Live FX Market Analysis – 16 October 2018 (Video)

It’s been another turbulent week in FX markets with last week’s sell-off suitably spooking investors, Saudi Arabia causing a stir following allegations of murder at its embassy in Turkey, Brexit talks stalling and Italy risking the wrath of the European Commission after submitting its budget. Senior Market Analyst Craig Erlam discusses all of these and more in this week’s webinar.

Craig also gives his live analysis on EURUSD (16:37), GBPUSD (18:09), EURGBP (20:05), AUDUSD (21:56), USDCAD (24:25), GBPCAD (29:37), NZDUSD (30:14), USDJPY (31:05), GBPJPY (31:50) and EURJPY (32:40).

Pound suffers on Brexit stalemate


Pound pressured at start of the week

Weekend news that the latest Brexit negotiations had hit yet another stalemate pressured the pound at this week’s open. UK’s Financial Times reported that PM May is said to call the current draft Brexit deal a “non-starter” and as a result EU leaders may cancel plans for a special summit in November due to the lack of progress in negotiations. EU leaders are supposed to convene for a Brexit summit this Wednesday, and hopes were that a deal could be announced.

GBP/USD hit its lowest level in six days and tested the 100-day moving average support at 1.3099 again. The FX pair had climbed to a three-week high of 1.3259 on Friday on deal hopes, but closed lower on the day. Should the 100-day moving average support be breached convincingly, then the 55-day average at 1.2990 would come in to focus.


GBP/USD Daily Chart

Source” Oanda fxTrade


Asia Market Update: Echoes of October past

RBA’s Harper reiterates current stance

RBA board member Ian Harper has reiterated the RBA view that interest rates are more likely to rise than fall, however added that a near-term rate increase would “spook” consumers. He commented that a cloud remains over the consumer outlook though some stimulus is coming from a lower Australian dollar, which is helping to support confidence.

Monthly retail sales growth has been either zero or positive over the past eight months, though not setting the economy alight, with a maximum reading of +0.6% in February and the August reading at +0.3%. Meanwhile, Westpac’s consumer confidence index rose above zero for the first time in three months this month.

Aussie has been on the defensive versus the US dollar this morning, looking set to post a decline for the second straight day. AUD/USD is currently at 0.7107 with this month’s previous lows above the 0.7040 level acting as support.


AUD/USD Daily Chart

Source: Oanda fxTrade


US retail sales expected to show a rebound in September

The Asian data calendar is not yet complete, with Japan’s industrial production and capacity utilization data still pending. The European calendar is barren of tier-1 data, and the highlight of the North American calendar will be US retail sales for September. Sales are expected to rise 0.5% m/m, more than the 0.1% posted for August, and would be back at the June/July levels. The Empire State manufacturing index and business inventories are also due. The Bank of Canada’s business outlook survey is the only release from north of the border.

You can view the full MarketPulse data calendar at


Market Podcast October 15

Source: MarketPulse - Market Podcast October 15

Asia Market Update :Worst case scenarios abound

Local traders remain the huge sellers of risk but are now pricing in worst case scenarios 
*Japan Securities Clearing Corporation (JSCC): Emergency margin call triggered for Index Futures trading
*South Korea closely monitoring markets

Oil Update

Brent crude continues moving sharply lower on today triggered by the deeper sell-off on global equities on concerns rising interest rates could severely derail global economic growth. But more specifically DOE monthly Short-Term Energy Outlook revised non-OPEC supply higher for 2019, which is leading more support to the supply side of the equations.

So with prospects of lower demand and additional supply in 2019, there has been no place to go but lower as bullish bets are heading for the exits with nary a substantial bid in sight.

Now if we get a bearish surprise in tomorrows DOE weekly status report, selling will intensify two folds. With tail risk mounting, bullish sentiment has evaporated quickly.

Equity update

Equity markets were pulverised today as investors remain in full out retreat and even the most pessimistic of equity bears are still in shock by the sheer magnitude of the move. This meltdown isn’t just a mild case of the sniffles suggesting the latest sneeze from the US equity market could morph into a global markets pandemic.


Presidents Trump’s scathing and ramped up attack on the Fed has the dollar bulls retreating as even the hint of policial interference on monetary policy is unsettling also if it doesn’t lead to the Feds to taking their foot off the gas. But if these higher US rates are trigger more than risk aversion and this move turns into the next significant correction, it could give the FOMC some pause of a cause.


Speaking of worse case scenarios

USDCNY fixed at 6.9098 today, +26 pips from last fixing and -96 pips from the previous closing at 6.9194 on 16:30 Beijing time as the counter-cyclical mechanism takes effect, but higher than everyone expected. So, another dubious fixing. Traders aren’t reading much ambiguity in today setting which is little more than a call to action for Yuan bear. The Pboc appears to be in little rush to steam the weakening tide.  Despite the apparent risk from capital outflows and more equity liquidations.

