Trump: "it might be better to wait until after the 2020 election for the China deal"
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President Trump is coming to the rescue for the USDCAD market again this morning after telling reporters in London that “it might be better to wait until after the 2020 election for the China deal”. He also said that he has no deadline on timing for the deal and that the “China deal is dependent on whether or not I want to make it.” See folks…we’ve gone nowhere when it comes to US/China trade negotiations. We’ve been harping on this point since the nonsensical, trade-hope-driven, October/early November rally in the US stock market and US yields. The US/China trade war doesn’t need to be solved any time soon in our opinion. It continues to be the convenient, scape-goat, narrative to explain everything that’s wrong with the global economy right now and so long as President Trump holds himself out as “the one” that can turn things around, he holds a Trump card (pun intended) that he can play to garner support and optimism into his 2020 election campaign.
For the time being though, global markets appear to be waking up to the US/China trade war charade and are going “risk-off”. The S&P futures, Chinese yuan and USDJPY continue lower today, with US 10yr yields finally catching up to the downside. The commodity currencies, AUD and CAD, are faltering as we head into NY trade. Today’s economic/central bank calendar is very light, and so we think traders will focus on headlines out of the NATO summit in Europe, especially in light of Trump’s tough talk on France this morning and last night’s threat of punitive tariffs on 2.4blnUSD of French goods. We think a NY close above the 1.3300 level is critical to maintaining the market’s upward momentum, and will put continued pressure on the fund net short USDCAD position (which shrunk for the 3rd week in a row during the week ending Nov 26 as shorts continued to cover).
JAN CRUDE OIL DAILY
Euro/dollar vaulted to its next major trend-line resistance level in the 1.1080s yesterday after the US reported a pretty dismal ISM Manufacturing PMI for the month of November. The headline figure of 48.1 missed expectations of 49.2 but, to make matters worse, the prices paid, new orders, and employment sub-components also missed as well. This unleased a wave of “data-driven” risk-off across the markets, which hurt the USD broadly. Today’s “trade-related” risk-off move has caused some safe-haven USD buying, which seemed to hinder EURUSD’s second attempt to get above the 1.1080s earlier, but gold’s $10 rally this morning is helping to stem the slide. The fund net short EURUSD position fell slightly during the week ending Nov 26.
FEB GOLD DAILY
Sterling is plowing higher this morning as some UK polls like Kantar and YouGov showed the Tories extending their lead over the Labour Party heading into next week’s general election, and it’s been up, up, and away since the 1.2940s chart resistance level gave way to the upside. We think the 1.3000 level we be the psychological pivot for today’s price action, and we think a NY close above this level would be yet another positive technical development for the market. The funds re-build their net short GBPUSD position for the second week in a row during the week ending Nov 26, by liquidating longs and adding shorts.
The Australian dollar rallied last night after the Reserve Bank of Australia kept interest rates on hold, citing “the long and variable lags in the transmission of monetary policy”, which it still believes is supporting employment and income growth. While the RBA reiterated it was prepared to ease policy further “if needed”, we feel that the RBA’s verbiage above hints at them being more confident staying on the sidelines for the moment. They want to see how things pan out. AUDUSD surged up past chart resistance in the 0.6830s following the RBA announcement, but it has given back half of its gains this morning since the Trump remarks came out. Australia reports its Q3 GDP figures tonight, with the market expectation being +0.5% QoQ and +1.7% YoY.
Dollar/yen is hemorrhaging losses again this morning and we have Trump’s “it might be better to wait” comments on the US/China trade deal to blame. After falling sharply lower yesterday to test chart support in the 108.90s, the market has now fallen below that and made a bee line for the next major support level in the 108.60s. US 10yr yields seem to be playing major catchup today, as they plunge back towards last week’s breakout zone in the 1.7550-1.77% area. We think a move below this level could spell big trouble for the funds, which extended their net long position in USDJPY for the 5th week in a row during the week ending Nov 26.
US 10YR BOND YIELD DAILY
Charts: Reuters Eikon
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