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Europe Roundup: DXY holds marginal gains, Euro choppy, WTI crude extends declines ahead of API data, European stocks markets weaken from multi-month highs - Tuesday, October 29th, 2019

Market Roundup

  • Trade deal hopes spur Aussie gains vs. Swiss franc for a third day
     
  • U.S.-China tensions spur progress on giant Asia trade pact
     
  • UK house prices edge up but Brexit drag persists
     
  • Tokyo inflation remains stagnant after Japan's Oct sales tax hike
     
  • French consumer confidence stays at 20-month peak in October
     
  • China's factory activity seen contracting for sixth month on trade pressure: Reuters poll  

Economic Data Ahead

  • (0900 ET/1300 GMT) U.S. S&P/Case-Shiller Index Y/Y (Aug) (Forecast 2.1%, Prior 2%)
     
  • (1000 ET/1400 GMT) U.S. Pending Home Sales Y/Y (Sept) (Forecast 1.4%, Prior 2.5%)
     
  • (1000 ET/1400 GMT) U.S. Pending Home Sales M/M (Sept) (Forecast 0.9%, Prior 1.6%)

Key Events Ahead 

  • No Significant Event Scheduled

FX Beat

DXY:  U.S. Dollar index strengthens on the day as markets await Fed interest rate decision (Wednesday). DXY was trading at 97.85 at 11:25 GMT, up 0.12%. Later in the session, U.S. Conference Board’s gauge of the Consumer Confidence, S&P/Case-Shiller Index and Pending Home Sales will be in focus for further direction.

EUR/USD: EUR/USD extends choppy trade, erases most of the previous session's gains. EUR/USD was trading at 1.1078, down 0.19% after closing 0.19% higher in the previous session. Major and minor trend are bearish as long as pair remains below 200-DMA. Near-term support is around 1.1070 and any violation below will drag the pair down till 1.10370/1.100. Major resistance is around 1.1120 and any convincing break above targets 1.1150/1.11780. Minor trend reversal only above 1.11780.  

USD/CHF: USD/CHF is attempting break above 200-DMA resistance. Upside was dented after the major's failed attempt at 200-DMA on Monday's trade. A 'Gravestone Doji' formation on the daily candle on Monday dents upside. Technical bias is bullish. GMMA indicator shows both major and minor trend are bullish. However, decisive breakout at 200-DMA crucial for further upside. Fed policy meeting (Wednesday) will provide further impetus.

GBP/USD: Cable retraces from session lows at 1.2806 and was trading at 1.2864, up 0.07% at 11:40 GMT. The British Pound remains volatile amid Brexit perils and messy EU-UK divorce drama. Focus also on U.S. consumer confidence data ahead of Fed decision for direction. Price action is above 200-DMA. Major and minor trend are bullish. 200-DMA is major support at 1.2711, weakness only on break below.

USD/JPY:  USD/JPY pauses upside at major resistance at 200-DMA (currently at 109.05). The overall trend for the pair is bullish and any minor weakness only below 108.13. Decisive break above 200-DMA will take the pair to next hurdle at 110/110.48. Near-term support is around 108.60 (200-H SMA) and any violation below will drag the pair down till 108.24/108. Focus on U.S. Consumer Confidence, S&P/Case-Shiller Index and Pending Home Sales later today. Fed and BoJ policy meeting later in the week will also have a major impact on future direction.

Equities Recap

European stocks markets weaken from multi-month highs ahead of a key central bank meetings. 

At around 11:45 GMT, The Stoxx Europe 600 declined 0.41% to 397.34. The German DAX declined 0.13% to 12924.51.

The French CAC 40 was down 0.04% at 5728.00 and the U.K. FTSE 100 declined 0.77% to 7277.45.

Commodities Recap

Gold extends weakness for the 2nd straight session. Downside, however, remained cushioned amid expectations of a Fed rate cut on Wednesday. 

Spot Gold was trading at 1486.75 at 11:00 GMT, down 0.37% at the time of writing. Silver was also down 0.77% at 17.69.

Crude Oil prices slipped back for the second straight session, WTI crude was trading at 55.12 per brl at 11:00 GMT, down 1.08% after closing 1.61% lower in the previous session.

Treasuries Recap

U.S.: The U.S. Treasuries gained during Tuesday’s afternoon session on hopes of a further 25bp interest rate cut by the Federal Reserve at its monetary policy meeting on Wednesday amid an otherwise silent trading day that barely witnessed any data of major economic significance. The yield on the benchmark 10-year Treasury yield slumped nearly 2-1/2 basis points to 1.830 percent, the super-long 30-year bond yield plunged nearly 3-1/2 basis points to 2.316 percent and the yield on the short-term 2-year traded 1-1/2 basis points down at 1.636 percent.

UK: The United Kingdom’s gilts surged during European trading hours Tuesday amid ongoing Brexit politics and extension of divorce deadline to January 31, 2020. However, in terms of economic data, focus will remain on the country’s manufacturing PMI for the month of October, scheduled to be released by end of this week for further direction in the debt market. The yield on the benchmark 10-year gilts, plunged nearly 3-1/2 basis points to 0.690 percent, the 30-year yield slumped 2 basis points to 1.208 percent and the yield on the short-term 2-year suffered nearly 3 basis points to 0.520 percent

EUR: The German bunds jumped during European session Tuesday ahead of the country’s labour market report for the month of October, scheduled to be released on October 29 by 08:55GMT and the consumer price inflation (CPI) for the similar period, due for release on the same day by 11:00GMT for added information in the debt market. The German 10-year bond yield, which move inversely to its price, slumped 2-1/2 basis points to -0.353 percent, the yield on 30-year note also plummeted 3-1/2 basis points to 0.142 percent and the yield on short-term 2-year suffered 1-1/2 basis points down at -0.661 percent.

JGBs: The Japanese government bonds closed mixed Tuesday ahead of the country’s industrial production data for the month of September, scheduled to be released on October 30 by 23:50GMT and the Bank of Japan’s (BoJ) monetary policy meeting, due to be held on October 31 shall provide further direction to the debt market. At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, remained 11 basis points down at -0.111 percent, the yield on the long-term 30-year jumped 2 basis points to 0.450 percent and the yield on short-term 2-year suffered 20 basis points to -0.207 percent.

AUS: The Australian government bonds remained flat during Asian session of the second trading day of the week Tuesday amid a muted trading session that witnessed data of little economic significance. However, the country’s consumer price inflation (CPI) for the third quarter of this year, due for release on October 30 by 00:30GMT shall impart further direction to the debt market. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, remained steady at 1.175 percent, the yield on the long-term 30-year bond hovered around 1.753 percent and the yield on short-term 2-year too traded flat at 0.829 percent.

By Anupama Grandhi
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