The Yuan has such a far-reaching influence on regional markets but even more so as the markets are becoming very suspicious of Pboc currency policy that in the face of being declared a currency manipulator, they could discard the YCC and let the currency go (weaker)

It’s potentially destabilising for global markets as it could trigger colossal liquidation in China equities and will trigger capital outflows.

The tail risk if they did for shock value, even as a temporary retaliation to the US Treasury accusations. Eventually, they would need to intervene.

However, instead of using reserves they could sell US treasuries to raise dollars to sell back to the currency markets(USDCNH) creating a nasty feedback look that will trigger broader-based US bond markets sell-off and more equity collapse

AUD/USD & GBP/USD – Poised for a rally? (video)

Nick Batsford, CEO of Core London is joined via Globelynx by Craig Erlam, Senior Market Analyst at OANDA to look at AUDUSD and GBPUSD chart. Both have been trending lower for some time and Craig discusses why he thinks a move higher may not be too far away.


European open – Brexit reports provide early liif

Robbins and Barnier make progress on Irish border

A relatively mixed session in Asia overnight has provided little direction for Europe markets ahead of the open on Tuesday, although it would appear investors haven’t been short of news flow to get their teeth into.

Reports overnight that “meaningful progress” has been made between Theresa May’s chief negotiator Olly Robbins and EU Brexit negotiator Michel Barnier - much to the annoyance of UK Brexit negotiator Dominic Raab I imagine - helped the pound hang on to earlier gains as we enter into a real crunch period for exit talks. Naturally, the report lacked any useful detail but that is something we can hopefully hear more about in the coming hours or days, if this is in fact true which isn’t always the case.

GBPUSD Daily Chart

OANDA fxTrade Advanced Charting Platform

Sterling traders – who have been very sensitive to any Brexit-related speculation – were surprisingly unmoved by the reports which emerged late in the evening, although this may simply reflect to constant flow of news we’ve been getting and that this represented more of the message we had been seeing spill out throughout the day. Still, it’s rare cause for optimism, although there’s clearly still some way to go.

Pound extends gains on Brexit noise

Tria seeks to calm investors but stands by budget

Italy has emerged as a greater cause for concern for Europe recently, with the populist coalition of the eurosceptic right and left seizing the first opportunity to collide with Brussels only to find that it is in fact investors that represent a greater risk to their budget plans. Yields on Italian debt have spiked recently after the government proposed widening its fiscal deficit in order to stand by its election promises, something that has drawn criticism from both the European Commission and investors due to both the impact on its already huge debt levels and it’s unrealistic assumptions that risk it missing targets.

Italy’s Finance Minister Giovanni Tria has attempted to take a more calm approach in light of rising yields – very different to the hostility shown by his colleagues to both Brussels and the markets – in an attempt to ease some of the pressure on Italian debt but this is failing to calm fears. Tria stood by the need to spend more and generate more growth but urged calmer discussions with Brussels. Taking on Brussels, providing overly optimistic forecasts and attempting to fuel euroscepticism in the country isn’t the best way for the government to keep investors on side, much to the annoyance of the most vocal anti-establishment figures in government.

OANDA Trading podcast : CNH and IDR insights with MONEYFM 89.3

Dollar softens as Trump once again attacks Fed hikes

The dollar has been given some reprieve after US President Donald Trump gave his two cents on the central bank – not for the first time – claiming once again that he’s not too pleased with the pace at which they’re tightening. Trump has taken it upon himself to regularly chime in on the decisions of the independent central bank, something a President would typically refrain from doing so as to avoid blurring the lines between the two.

US Dollar Index Daily Chart

Source - Thomson Reuters Eikon

Some see this as a desire on his part to have more control over interest rates – which may be true – but I think it’s much more simple than that, a force working against him is an annoyance and he’s laying the groundwork early to direct the finger of blame at when the economy stumbles and markets slip.

Oil pares gains as IMF lowers growth forecasts

The latest IMF forecasts could be taking some of the spark out of the oil rally in the near term, with lower growth naturally weighing on demand. Oil continues to be well supported though as Iranian sanctions prepare to come into force, taking significant supply out of the market, while Hurricane Michael in the US is expected to provide some additional near-term supply disruptions.

Brent and WTI Crude Daily Charts

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

Decision Day : The FOMC looms

US markets

Major U.S. indexes closed mostly lower Tuesday ahead of the Federal Reserve Board rate decision, as airlines, transportation and shipping companies are feeling the squeeze from higher oil prices. But higher energy prices are stoking the inflationary fires, and that pass-through effect is pushing  US bond yields higher, which tends to lessen investors appeal for stocks.


