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Australian dollar sinks for 8th consecutive day

Fresh lows in the Australian dollar

Early last week it looked like the Australian dollar was breaking out as it hit at three-month high. Instead, it’s resulted in a brutal turnaround and 8 straight days of declines.
The pain extended today in the past few minutes as AUD/USD fell to a session low at 0.6871 — the worst since June 19.
Fresh lows in the Australian dollar
This is really a story about the Fed.
Falling rate cut expectations are giving the US dollar a boost while stoking worries about global growth.
Technically, the way the pair broke through the mid-July low is a negative sign. It will need to show some kind of life ahead of the June low of 0.6832.
Excluding the flash crash at the start of the year, that level matched the 2016 low and is a huge level. Given that we’re near oversold levels, and that support is nearby, there is a case for buying the Aussie but a better trade might be to wait and sell on a break lower.

Trump says there will be a great deal with China or none at all

Comments from Trump

Trump lawn
I don’t think his rhetoric is going to make a deal any easier.
In the next breath he said China talks were going well, so who knows where they stand. However Global Times editor Hu Xijin responded to Trump’s earlier tweet with this:
“Whenever it’s time to negotiate, the US side comes up with the trick of piling pressure. Really not a good habit. Americans need to change their negotiating style, show more sincerity, not just wield stick. The past one and half years have proved big stick is useless to China.”
Does anyone think a deal is going to happen?
More from Trump, who is speaking to reporters:
  • Fed moved far too early and far too severely
  • Would like to see quantitative tightening stopped
  • Would like to see a large rate cut before year end
  • Says he is disappointed in the Fed
  • Says he’s not sure if he will accept China’s offer in talks
  • Says it’s up to him, not China, for a deal to be reached

EU reportedly set to call Boris Johnson’s bluff on no-deal Brexit

The Sun reports, citing sources from the European Commission

Brexit

The report says that European leaders can see that it is clear Boris Johnson is trying to build pressure by running down the clock and try to use the European Council meeting in October to demand major concessions on Brexit.

Hence, they are instead planning to turn the October meeting into one preparing for a no-deal Brexit by 31 October instead – by discussing contingency measures and communiques bracing businesses and financial markets ahead of deadline day.
Citing a senior EU source, the report adds:

“It’ll be about where are we heading with the Brits, where do we stand with the implementation of contingency measures. If we’re really in the deal making business this is not a thing you invent on a small piece of paper on the corner of a table at 3am. You don’t do a deal by simply arriving on the 17th after having had a kind of general exchange about what they think in Britain now.”

The political game of chicken resumes again as Johnson is trying the same old trick that May pulled in March this year, only to have led to an extension of the Brexit deadline.

Eurostoxx futures -0.1% in early European trading

Flattish tones observed in early trades

  • German DAX futures flat
  • French CAC 40 futures +0.1%
  • UK FTSE futures +0.3%
UK stocks are once again the standout here as the pound continues to be ravaged to start the new week. Sentiment elsewhere is more reflective of the mood in US equity futures, which are near flat levels as well with E-minis just up by 0.1% currently.
All eyes are on the Fed decision tomorrow but just be wary of any potential headlines to follow from Shanghai as US-China trade talks resume today and tomorrow.

Nikkei 225 closes higher by 0.43% at 21,709.31

Asian equities fare slightly better after mixed sentiment overnight

Nikkei 30-07

The gains today belie the more choppy market sentiment ahead of the Fed decision tomorrow as traders and investors are all waiting with bated breath on what the US central bank will decide and communicate to markets.

US futures are up by about 0.1% but it isn’t really telling of much in my view as we will only get more clarity after the Fed. USD/JPY holds lower at 108.63 amid pressure from GBP/JPY selling as the pound continues to stay weak on the day.

IG Markets: Pound seen falling to 1.1800 level as Brexit woes worsen

IG markets say

The GBPUSD may fall further as funds fret over the UK’s divorce from the EU, according to IG markets.
They say:
  • “PM Johnson putting together a brigade of Brexiteets to take a hard line with Europeans are seeing markets react negatively to sterling”
  • “The rates futures curves in the UK shows an increased chance the Bank of England will cut rates next year as markets price a hard Brexit shot to the economy, and that’s also weighing on the currency”
  • “Breaching the 122 level where there was reasonable support is significant — we are open now to the downside”, with 1.1800 as a target over the next several months
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