On Friday, the United States and China announced that they had made a partial trade deal. This deal will see the Chinese buy more US farm produce, like soybeans. The US will not increase the tariffs it had threatened to increase later this month. The two countries also pledged to continue engagement ahead of the official signing of a broad trade deal between Xi Jinping and Donald Trump. Meanwhile, data from China showed that its trade surplus increased to $39.65 billion in September. This is after imports declined by -8.5% while exports declined by -3.2%.
AUD/USD. In reaction to the trade news, the Australian dollar declined to a low of 0.6770 from Friday’s high of 0.6810. As of this writing, the pair is trading at 0.6787, which is slightly above the 50% Fibonacci Retracement level. The price is slightly below the upper line of the Bollinger Bands while the RSI has dropped from an overbought level of 70. The pair might continue moving higher today due to trade optimism.
The Japanese yen rose sharply in early trading even as the country experienced the worst typhoon in decades. The typhoon led to record-breaking rainfall to most of the country leading to deaths of more than 30 people. In some regions, the amount of rainfall that fell in a few hours was more than what falls in an entire year. Winds around the eye of the storm reached 90-miles an hour. Japan is no stranger to natural disasters. In 2011, the country experienced a rare 9-magnitude earthquake that led to the death of more than 20k people.
The USD/JPY pair declined from Friday’s close of 108.63 to a low of 108.18. On the hourly chart, the price is on the middle line of the Bollinger Bands. The price is also above the Ichimoku Cloud and along the Tenkan Sen indicator. The pair could move lower in the short term. The key point to watch will be the 108.00 level.
Sterling eased in early trading ahead of the most important week of Boris Johnson leadership. Over the weekend, negotiators from both sides tried to come up with compromises that will be acceptable by members of the European Parliament and the House of Commons. These talks started on a high note as Donald Tusk said that he had seen some progress. On Sunday, diplomats told the media that there had been no breakthrough because of the gap between the two sides. Just last week, Leo Varadkar, the Prime Minister of Ireland said that he was optimistic that a deal will be made before the October 31 deadline. If a deal is made, the UK will enter a 14-month period where relations with the EU are maintained as a new trade deal is negotiated. On the other hand, if there is no deal by October 19, Boris Johnson will be forced to seek for an extension.
GBP/USD. After the impressive run last week, the GBP/USD pair eased slightly today. The pair declined from Friday’s close of 1.2705 to a low of 1.2585. On the hourly chart, the price is above the Ichimoku Cloud and between the Tenkan Sen and the Kijun Sen lines. The Chaikin Oscillator has moved below zero while the momentum indicator has fallen. The pair will likely see some volatility as traders receive more news from Brussels.
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