Forex news for NY trading on October 25th, 2018

A summary of other markets near the close shows:

  • Spot gold down -$2 or -0.16% AT $1231.76
  • WTI crude oil up $0.26 or 0.39% at $67.08

The US stocks move sharply higher today, erasing some of the declines (but after session earnings for AMZN and GOOGL disappoint on revenue miss). European shares also rebounded after earlier declines. Below is a summary of the ranges and % changes.

In the US debt market today, yields moved higher initially on the back of an exit out of the flight to safety bid on yesterday's sharp stock sell-off, but by the close saw yields come back off by a couple bps across the curve.

European benchmark 10 year yields ended the session mixed. There was some relief in the Italian yields and the Italian to Germany spread also contracted by about 10 bps on the day to 309 (was 320 yesterday).

In the forex market, the strongest and weakest currencies is showing that AUD the strongest and the GBP the weakest. The USD was mostly higher with gains vs the GBP leading the way (+0.49% move higher).

I would characterize today as having a little of something for everyone:

  • The ECB kept rates unchanged as expected with the end of QE remaining at the end of the year and rates staying where they are until the end of summer 2019. Draghi did say at his presser that the ECB has no reason to doubt confidence in inflation. That sent the EURUSD higher initially. However, the market tired and started to come off as there were little surprise. Toward the end of the his remarks he did warn that as time goes by businesses would have to worry about a hard Brexit. Although the reaction was muted, as soon as he finished, the GBPUSD and EURUSD started to head lower
  • Stocks soared helped by better earnings yesterday and before the bell. Although the -4.4% decline in the Nasdaq and -3% decline in the S&P were not fully erased, they did whittle away some of the declines. The after hour results from Amazon and Alphabet disappointed on revenues despite beating on earnings by a healthy amount. So we might expect more downside in trading at the opening tomorrow.
  • The data in the US had a little bit of something for bulls and bears. The Durable goods headline reading beat expectations along with positive revision, but the key reading - non-defense ex air - was underwhelming. The advance goods trade deficit was larger than expected (no trade gains from tariffs). The initial jobless claims had the 4-week average remain unchanged at 211.75K. The job market is still solid.
  • GDP estimates for the 3Q which will be released tomorrow converged Goldman and the Atlanta Fed estimates at 3.6% (Goldman went up and Atlanta moved down). Both are above the consensus of 3.3%. Key release tomorrow at 8:30 AM ET/1230 GMT
  • Newly appointed Fed Vice Chair Clarida is in the camp to keep moving toward neutral rates, but said there may be some signs of productivity growth (which is good for GDP going forward) and that inflation was not signaling "red".

There was a little bit of something for everyone today.

Looking at the charts, a technical review of some of the major currency pairs are showing:

  • EURUSD: The EURUSD moved higher on comments from Draghi that the ECB was confident on the direction of inflation. However, the run higher could not get back above the double bottoms from earlier in October at 1.14315. That inability to go higher, turned the buyers to sellers and the price moved lower. The fall broke a lower trend line (currently at 1.1377) and that helped to push the pair to the day's low at 1.33556. The underside of the broken trend line will need to be taken back (at 1.1377) if the buyers are to start taking back more control from the sellers (that is the minimum). Ultimately, a move back above the 1.14315 level is now even more important for the pairs technical bias (what was support, is not resistance).
  • USDJPY: The USDJPY reversed much of the decline from yesterday when stocks got hammered. Today stocks did not get hammered, so sellers yesterday in the pair, were buyers today. The pair moved back above the 100 hour MA in the US morning session at 112.47 and then held that level on a retest in the session. That gave buyers the go ahead to move to the next target at a topside trend line at 112.65. That is where the momentum faded and the price rotated back toward the 100 hour MA. In the new day, the 100 hour MA will be a barometer on the downside (bearish on a break below/bullish if the price holds support). On the topside the trend line (it is a little lower now at 112.64 and moving lower) will be a barometer above. Move above and stay above and the highs for the week will be targeted at 112.735 and 112.88
  • GBPUSD: The GBPUSD tumbled lower in the NY session as Brexit worries and a rebounding USD became more of the theme. The fall lower took the price from about 1.2909 to below a lower trend line at the 1.2836 area. The underside of that trend line became resistance, and the pair stayed below that line for the rest of the day. Late in the day a headline of tension within the PM May cabinet, sent the pair down to the next target at 1.27865-98 area. The low reached 1.2788 and quickly rebounded. The underside of the broken trend line comes in at 1.2826 currently. A move above could solicit more short covering in the pair. A move below the 1.27865 level keeps the sellers in control, and the buyers feeling the pain.

Other pairs:

The USDCAD moved above it's 100 day MA at 1.3068. That level will be a bullish above/bearish below barometer in the new trading day.

The AUDUSD is back below its 100 hour MA after a failed move above in the NY morning. The price in the US afternoon retested the MA level but stalled just below the level. The 100 hour MA will be the key level in the new day. Stay below, is more bearish. Move above gives the buyers/bulls the edge. On weakness, the 0.7050 level will be eyed as a key support target.