> NZ August Trade Balance : -2144Mio v. 110Mio exp.
> EU September German ifo Business Climate : 98.8 v. 99.0 exp.
> EU German Federal Elections – currently too close to call as the vote split between Social Democrats and Christian Democrats are in a tight race
Weekend Headlines (BBG)
> China took explicit aim at cryptocurrency yet again, with the PBOC stating that all crypto transactions are illegal sending jitters throughout the volatile market
> The US Biden spending/tax plan is likely to come to a head this week, at the deadline to raise the limit on the debt ceiling fast approaches on Friday with the GOP/DEM in a fierce debate
What you need to know
Looking like a soft open to the trading week in Asia, with both the AUD and NZD off as we open up the final trading week of Q3. The Dollar regained some of its appeal in the back half of the week as investors prepared for the eventual tapering of policy from the Fed, of which we still have very little detail thus far. China took most of the headlines, as their large property developer seems to be on the brink of collapse as they have been unable to repay their interest payments on large on-shore and off-shore bonds. The on-shore bond was taken care of with investors, however the off-shore bond payment has yet to have been received as the lingering risks remain.
China takes next week off for their Golden Week holidays, so expecting an interesting week ahead of Friday’s holiday celebrations for the Chinese. Germans have gone to the polls over the weekend, and there seems to be a very even split between two of the parties although the incumbent Christian Democrats have seen their worse election result since 1949 as change seems on the horizon in Germany. EURUSD a touch stronger to open the week, trading above 1.1700 as I write this morning. The Dollar is up against nearly all the majors, with the DXY recovering and opening up 0.25%. UST yields are up across the curve, with the 2s,10s and 30s all finishing the week higher. The commodity recovery in metals continued, with both iron ore and copper gaining to close out the week, while WTI crude is 1% stronger to kick it all off. S&P500 opens up 0.15% in the black, while Gold is 0.5% higher.
The Day Ahead
> EU ECB President Lagarde to speak
> EU September German ifo Business Climate : 99.0 exp.
> US FOMC Members Evans, Williams and Brainard to speak
> UK Bank of England Gov. Bailey to speak
> US August H/line Durable Goods Orders & Core Durable Goods Orders : 0.7% & 0.5% exp.
Expecting this week to be driven by headlines as China’s Evergrande story lingers away while the Fed members are back on the wires to provide more clarity on their policy path. The week is highlighted by the Core PCE numbers to drop on Friday, while China’s mid-week PMI numbers are likely to see some market reaction ahead of the extended holiday.
Debt ceiling is likely to be on the minds of investors, with politicians playing a dangerous game with the debt limit expected to be reached in the coming weeks with only US$70bio left of emergency measure room. Any sort of gridlock or shutdown would be a major event, so expect this to dominate if no agreement is made closer to the deadline. AU momentum is building as vaccinations ramp up across the country, with the likelihood of a sooner than expected reopening boosting sentiment.
Range Today : 0.7240 – 0.7330
The pair found its new range, however lower highs may signal that more downside may be on the cards before a breakout. The YTD low of 0.7106 is still the ultimate target, while the September high of 0.7478 is capping the upside. A break of 0.7316 may leave the door open for a test of the 55DMA, now sitting at 0.7333.
“Cambridge Global Payments” is a trade name, which in this document refers specifically to one or more of these legal entities: Cambridge Mercantile Corp., Cambridge Mercantile Corp. (U.S.A.), Cambridge Mercantile Corp. (Nevada), Cambridge Mercantile (Australia) Pty. Ltd.
Cambridge Global Payments (“Cambridge”) provides this document as general market information subject to: Cambridge’s copyright, and all contract terms in place, if any, between you and the Cambridge entity you have contracted with. This document is based on sources Cambridge considers reliable, but without independent verification. Cambridge makes no guarantee of its accuracy or completeness. Cambridge is not responsible for any errors in or related to the document, or for damages arising out of any person’s reliance upon this information. All charts or graphs are from publicly available sources or proprietary data. The information in this document is subject to sudden change without notice.
Cambridge may sell to you and/or buy from you foreign exchange instruments (including spot and/or derivative transactions; both kinds are here called “FXI”s) covered by Cambridge on a principal basis.
This document is NOT: 1) Advice of any kind, or 2) Approved or reviewed by any regulatory authority, or 3) An offer to sell or a solicitation of an offer to buy any FXIs, or to participate in any trading strategy.
Before acting on this document, you must consider the appropriateness of the information, based on your objectives, needs and finances. For advice, you must contact someone independent of Cambridge.
Certain FXIs mentioned in this document may be ineligible for sale in some locations, and/or unsuitable for you. Contact your Cambridge representative for further information regarding product availability/suitability before you enter into any FXI contract.
FXIs are volatile and may cause losses. Past performance of a FXI product cannot be relied on to determine future performance.
This document is intended only for persons in Canada, the US, and Australia. This document is not intended for persons in the UK or elsewhere in the EEA. In Australia, this publication has been distributed by Cambridge Mercantile (Australia) Pty. Ltd. (ABN 85 126 642 448, AFSL 351278); for the general information of its customers (as defined in the Corporations Act 2001). This entity makes no representations that the products or services mentioned in this document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law.
Fees may be earned by Cambridge (and its agents) in respect of any business transacted with Cambridge.
The document is intended to be distributed in its entirety. Unless governing law permits otherwise, you must contact the applicable Cambridge if you wish to use Cambridge services to enter a transaction involving any instrument mentioned in this document.
© Copyright 2018, Cambridge Mercantile Corp., ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Cambridge Mercantile Corp. See www.cambridgefx.com for contact details.