Safe Havens Down on Trade Deal Hopes

Safe havens have been mixed so far today with gold prices trading firmly lower against USD. Meanwhile, JPY has put up more of a fight. XAUUSD is now heading back down toward the 1280.58 level support which, if broken, will open up the run down to 1241.81 support next. USDJPY, on the other hand, is still sitting just under 112.16 resistance which has capped the rally for now.

Crude Capped By Bearish EIA Report

Despite positivity around the likelihood of a US/China trade deal, oil prices have continued to move lowerat the start of the week. Prices have extended the decline posted last week in response to the latest EIA report. Alongside a further build in US crude stocks, the EIA has also updated its 2019 oil outlook which now projects an even higher level of US crude production. Oil has now turned lower from the 64.38 resistance level with the next support coming in at 61.89.

Commodity Currencies Softer

The sell-off in oil prices has allowed for some recovery in USDCAD which saw a strong sell-off on Friday but has since traded back up to 1.3334. For now, though, price is still capped by 1.3377 resistance which remains the key upside level to break.

AUDUSD is a little softer today due to oil flows, despite ongoing optimism around a potential US/China trade deal, as well as a weaker US Dollar. AUD rallied strongly last week, with price breaking out above the bearish trend line from 2018 highs. Bulls will now be looking for a break of the .72 structural resistance next to gain stronger conviction in a recovery.