Markets Remain Calm on Trade & Brexit Headlines
Risk sentiment in the market was somewhat quiet amid a lack of data.
Minor reports on the US-China trade deal did not bring much cheer. Equities were up only slightly, while safe-haven assets were on the back foot.
The Brexit saga continues after the UK parliament rejected the Brexit deal over the weekend. However, the market reaction was soft.
German Producer Prices Inch Slightly Higher
The monthly producer prices index data for Germany saw a modest increase. Headline PPI rose 0.1% on the month in September.
The official data from Destatis beat the forecasts of a 0.1% decline. September’s PPI marks a reversal from a month ago. It was also the first increase after PPI fell for two consecutive months.
EURUSD Slips Off Resistance
EURUSD eased back after briefly testing the resistance area of 1.1177. But we expect to see a firmer retest of this level in the near term.
The bias to the downside will increase if price tests the resistance level. To the downside, the correction points to 1.1075 – 1.1062 level in the near term.
EU Mulls Over Brexit Extension
The sterling was muted after PM Boris Johnson failed to secure his Brexit deal in the Parliament. As a result, the British PM sent a formal letter of extension to the EU.
The PM was also prevented from holding a key vote on Monday. However, the speaker of the house said that there was still scope for the UK to close the Brexit deal by October 31st.
GBPUSD Maintains the Bullish Momentum
The currency pair continued to lift slightly higher. Prices tested a five-month high on Monday. However, GBPUSD is trading in the resistance zone. This makes it risky for the currency pair to reverse. If GBPUSD does not break the resistance level, then price action could slip to the lower support at 1.2582.
Gold Maintains Downside Bias
Gold prices were largely subdued on Monday. Positive reports from Larry Kudlow, the economic advisor, saw risk sentiment rising. Bond markets were largely calm. Kudlow said that if the talks continue, there is a good chance that the US will lift the new trade tariffs due to take effect in December.
XAUUSD Maintains Consolidation
XAUUSD remains rangebound for the large part. Price action is testing the lower trend line. A breach of this trend line will potentially send prices lower.
The downside target for XAUUSD is at the 1445 handle. A retest of this level in the short term for support could offer some bounce. However, unless we see a strong breakout, XAUUSD will remains trading flat.