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Europe set for positive open despite negative US close

Europe set for positive open despite negative US close

European markets managed to finish higher for the first day this week yesterday, helped in part by the return of some optimism after China pledged to buy more US pork and soybean products. This was taken as a positive, in a week when the dominating narrative has been one of negatives, and pessimism around the trade story.

US markets, on the other hand were more preoccupied with the release of the whistle-blower manuscripts which alleged that White House officials tried to cover up the contents of the Presidential conversation with the Ukraine President, as well as other key conversations, that might have breached national security guidelines. There was also some concern that the US might not extent waivers that were granted to US companies that have dealings with China's Huawei.

As a result of this both the S&P500 and Dow struggled to make much in the way of headway, finishing lower, as the cross currents of impeachment concerns and trade uncertainty made the prospect of a move back towards the highs this week a struggle.

This lower close doesn’t appear to be filtering down into today’s European open where we look set to see markets pick up from where they left off yesterday, with a higher open on reports that the US and China are set to restart trade talks on October 10th in Washington.

The US dollar had a better day of it finishing near its highest levels in two years driven largely by interest rate differentials with the euro making another new two year low, while the pound continued to find itself hobbled by the deadlock in the UK parliament.

Having gone to all the effort of forcing Parliament to reopen, through the courts MPs have managed to achieve the sum total of diddly squat over the past couple of days, only succeeding in showing the British public how devoid of solutions they are to the current deadlock in front of them, and proving once and for all how unfit they are for office, by hurling insults and screaming at each other.

On the data front we get a look at the latest personal spending and income data for August from the US, after yesterday’s weekly jobless claims rose by 3k to 213k.

Wages data, along with retail sales growth have been one of the outperformers thus far this year, and personal income data has proved to be remarkably resilient in recent months, rising at a steady 0.2% for the last four months. A rise of 0.2% is also expected for August, while personal spending is expected to rise 0.3% slightly down from the 0.6% seen in July. The numbers here have been consistently positive all of this year with one exception, when we had a 0.5% decline during the government shutdown episode, at the start of the year.

EURUSD – looks set for a move through the 1.0900 area, with a break below targeting a move towards the 1 0800 area. We still have trend line resistance at 1.1070, from the June peaks at 1.1412, with further resistance at the 50-day MA just above.

GBPUSD – has slipped below the 1.2380 level raising the prospect that we might see further losses towards the 1.2280 area, and 50-day MA.  A move below 1.2270 retargets the August lows at 1.1985. If we can hold above 1.2280 then a move back to 1.2500 is possible.

EURGBP – has continued to edge higher towards the 0.8900 area we have resistance. The key support area remains at the lows last week at 0.8785/95 level. This is the 61.8% retracement of the entire 0.8475/ 0.9325 up move. A move back above the 0.8900 area targets the 0.8930 level. A break below 0.8780 opens up 0.8720.

USDJPY – found support at the 50-day MA at 107.00, which could see a return to the 108.50 previous highs. A move below the 107.00 level opens up the prospect of a move towards 106.00. 

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