The US and China declared a truce in their trade war. The White House said “President Trump has agreed that on January 1, 2019, he will leave the tariffs on $200 billion worth of product at the 10% rate, and not raise it to 25% at this time. China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries. China has agreed to start purchasing agricultural products from our farmers immediately.” China’s official statement was a tad light on details but concurred that both sides would stop adding tariffs on each other.
Stock markets soared as did commodity currencies. The Shanghai Shenzhen CSI 300 Index jumped 2.78%, and the Hang Seng rose 2.55%. The German DAX rallied 2.38%, and US equity futures point to a strong opening on Wall Street.
EURUSD chopped inside a 1.1324-1.1377 range and opened in New York at the bottom of that band. Prices are pressured by concerns about the Paris riots and the ongoing EU/Italy budget debate.
AUD & JPY
The Commodity currency bloc rallied led by a 0.82% rise in AUDUSD. USDJPY gapped higher at the open but traded lower throughout the overnight session. Prices bottomed out at 113.38 before climbing to 113.54 at the New York open.
Sterling is in a Brexit world and trading with a negative bias ahead of the December 11 House of Commons vote on Prime Minister May’s Brexit deal. At the moment, it appears May will lose the vote which could result in another referendum and a general election. GBPUSD is trading at the bottom of its 1.2713-1.2823 range. Traders ignored better than expected UK Manufacturing PMI data (Actual 53.1 vs forecast 51.8)
Oil prices soared. WTI rallied from Friday’s close of $50.66/barrel to $53.82/b before easing down to $53.07 when New York started. The rally was sparked by a report that Russia had agreed to Saudi Arabia’s plan to extend oil production cuts. The drop was triggered when Qatar announced it would quit Opec in January.
The US releases ISM Manufacturing PMI which is forecast to be unchanged at 55.4 for November. Construction Spending is also on tap.
USDCAD plunged on the back of the soaring oil prices and the US/China trade truce. Traders were caught “long and wrong” as prices fell through support at 1.3220. Traders are looking ahead to Wednesday’s Bank of Canada policy decision. The BoC is expected to leave interest rates unchanged, but it isn’t a slam-dunk decision.
The intraday USDCAD technicals are bearish. USDCAD gapped lower at the Asia open and briefly dipped below uptrend line support at 1.3170, from October 3. USDCAD has triple bottom support at 1.3180. A decisive break below that level will negate the uptrend and target 1.3050. Nature and FX abhor a vacuum. The gap from Friday’s close(1.3287) and Monday’s Asia open (1.3260) will get filled. For today, USDCAD support is at 1.3270 and 1.3210. Resistance is at 1.3210 and 1.3240