Italian ” fondere”

The Euro 

EUR continues to leak lower as Italy’s government has shattered the budget and challenged the EU’s mandate. BTPs have driven a good chunk of the move lower.  The Euro was holding on the 1.1600 handles by a thread, but the less -than -vigorous Eurozone September Core CPI came in lower than expected at 0.9%YoY (1.1% estimated, 1.0% prior) which sprung the 1.1600 trap door triggering a wave of stop losses as that fundamental and  psychological level ceded.

Indeed music to EURO bears ears as the ECB will be in no mood to signal a quicker pace of interest normalisation anytime soon. And with the Fed laying their cards on the table and guiding the markets to a December rate hike, the keep it simple pragmatic approach to this trade suggests the dollar remains clearly in favour as US growth and positive USD differentials will stay supportive.

The Japanese Yen

For all the right macro reason spot USDJPY is looking to break higher, and if the NKY and US 10 y yields continue to track higher, there is no reason we cannot push into the 114 zones next week.

There are some chunky structural long EURJPY and a lot of underlying derivatives that add up to the same trade still sitting on traders books. These positions are clearly at risk during this Italy induced panic as we leak near yet another psychological support level EURJPY 131. However, these structures  should not come under any stress provided EURJPY  130 remain intact

Oil markets 

I’ve been told me my views are far too unabashedly bullish, but from my seat until sizable supply is offered up by OPEC and with pandemic market chatter raging about the $100 per barrel market, its hard not to be blatantly bullish.

Gold Markets

Gold has been trading in a rather begin range after dropping to fresh one-month lows on the stronger USD dollar narrative. But frankly, the market is so oversold that we should expect consolidation to set in before the next leg lower. We’re in the domain of the Gold Bears who have August $1160 lows in their crosshairs.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes