The London close has been choppy as the Monday forex range gets carved out. The levels created today will no doubt offer decent support and resistance lines to trade-off later this week when we do get some scheduled Tier-1 data to come through the calendar. A weakening US dollar will be really good for the commodities and associated forex pairs which have started off well this week.
At the London close, the biggest change in the composition of the heatmap is the decline in relative strength for the Chinese yuan. The Antipodeans plus the Canadian dollar have maintained their strength against the safe-haven currencies and the US equities currently reflect a slight positive momentum.
There has been little scheduled data released during the start of the US session but today is the turn for the US treasury to release their monthly budget statement. Tracking the flows as I do, I can tell you daily how much the US government spends as I feel it has a major impact on the US stock markets.
The end of September is also the end of the US Treasury fiscal year and in this fiscal year, they have spent a record amount, already up to $7.409 trillion. The orange line on the graph above is the monthly closing prices of the SPX (S&P500) which I believe is largely influenced by the flows.
A decline in the US dollar could be to do with the issuance of lots of corporate debt but also with news from China’s Evergrande who say rumors of their impending bankruptcy are unfounded. Last week could have been a move into the US dollar from worried East Asian investors trying to distance themselves from the run on Evergrande after rating agencies downgraded them. On the US dollar index, the turn came at the 50% level of the last down wave so a close below the recent swing low and the $92.30 level will be bearish for the greenback.
The oil markets are higher today on the weakening US dollar but also on news from OPEC+ and the US Department of Energy. Exxon Mobil has requested a further 1.5mln barrels of oil from the Strategic Petroleum Reserve as resumptions of their infrastructure in the Gulf of Mexico remain slow. Whereas OPEC+ has not raised their forecast for global demand of oil and more importantly have not downwardly revised their estimates for 2022.
The US Open and London close has been good for the GBPUSD after a quick dip down to the weekly pivot at 3.30 pm today. If this level can hold as support the next logical target is the recent swing highs and above.