Weekly Fundamental Forecast: Trade Wars and Emerging Market Pressures to Mix with Rate Decisions and Liquidity Next Week
The summer lull has come to a close, but no serious fundamental themes have been resolved during the volatility hiatus. Now, with an expected seasonal pick up in market participation; the markets will have to keep tabs on pressing themes like Trade wars while high profile event risk (such as NFPs) crosses the wires.
The US Dollar is poised to continue higher, finding compelling narratives to drive demand in both risk on and off trading conditions.
Despite the calendar flipping to September, issues prevalent in August - like Brexit and Turkey - will continue to guide the EUR-crosses.
USD/JPY may exhibit a more bearish behavior ahead of the Non-Farm Payrolls (NFP) report as it initiates a bearish sequence after failing to test the August-high (112.15)
The mid-week announcement that the EU is willing to offer the UK an unprecedented third-country deal sent Sterling racing higher as Brexit gloom began to clear.
There is plenty of interesting Australian stuff going on this week, with an interest rate decision and official growth data crowning a full schedule.
New Zealand Dollar seems vulnerable to US tariffs on China as trade war fears rise, sending the S&P 500 lower. Also, the BoC preparing markets for a hike bodes ill for NZD/USD prices.
Key risk events keep implied volatility for the CAD at lofty levels with markets placing close attention to the outcome of NAFTA talks. Elsewhere, the BoC will likely emphasis gradual tightening at rate decision.
Donald Trump will continue to bring tariff headlines that likely will bring short-term downward shocks to the oil market, but overall support looks to be firm for crude oil in coming months.
September season tendencies favor Gold strength and we’re looking to validate the August low. These are the targets & invalidation levels into the monthly open.
The resumed trade war is expected to add pressure on the Yuan; yet, whether the USD/CNH can break above 6.90 will still need a say from China’s Central Bank.
Global equities continue to diverge as European markets took a dip this week after US stocks set fresh highs. Meanwhile, a big setup is brewing in the Nikkei as we move towards the final four months of 2018.
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