EU Summit in full swing, focus on the pound and euro! ~ Strategy for October 18 ~
◎ Current Positions and Strategies
EUR/USD Short position has been added to. We added as the double top formed after breaking below the 61.8% Fibonacci (yellow) on the time-frame chart, and due to negative comments regarding the Italian budget. We also added at “1.1500”. For the added position, the stop is placed at “1.1600”, but if positive statements regarding the budget arise, I plan to close the position early. The next adding position will be considered around the previous low update.
EUR/USD Time-frame chart
EUR/USD Daily chart
AUD/USD Short position is currently held. It hasn’t fallen much, but the dollar strengthened due to hawkish FOMC minutes yesterday. Today I’d like to decide whether to close based on the payrolls and unemployment data, or to add more. The timing for adding is around a new low. The stop is set at the entry price, so I’m considering a position close at entry.
AUD/USD Time-frame chart
AUD/USD Daily chart
Other points of attention are,Cross-yen. I’m considering whether to hold a position today, butGBP/JPY. If the Brexit negotiations look hopeful, I’d like to target it. Also,CAD/JPYdepends on tomorrow’s CPI. Since there were no changes in the Currency Report, risk-off mood has diminished and yen depreciation has progressed. Considering that Canada expects rate hikes and the UK (pound) has priced in bad news, there may be buying catalysts — I’m watching closely.
◎ Today's Focus
1) EU Summit and Brexit Negotiations
The EU Summit started yesterday. Specifically, an informal dinner with 27 countries (excluding the UK) has begun. In advance, there have been cautions. There have been statements about extending negotiations, followed by denials. Notably, statements about a no-deal Brexit stood out.
What matters at the EU Summit today. Yesterday was informal; tomorrow is the Asia-Europe Meeting, so today is likely the only time to discuss Brexit negotiations. There are two focal points. 1) Can they pave a path toward an agreement on Brexit negotiations? Or will a no-deal Brexit become likely? Will there be an extraordinary EU summit in November, or can an agreement be reached by the December EU Summit? 2) Ireland border issue. Even if the broad negotiation framework is agreed, if the Irish border issue cannot be resolved, the UK (May administration) may not survive. Today is a day to see how far discussions advance or if it ends with only warnings.
Ireland Border Issue ~ The Most Difficult Part of Brexit Negotiations ~
2) Italian Budget Plan
Yesterday, statements regarding the Italian budget finally emerged. The content suggests that the EU may not approve the budget. It was expected and negative for the euro, causing euro depreciation. However, there has not been a formal announcement yet; the official release is awaited. The Italian government has not shown signs of revising the budget (reducing the deficit). It remains to be seen whether the EU will approve this budget. Also, at month-end, Fitch and Moody’s rating announcements are due. Remarks and outlooks on ratings are also of interest.
Euro Volatility Around Italian Budget — What’s the Issue? Explainer
3) Forex Report and Foreign Exchange Clauses
This morning, the Forex Report was released. There were no changes in content; six countries remain on the monitoring list, but no country was designated as a currency manipulator. The anticipated issue was whether China would be labeled a currency manipulator and how the US would respond. Although concerns existed about potential impact on the trade war, this time it was avoided. The avoidance reduced risk-off mood.
Regarding currency clauses, there are discrepancies between Japan and the US. Japan denies currency clauses, while the US (Secretary Mnuchin) has expressed a positive stance. If the US strengthens its statements on currency clauses, it could lead to aggressive acceptance. If currency clauses become a substantive topic, it would put upward pressure on the yen. Going forward, both countries’ statements will be watched.
◎ Today’s Event Schedule
10/18 (Thursday)
EU Leaders' Summit (Brussels, 18-19)
Asia-Europe Meeting (Brussels, 18-19)
09:30 JPY Kuroda, Bank of Japan Governor remarks
09:30 AUD Employment Change / Unemployment Rate
17:00 EUR Nowotny, Austrian Central Bank President remarks
17:30 GBP Retail Sales
21:30 USD Philadelphia Fed Manufacturing Index
22:00 USD Williams, New York Fed President remarks
22:05 USD Bullard, St. Louis Fed President remarks
10/19 (Friday)
EU Leaders' Summit (Brussels, 18-19)
Asia-Europe Meeting (Brussels, 18-19)
01:15 USD Quarles, Fed Vice Chair remarks11:00 CNY China GDP
↓↓↓ Please refer to the weekly schedule and focal points below ↓↓↓