The market has completely priced in today’s Federal Reserve Board rate hike so that the focus will fall on the Fed’s forward guidance and Fed Chair Jay Powell’s press conference. Over the past few weeks, we’ve seen some interesting quantified arguments from traditional Fed doves suggesting the Feds will need to move off neutral to a more restrictive monetary policy. So, I expect the real focus of the meeting will be on the “neutral rate” with comments from Brainard and Evans indicating that the Fed may continue hiking into a restrictive territory.

On the flip side, elements of the markets remain policy pessimists concerned about adverse effects of the trade war and preaching fiscal fatigue as we enter mid-2019, and as such are looking for a Fed pause in 2019. As I told my Trading desk,

I’m hawkish, but only 51 % is implying I have no idea what to expect from this newly minted sitting Fed. But this red-hot US economy does suggest the Feds will continue to drain the punch bowl, but if the Chair Powell shows any support for hiking into the restrictive territory, the dollar will surge immediately.

While everything remains little more than a crystal ball hypothesis when it comes to this FOMC, but one thing we can be sure of is that Fed Chair Powell will stay as far away from politically charged topics such as China Trade and the President’s constant meddling in Fed policy.

Through the looking glass

Trump’s address to the UN was the highlight of the overnight session while not the overly market is impacting, as everyone had pretty much expected his comments to be tinged with Trump “Through the looking glass “, as predictably his most prominent ” wrath of Trump targets were China, for its trade policies; OPEC for fixing oil prices; Syria for chemical weapons; Venezuela for socialism and corruption.

Oil markets

Trump’s UN address did not sway the rally in oil prices one iota, but crude conceded a chunk of yesterday’s gains after the American Petroleum Institute reported an unexpected 2.9 million barrels increase in US crude stocks for last week. But indeed, it will be a substantial bearish surprise for the market if the more certain DOE Weekly Petroleum Status Report at 10:30 AM EDT on Wednesday confirms a similar inventory build.

But for the most part, Oil prices remain in the Bulls domain amid concern that US sanctions on Iranian crude oil exports will result in much tighter physical market conditions once they take effect in November. While the US oil inventory data counts, the fact that the markets could still be underestimating the supply crunch from Iran sanction has many Oil investors running with the bulls.

Gold Markets

The precious complex is marginally higher with gold consolidating either side of the $1200 level. But with Gold ETF inflow stagnant and no or a real shift in investment allocation portfolios, most Gold dealers and market speculators are left watching the US dollar for direction. And since even the most astute G-10 traders are struggling for dollar direction, gold remains mired in no man’s land, smack dab in the middle of the well worn $1190-$1210 range.

Currency Markets

Japanese Yen

With the 112.75-65 near-term support channel holding up overnight USDJPY looks well positioned to move higher. But everyone will be watching the wires today as the FOMC will deliver a rate hike. I’m expecting entirely no shift in forwarding guidance but listening carefully for any bullish inference on the “neutral rate” with comments from Brainard and Evans indicating that the Fed may continue hiking into a restrictive territory.

Malaysian Ringgit

Market remain focused on the FOMC where a hawkish tail risk could weigh negatively on the Ringgit. Despite surging oil prices, one glance at The US 10y is trading up at 3.10 % should be convincing enough to tread gingerly, not only in the Ringgit but EM Asia in general but expect USDASIA, and the MYR to consolidate into the FOMC.
Support comes in at 4.12 resistance 4.15

Live FX Analysis – 25 September 2018 (Video)

In this week’s FX webinar, Senior Market Analyst Craig Erlam discusses the upcoming Federal Reserve meeting and provides and update on Brexit and trade wars.

Craig also gives his live analysis on EURUSD (12:04), GBPUSD (17:23), EURGBP (22:05), AUDUSD (24:38), USDCAD (27:24), GBPCAD (28:30), NZDUSD (29:54), USDJPY (30:47), GBPJPY (32:31) and EURJPY (34:25).

OANDA Trading Asia markets update

Asia markets update

The weekend headlines have not been a blessing for ‘risk sentiment” and while the optimist in me is siding on this too shall pass. But with markets closed in Japan, China and South Korea as a large part of Asia celebrates the Mid-Autumn festival, it impossible to gauge sentiment in these drastically diminished liquidity conditions.

While Hong Kong markets are trading poorly but it difficult to separate the wheat from the chaff after last Friday the Pboc announced they would issue T-bills via the HKMA in Hong Kong money markets, which implies driving local interest rates higher. But of course, shelving the US-China trade talks is not rated highly for local risk sentiment either, a bit of a double whammy of sorts today for Hong Kong.

However, it was unlikely that either the US or China was going to pull a rabbit out of the hat before the US midterm election anyway. However, traders remain in wait and see mode while treading rather gingerly in today Asia session. But indeed, this discussion will likely continue throughout the 24-hour trading cycle.

