The Australian dollar rose sharply in overnight trading as trade talks between the United States and China started. The same was true for Australian, US and Asian stocks. Yesterday, China’s Vice Premier, Liu He began meetings with Steven Mnuchin and Robert Lighthizer with the goal of resolving the underlying issues on both sides. The meeting received a boost after Donald Trump confirmed that he would be talking with Lie He later today. Still, the market is cautious about trade since the two sides have significant differences. A good deal with China will be beneficial to Trump’s re-election campaign while China’s Xi does not want to give in to US pressure.
AUD/USD. The AUD/USD pair rose sharply to a high of 0.6780. This was the highest level since September 26. On the hourly chart, the price is along the upper line of the Bollinger Bands while the RSI has moved to the overbought level of 70. The average directional index has declined to a low of 21. Today, the pair could continue moving higher but it will depend on the outcome of the trade talks between the US and China.
Sterling. The pound had the best day in seven months after Boris Johnson and Ireland’s Prime Minister, Leo Varadkar issued a joint statement saying that they hoped for a deal before October 30th. Varadkar said that he will meet with Michel Barnier and brief him on the progress. The customs union of North Ireland is the toughest detail related to the ongoing negotiations. Under Theresa May’s agreement, the UK would remain in the EU customs union after a Brexit deal is done. Under Johnson’s plan, Northern Ireland would leave the EU’s customs union alongside the rest of the UK in 2021. The EU has insisted that Johnson’s plan is unacceptable.
EUR/GBP. The EUR/GBP pair bucked the trend and declined sharply yesterday. The pair declined to a low of 0.8830 from the day’s high of 0.9015. This price is below the 14-day and 28-day moving averages on the four-hour chart. The RSI crashed from a high of 70 to the oversold level of 30. The average true range, which is a measure of volatility increased sharply too. Today, the pair will move depending on Brexit news. While the downward momentum could continue, there is a possibility that the pair could reverse.
Loonie. The Canadian dollar will be in focus today as the country is expected to release its employment data for September. Data from Statistics Canada is expected to show that the country added more than 10k jobs. While this will be a strong number, it will be weaker than the 81k that were created in August. The participation and unemployment rates are expected to remain unchanged at 65.8% and 5.7% respectively. The Canadian central bank has resisted following the action of other central banks. It has not slashed rates this year. Weak jobs data could add more pressure to the bank.
The EUR/CAD cross was relatively unchanged in the Asian session. As of this writing, the pair is trading at 1.4640 level. This is higher than the September low of 1.4415 but lower than this month’s high of 1.4688. On the four-hour chart, this price is along the 38.2% Fibonacci Retracement level. This price is also along the upper line of the Envelopes indicator. The pair will likely remain along this holding pattern ahead of the Canadian jobs data.
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