Will it become a trend reversal point?! Germany election and U.S. currency report ~ October 15 strategy ~

◎ Current positions and strategy

EUR/USD Short positionis holding only the core position。 This morning, voting is underway in the state parliament elections in Germany. It appears that the number of seats held by Prime Minister Merkel will decrease, which would be a negative development for her. Personally, I view this as a negative factor for the euro, but since it has been somewhat priced in, I want to watch how far the impact will extend. I am also keeping an eye on the results of Italy’s budget proposal. Fundamentally, the time-frame Fibonacci (blue) has rebounded at 50%. The Fibonacci (yellow) is approaching just below 61.8%. If it breaks below 61.8%, I would consider adding to the Short position.

EUR/USD Time-frame chart

EUR/USD Daily chart

AUD/USD Short position is held。 The focus is on the currency report and the response to China, but I expect negative factors to appear and no positive factors to appear. Therefore, I am considering a strategy of selling AUD, but last weekend the dollar weakened strongly, so AUD/USD rose. On the hourly chart, it looks like it retraced at the green 61.8% Fibonacci. If it tests new lows again, I will consider adding to the position.

AUD/USD Time-frame chart

AUD/USD Daily chart

GBP/JPYhas been hit by negative pound factors and risk-off yen appreciationstops, triggering losses. This week I want to consider the direction once Brexit negotiations become clearer.

◎ Today’s points of focus

1)Germany: Bavaria state election

This morning, in Germany's Bavaria, where Merkel’s base is located, voting is underway for the state parliament. Exit polls currently show the ruling party losing many seats. This could be seen as a reduction in Merkel’s influence. However, although it’s a sizable decrease, the results appear to be better than pre-election expectations (securing more seats than anticipated). Since it’s exit polls, we should watch the actual results as ballots are counted. I also want to observe how the market reacts to the results.

2)U.S. Currency Report

The currency report will be released today the 15th. Attention is on how China is treated. Will China be certified as a currency manipulator? If certified, what actions will the U.S. take toward China? There has not yet been a country labeled a currency manipulator, so it’s unclear what actions will be taken. I will carefully assess this response and the market’s reaction.

3)Italy’s budget

This week, Italy must submit its budget to the EU. Will it be submitted smoothly? How will the EU respond to the submitted budget? I will be watching closely.

EURO swings on Italy’s budget案 — What’s the issue?

4)Brexit negotiations

By the 18th, EU leaders’ summit aims to put a provisional end to Brexit negotiations, but many issues remain. Until the 18th, headlines are likely to be frequent, with high volatility and mixed sentiment. Personally, if there is a clearer outlook on the Ireland border issue, I expect the pound to rise. Conversely, if negotiations end in stalemate, a no-deal Brexit could occur, potentially pushing the pound lower again. It looks like a week not to miss.

Ireland border issue — The hardest part of Brexit negotiations

This week will feature many focus points across the U.S., U.K., and Europe. It could be a turning point for direction, so I believe it’s important to observe events and focus points calmly and thoroughly.

◎ Today’s event schedule

10/14 (Sunday)

Germany: Bavaria state election

10/15 (Monday)

Italy budget proposal submission deadline

16:00 TRY unemployment rate
21:30 USD Retail sales

10/16 (Tuesday)

06:45 NZD Quarterly CPINew Zealand CPI (quarterly)
09:30 AUDMinutes of Monetary Policy Meeting (Oct 2)
10:30 CNY China CPI (Consumer Price Index)

◎ Last weekend’s Record Room

For last weekend’s long-term yields, stock prices, and remarks by officials, please refer to the following

October 12 Record Room — Rates, Stocks, and Remarks