Market Update – September 20 – USD & Yields Bid, Stocks Sink – It’s FOMC Week

Market News

• USD (USDIndex 93.25) third day higher (20 day high) after strong close on Friday. CAD & CHF biggest fallers Friday – AUD Shorts at 18-month high.
• Yields rallied too on Friday – higher again this morning (10yr closed at 1.37%), pushing 1.375% currently.
• Equities tanked Friday, and FUTS are lower following a weak Asian session with Japan, China, Korea & Taiwan all closed  (Evergrande down 19% to 11 year low as default becomes real). Chinese regulators now looking a the wider real estate market.  (USA500 -40 (-0.91%) at 4433. USA500.F 4385. (Tech giants down around 2% – FB hardest hit -2.24%) on large volumes too. Robinhood +1.00% (ARK invested $14.7 million).
• VIX +over 5% to 23.12
• USOil down $1.20 and third day lower) to $71.25 after rejecting $73.00 last week.
• Gold finding support at $1750 remains pressured on rising Yields and strong dollar, next support  at $1730 and resistance at $1788.

Overnight   UK house price data from Rightmove showed prices up 5.8% y/y, up from 5.6% y/y in the previous month. German PPI inflation much stronger than expected +1.5% vs 0.8% as price increases and supply chain problems continue.

European Open – The December 10-year Bund future is up 24 ticks, outperforming versus Treasury futures, which are also higher though. Bunds, which were under pressure on Friday amid reports suggesting internal inflation projections, saw yields moving higher, but risk aversion picked up again over the weekend as markets eye virus developments and China’s growth outlook. DAX and FTSE 100 are down -0.6% and -0.4% respectively, while U.S. futures are also in the red, with a nearly 1% decline in the Dow Jones leading the way. In FX markets both EUR and Sterling declined against a stronger dollar, leaving EURUSD at 1.1713 and Cable at 1.3700. USDJPY cremains capped by 110.00 and trades at 109.88 

Central banks will be in focus this week, first and foremost of course the Fed, but in Europe, the BoE, the SNB and Norges Bank also set policy this week. That will likely see investors holding back at least until the Fed decision is out of the way. Today’s data calendar is also pretty quiet. UK house price data from Rightmove showed prices up 5.8% y/y, up from 5.6% y/y in the previous month. German PPI inflation much stronger than expected +1.5% vs 0.8% as price & supply chain problems continue.

Today – Canadian Elections, ECB’s Schnabel

Biggest Mover @ (06:30 GMT) AUDUSD (-0.59%) continued last weeks decline and the rejection of 0.7400, earlier in the month. Trades at 0.7230, next major support 0.7225 and 0.7200. Faster MA’s aligned lower, MACD signal line and histogram below 0 line and declining.  RSI 27 and OS zone, Stochs OS zone from Friday. H1 ATR 0.0010, Daily ATR 0.0060.

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Stuart Cowell

Head Market Analyst

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