There has been no resolution to the political/monetary policy debacle coming out of the USA. However, the flows have been positive towards a more risk-on day, so it would seem the markets are assuming that this all works out even if it goes to the wire. According to Treasury Secretary Yellen, the Senators have until October 18th before the USA runs out of money. Economic data out of Germany hasn’t been very inspiring so a stronger dollar today will undo any positive moves in the single currency.
Data this morning shows that UK house prices in September were 7.4% higher than they were a year ago. As the UK stamp duty holiday ends, the average house price has soared sharply to an average price of £267,587. Month-on-month, house prices increased by 1.7%, and over the last year, they were up by 7.4%. However, the latest Bank of England figures show that mortgage approvals for home purchases declined by 1% in August 2021 to 74,453. Numbers for August are down 15% when compared to last year. If credit is not being issued at a high rate this could be for several reasons but ultimately it is a drag on the economic growth.
According to Germany's Federal Statistical Office, industrial production declined by 4% in August. Compared to the same month the prior year, the increase was 1.7%.
Excluding energy and construction, production in industry was down 4.7%, while the production of capital goods declined 7.8%. Consumer goods slid 2.6% and intermediate goods production lost by 2.5%. Germany really needs to do better at coping with the disruptions from coronavirus if it is to drag the rest of Europe forwards into an economic recovery.
The EURUSD sentiment on the ActivTrader platform shows that 73% of traders are bullish on the euro, even though data out of Germany recently has not been that positive.
The daily chart for EURUSD is clearly in a downtrend, with the moving averages pointing to lower prices and the price action is clearly in a downtrend too. The London session has started off with an appreciation in the euro, but I wouldn’t be looking for a long position until we breach the most recent swing high.
The forex heatmap shows that the general mood of the markets is leaning towards risk-on, with the commodity pairs gaining as the US dollar stalls. The Swiss franc is mixed but the yen is clearly weaker. According to Governor Haruhiko Kuroda of the Bank of Japan, the country's core consumer price index (CPI) will remain around 0% in the near term and start to rise slowly next year. Despite the effects of the Coronavirus pandemic, Kuroda said that the economy is improving overall and will continue to do well and that the financial systems remain stable. Lastly, Kuroda said that the central bank is "closely watching" the impact of the coronavirus and that it won't hesitate to ease financial policies further if the situation calls for it.
The EURJPY is currently at a pivot level and is probing the 128.70 prices again. If we see a close below here, support could become resistance and the next logical move would be to test the September lows.
Following on from the BOJ governor’s comments the Nikkei 225 has been positive and is carving out a bullish reversal pattern across the last few trading sessions. On an H1 chart, there is a positive divergence between the lows of the RSI oscillator and the lower lows in the price action. If we get above the recent swing high and 28,297 there is room to the upside for a motive wave up towards 29,500 at least before we run into resistance again. The Nikkei 225 had fallen -6.5% and is currently up 0.5% today, with its closest peers also doing well.
Silver and Platinum are up over 2% this week and gold has turned green for the week in early trading today. There is a chance that the spot gold price lifts higher as there is also a positive divergence between the RSI indicator and the price action. For me the key level of resistance that needs to be removed, and a close above would confirm this, is the $1,785 /oz price level. When we get back up there traders could start to pile in and push for an impulsive move higher, to break out of the June-Sep corrective channel.