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USD up trend is 99 months old soon. Is it over? No, another 12-24 months still to come

  
Analysis, Forex
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The headline is the in summary version of a client note from UBS on the US dollar.

Its a detailed look at the US dollar trend, but adding to the to the headline points in brief.
When and how the dollar might turn is anyone’s guess
  • longterm dollar trend …  As of last month, it was still levying upward pressure … did not appear to be waning materially
  • medium term trend  …  duration of 2-5 years … more or less mirrors intra business cycle growth surges and slowdowns
  • shorter term one that averages about a year…. seems to relate to shocks caused by politics and supply disruptions to commodities … a modest dollar drag today … could reflect the … trade war coming home to roost and the drag on Chinese leading indicators passing, as fiscal stimulus from tax cuts and modest credit easing have begun to filter through

Goldman Sachs says yuan to decline further after the trade tension pause

  
Analysis, Forex

The investment banks sees USD/yuan to 7.20 in 3 and 6 month time horizons.

  • 12 month view is 7.10
In brief:
  • short-lived pauses in trade tensions have in the past given way to renewed escalation rather than a roll-back of the trade war
  • If anything, disagreements have spread to more dimensions — technology, financial flows, immigration and foreign policy — such that finding ramps to de-escalate is even harder.

Monday morning open levels – indicative forex prices Monday 14 October 2019

  
Analysis, Forex

Good morning, afternoon or evening to all ForexLive traders and welcome to the start of the new FX week.

As is usual for a Monday morning, market liquidity is very thin. It improves as more Asian centres come on online … prices are liable to swing around on not too much at all, so take care out there.
Some small change from late Friday levels, a few tics here aand there. GBP the biggest.
  • EUR/USD 1.1036
  • USD/JPY 108.35
  • GBP/USD 1.2611
  • USD/CHF 0.9974
  • USD/CAD 1.3204
  • AUD/USD 0.6789
  • NZD/USD 0.6330

The two-day rally in the pound was the largest in a decade. Here’s why

  
Analysis, Forex

That’s a big rally

That's a big rally
Cable has rallied to 1.2655 from 1.2206 yesterday on signs and hopes for a Brexit deal. That 450 pip, 3.75% rally is the largest two-day gain since the financial crisis.
The huge rally reflects two dynamics:
1) There are genuine signs of a deal
With Conservatives polling in majority territory, there probably wasn’t any benefit to forcing a UK election. That would just lead to fresh negotiations with an emboldened Conservative party and a real chance of a no-deal Brexit. That would have also given the EU worries about stoking exit parties elsewhere.
So they came to the table and leaned on Ireland to get something done. We’re still far from the finish line and Parliament remains a significant hurdle but there is a real chance of a deal. Morgan Stanley moved it up to 55% from 35% today.
2) Positioning is extremely short
The latest CFTC data is due shortly but last week’s report showed a net short of 77,000 futures contracts among speculators. That’s a very large position that’s been in place for a long time. It’s possibly a hedge but undoubtedly predicated on the risks around a no-deal Brexit and/or continued uncertainty. Today’s rally puts GBP/USD at the highest since June 26. Everyone who has sold since then is now underwater and the speed of the move will surely have caused significant pain.
What’s next?
Positioning is stretched here in the short term and fundamentals will continue to dominate. Barring any news on Monday, I could see some jitters and a slip back to 1.2600 and the Sept highs but that looks like a good spot to buy. However I’d caution that everything is subject to change based on any leak and headline and the weekend is a big risk that’s suddenly a two-way risk.

GBPJPY is the biggest mover today. Soars toward 2019 midpoint/200 day MA

  
Analysis, Forex
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After an early ping pong pause at target levels, the pair shot higher.

In a post yesterday (on other GBP pairs technicals) I outlined levels of importance for the pair after the sharp moves higher.   Below is the chart from that post.
After an early ping pong pause at target levels, the pair shot higher.

At the end of yesterday and into the Asian session, the price of the pair ping-ponged between the 134.60 level above and the 133.86-99 level below.  The price based one last time at the support area (yellow area), broke above the 134.60 level and did not look back.  This is what that looked like:

GBPJPY on the hourly
What now?
Taking a broader look at the daily chart, the pair has moved above swing levels and currently is testing the 50% retracement of the 2019 trading range at the 137.702 level. The price is also trading at the highest level since June 2019.  There is some pause around the midpoint. However, the buyers still remain in control, and the lure of the 200 day above at 138.588, may be the magnet target for the move.
GBPJPY on the daily
The GBPJPY is getting a double boost from hope for Brexit and hope from US/China (that is propelling stocks and yields higher).  That is the right cocktail for the explosive currency pair.

Trump directly threatens lira if Turkey launches ‘unnecessary’ attacks

  
Analysis, Forex
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Lira fell 2% yesterday

Trump is responding to criticism about abandoning the Kurds in Northern Syria as Turkey launches attacks near the border.
We may be in the process of leaving Syria, but in no way have we Abandoned the Kurds, who are special people and wonderful fighters. Likewise our relationship with Turkey, a NATO and Trading partner, has been very good. Turkey already has a large Kurdish population and fully understands that while we only had 50 soldiers remaining in that section of Syria, and they have been removed, any unforced or unnecessary fighting by Turkey will be devastating to their economy and to their very fragile currency. We are helping the Kurds financially/weapons!

Erdogan will visit the White House on November 13.

Order flow levels across major pairs.

  
Analysis, Forex
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Orders in the market seen across major pairs

  • Sell orders on NZDUSD on 0.6480/90 and 0.6360/70
  • Sell orders on AUDUSD at 0.6800/10 and 0.6910/20
  • Sell orders on EURJPY at 120.40/50, 118.70/80

and buy orders at 116.20/10

  • Sell orders on USDJPY at 108.70/80, 108.30/40

and buy orders at  106.00/90 and 105.00/90

Sell orders on GBPUSD at 1.2680/90 and 1.2530/40

and buy orders at 1.2000/90

  • Sell orders  on EURUSD at 1.1010/20

Currencies in focus: AUD and NZD strongest against the USD

  
Analysis, Forex

Positive risk tones

In yesterday’s US session the news that China are ready to deal on parts of the agreement both sides agree on gave a risk on tone to the markets.
The mood has continued and AUD and NZD are the strongest currencies on the day against the dollar and the safe havens CHF and JPY are the weakest. So, joining that risk tone direction makes sense this am, keeping an eye out for any negative headlines of course. Optimism is the mood of the moment.
Positive risk tones
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