Intraday Market Thoughts

USD Pushes Envelope Pre-Trade Talks

by Adam Button
Feb 11, 2019 22:33

Better sentiment on a US-China trade deal kicked off the week but be warned that it could all fall apart in a moment. The US dollar led the way while the pound lagged. Powell speaks on Tuesday. The DAX trade was locked in at a gain and a new Index trade was opened. The latest Premium Video is posted below, containining technical and fundamental ideas on the existing and upcoming trades. It also details the FX implications to the binary outcome of the US-China talks.

White House advisor Kellyanne Conway said on Monday that it looks like the US and China are getting closer to a deal. High-level talks will take place Thurs-Fri but lower level meetings have already begun so expect a steady stream of rumours and reports.

The rule of thumb on negotiations is that they're always toughest at the end. They often look like they may fall apart before there is a deal. Trump and Xi have both privately pushed for compromise but the 'generals' of the negotiations might be less flexible and the latest market moves could evaporate. The US dollar strengthened to start the week as equities and yields rose. Gold fell $6 on slipping demand for safety. Flows may also have been a factor with China returning from a week of holidays and Japan finishing up a long weekend.

The Premium video lays out how to tie the FX component to the binary outcome of the US-China talks, while highlighting the crucial support levels for EURUSD, GBPUSD and XAUUSD. Specifically for GBPUSD, traders must be aware that despite Brexit-related event have tended to trigger +100 pip intraday swings, the closing value is proving more crucial.

Looking ahead, an event to watch will be a speech from Powell at 1745 GMT Tuesday. The topic is rural poverty so it may shy away from monetary policy but it's also the kind of topic that lends itself to dovish undertones so watch out for US dollar selling. The RBNZ decision is also due early Wednesday.

Act Exp Prev GMT
Fed Chair Powell Speaks
Feb 12 17:45

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