But overall, no one is taking anything for granted and certainly won’t underestimate the possibility of the US announcing reviews of further China tariffs at some point in time given the Trump administration ‘modus operandi’ of applying non-stop pressure.


More risk-sensitive currencies, especially EM are feeling the pinch from weekend headlines bluster, but liquidity is extremely thin and likely contributing to some outsized moves. For reference, G-10 volumes are around 50 % lower as per EBS data. But what action we are seeing is small AUD selling.

Indian Rupee

Not too surprising the INR back under pressure from rising crude prices and domestic credit wobbles after one of the large Non-Banking Financial Companies missed an interest payment last Friday

Oil Markets

Oil investors are trading the weekend news very favourably, Saudi Arabia and Russia ruled out any expeditious supply increases at the Algeria meeting while decidedly ignoring U.S. President Trump’s call to increase supplies and ease price pressures.
Not a great deal of oil market noise today, but traders are quickly pivoting to US inventories data with some small discussion around reports that Cushing Oklahoma delivery point may have declined further in the week ended September 21. But ultimately all these noises pale in the lead up to November 4 Iran sanctions, which continue to underpin sentiment

OANDA Trading Podcast: BFM 89.9 Kuala Lumpur

Sterling Down on May Brexit Warnings

May resorts to rehashing old threats after failed Salzburg meeting

Theresa May took to the podium on Friday in an attempt to hit back at the EU after she was humiliated in Salzburg in what was meant to be a positive meeting ahead of the Tory Party Conference.

While May will be desperate for the takeaway from the speech to be that the UK is serious in its no deal threats and the EU should take their proposal seriously and resume dialogue based on the government’s Chequers plan or risk such an outcome, the speech itself was nothing but a stern rehash of what has been said in the past. As ever, these talks are showing themselves to be a frustrating and soul destroying game of chicken among a group of officials that agree that no deal is a bad outcome but are determined to drag them out in the hope of slightly better terms.

The pound came under pressure in the lead up to May’s speech and that continued during and in the aftermath, with traders potentially seeing this as a sign that no deal is a real and increasingly likely outcome. That may be exactly the message May wanted to send to the media, her party – particularly the Brexiteers – and the EU but I do not believe it changes anything. A fudged 11th hour deal that kicks the can down the road on the toughest decisions still remains the most likely outcome and I do not believe the appetite exists on either side for no deal that makes it as likely as we’re being led to believe.

GBPUSD Daily Chart

EURGBP Daily Chart

GBPJPY Daily Chart

GBPCAD Daily Chart

For a look at all of today’s economic events, check out our economic calendar.

Sterling lower as EU rejects May Brexit proposal

Investors in buoyant mood despite trade tariffs

Investors continue to brush off the ongoing trade dispute between the US and China, along with negative Brexit developments in Salzburg, with stocks in Europe trading higher to end the week.

Another winning day would cap a very good week for stock markets, with the Dow and S&P 500 both trading in record territory – the first time for the former since January – and those in Europe and Asia very much taking new US and Chinese tariffs in their stride. This may be a case of the tariffs already being priced in or being a little softer than was expected, but the important thing is it’s far from the end and investors may not be so buoyant if Donald Trump responds quickly and aggressively as he’s suggested he will.

Sterling slips as May is humiliated in Salzburg

The pound is paring its gains on Friday after the EU rejected Theresa May’s Chequers proposal, casting doubt on a compromise being found despite the UK being only months from leaving the block. Clearly traders don’t view this as too significant a setback or I would expect the drop off in the currency to be much larger and the rejection hardly comes as a surprise given that officials have publicly criticised the proposal in the past.

GBPUSD Daily Chart

OANDA fxTrade Advanced Charting Platform

That said, reports do suggest that EU officials have taken a harder line against May following her insistence that it’s Chequers or no deal. Clearly they believe this is a bluff and haven’t taken to kindly to such a stance so late in the day. May now faces a tough challenge in returning to the UK ahead of the Conservative party conference no closer to a deal than she was before, leaving her with a massive target on her back as certain colleagues look to position themselves as a better alternative.

Euro edges lower on weaker PMIs

The euro is also paring earlier gains after PMIs for September painted a slightly gloomier picture, particularly for the manufacturing sector where trade conflicts, Brexit and falling global demand contributed to a decline in optimism. Manufacturers are clearly a little nervous about the number of risks for the sector and the volatility and difficulties in emerging markets right now will not be giving them much reason for optimism.

EURUSD Daily Chart

The euro area has been experiencing something of a slowdown for much of the year but this hasn’t deterred the ECB which still plans to end its bond buying program in December and consider a rate hike in the second half of next year. The latter plans may be shelved though if the economic situation doesn’t improve, something policy makers hope will naturally follow an easing of trade tensions and resolution on Brexit. Right now though this feels a long way away.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.