According to media, US President Trump called the Fed “crazy”, “loco” and “too aggressive” in raising interest rates. The statements were targeting the bank’s projected rate hike in December. Analysts point out that the Fed seems to be on the spot, in its portrait of the US economy and does not seem to dent as recent data supports its reasoning. Also, the stock market mini sell-off seems to show some signs of easing as US inflation data came out lower than expected, yesterday. On other news, China’s trade balance figure came out far higher than expected with a record surplus regarding trading with the US, despite the recent US tariffs. Given Mike Pompeo’s, chilly reception from the Chinese in his recent journey to China, it may be the case that the reported Chinese surplus, could spark an escalation of the US-Sino trade war as the US side may harden its position. As US president Trump had already stated his intention to be willing to impose tariffs on the sum of the Chinese imports, we would not be surprised to see articles or statements announcing such measures in the next few days, in an effort from the US to mount pressure on the Chinese side. We could see further volatility for the USD in the upcoming days as it decides its next leg, and it should be noted that the 10 year treasury yields had a small rise yesterday, possibly supporting the greenback somewhat.

EUR/USD continued to rise yesterday, breaking the 1.1577 (S1) resistance line, now turned to support. For our bullish bias to be lifted we would require a clear breaking of the upward trend-line incepted since the 9th of October. It should be noted that gains made by the pair as time progresses, seem to get smaller and smaller and the pair may be approaching a make or break position. Should the bulls continue to dictate the pair’s direction, we could see the pair breaking the 1.1630 (R1) resistance line. On the other hand should the bears take over, we could see the pair breaking the 1.1577 (S1) support line aiming for the 1.1525 (S2) support level.

Sterling stabilizes and gains remain in check

The pound stabilised yesterday against the USD and any gains made remained in check, as caution could be settling among investors again. Concerns about the Irish border issue continue to exist among investors, keeping hopes and optimism contained. Analysts point out, that markets expect the Brexit negotiations to be by 80% resolved, however the remaining 20% may be the most difficult. Optimism remains however, as the negotiating parties are in a race to reach a deal before the EU summit on October 18th. On other news, former PM Tony Blair stated in an interview that there is a 50-50 chance of a new referendum, as Theresa May may not be able to reach the required majority in parliament, to get an approval for her Brexit plan. Further volatility could be expected for the pound, as the EU summit draws near.

Cable traded in a sideways movement, stabilising above the 1.3215 (S1) support line, during today’s Asian session. The pair tested the upward trend-line, incepted since the 4th of October and proved unable to breach it, hence we retain our bullish bias. Should the pair’s long positions continue to be favoured by the market, we could see it aiming if not breaking the 1.3285 (R1) resistance line, while if the pair comes under selling interest, we could see it breaking the prementioned upward trend-line, the 1.3215 (S1) support level and aim for the 1.3150 (S2) support barrier.

In today’s other economic highlights:

During the European session, Germany’s final HICP rate and Eurozone’s industrial production growth rate, both for September are due out, while in the American session we get from the US , the import prices growth rate for September and the U. Michigan preliminary Consumer Sentiment indicator for October. As for speakers, Chicago Fed President Charles Evans and Atlanta Fed President Raphael Bostic speak.

EUR/USD 4H

Support: 1.1577 (S1), 1.1525 (S2), 1.1480 (S3)

Resistance: 1.1630 (R1), 1.1673 (R2), 1.1720 (R3)

GBP/USD 4H

Support: 1.3215 (S1), 1.3150 (S2), 1.3080 (S3)

Resistance: 1.3285 (R1), 1.3360 (R2), 1.3445 (R3)