Focus has turned back to the US/China trade dispute after there was little sign of any agreement at the Asia-Pacific Economic Cooperation summit at the weekend, something that has muted risk appetite today. Whilst this was never going to be the forum for any real progress between the world’s two major economic powerhouses, the fact that the summit failed to agree on a joint communique for the first time ever, speaks volumes of the size of the task ahead for any trade negotiations. After a volatile few days on global markets with geopolitics on a number of key issues driving market sentiment, it is interesting to see that US bond yields have slipped back and are threatening to roll over again. Falls on both Treasury yields and the dollar came on Friday as the newly appointed vice chair of the FOMC, Richard Clarida discussed the fact that a neutral level for interest rates could be close (between 2.5% to 3.5%) and that the Fed should become data dependent. Being vice chair and said to be close to Fed chair Powell, this could be something to look out for. The dollar has regained a degree of support this morning after the APEC summit, but it will be interesting to see if this is a chance to buy on the dollar again or, whether sentiment is materially shifting.
Wall Street closed slightly higher on Friday with the S&P 500 +0.2% at 2736 and although futures are giving back these gains early today, Asian markets have still managed a positive close (Nikkei +0.7%, Shanghai Composite +0.8%). European futures markets are a little more cautious and are mildly higher as trading gets underway on Monday morning. In forex, there is a mildly risk negative move as the European markets take over, with a mixed outlook on the G4 currencies, but the higher risk commodity currencies (Aussie, Kiwi and Canadian dollar) are underperforming. In commodities there is a slight dip back on gold after Friday’s strong move higher, whilst oil continues to edge higher in a recovery.
There is a light economic calendar in store for traders today with little other than the NAHB Housing Market Index at 1500GMT which is expected to remain flat at 68 (68 in October).
Chart of the Day –USD/CAD
The near term outlook has been mildly corrective in the past couple of sessions across the majors, especially Friday after the dovish comments from the FOMC’s Richard Clarida. With oil bouncing too, this has manifested itself as a correction on USD/CAD. The question is whether the corrective move will continue to break the support of the six week uptrend, or whether the dollar bulls would be able to muster the strength to use it as a buying opportunity. The breakout above 1.3175/1.3225 has already been breached as a basis of support, but with the uptrend (currently 1.3130) holding to the pip on Friday and an early rebound today, could this be another ch