Trump trades re-emerge as China lowers interest rates

In a rather easing going Monday, given the lack of high-impact financial releases, we expect fundamentals to lead the way for the FX market. The USD slipped on Friday, yet as the week begins market analysts highlight that the USD may remain afloat from the support it gets from the Trump trades. Practically the market seems to be increasingly pricing in the possibility of Donald Trump getting elected and follow an isolationist economic policy with extensive tariffs to be placed on US imports, which in turn tends to support the USD while on the flip side it could weigh on emerging markets. Predictions tend imply a tight race between Trump and Harris for the time being. The US Presidential elections are nearing as we have only three weeks to go and increasingly affecting the markets. Furthermore, the high uncertainty of the outcome of the presidential elections may be generating safe haven inflows for the greenback, given also that the stakes are high.

AUD/USD remained still during today’s Asian session, after hitting a ceiling on the 0.6715 (R1) resistance line on Friday. The downward trendline guiding the pair has been broken hence we maintain a sideways motion bias for the time being. Should the bears regain control over the pair, we may see the pair reversing course, surpassing Thursday’s low point and renew its aiming for the 0.6575(S1) support line. Should the bulls take over, we may see the pair breaking the 0.6715 (R1) resistance line and start aiming if not breaking the 0.6825 (R2) resistance base.

On a deeper fundamental level, we also note that PBoC cut its one- and five-year loan prime rates by 25 basis points each during today’s Asian session. It should be noted that the People’s Bank of China announced a reduction of its reserve requirement ratio by half a percent and the benchmark seven-day reverse repo rate by 20 basis points on Sept. 24, which some analysts are regarding as maybe the most aggressive post pandemic stimulus, including measures to support the much troubled property sector and increase consumption, as per media. Today’s rate cut was in continuance of China’s efforts to boost its economy, yet it remains to be seen whether the markets will consider the move as sufficient as doubts linger on. Should the rate cut satisfy the markets we may see riskier assets getting some support as more risk on approach may emerge among market participants.

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Today we get Germany’s September producer prices while Dallas Fed President Logan and Minneapolis Fed President Kashkari are scheduled to speak. During tomorrow’s Asian session, we get New Zealand’s trade data for September, while Kansas Fed President Schmid and RBNZ Ass Governor Silk speak.

NZD/USD seems to maintain a sideways motion between the 0.6095 (R1) resistance line and the 0.6045 (S1) support line. We tend to maintain our bias for the sideways motion, as long as the pair’s price action respects the prementioned levels. Yet we also note that the RSI indicator is over but near the reading of 30 implying a rather bearish sentiment for the pair, hence some bearish tendencies may exist which could drag it lower. Should the bears come in control over the pair’s direction, we may see NZD/USD breaking the 0.6045 (S1) support line and aiming for the 0.5985 (S2) support level. Should the bulls take over, we may see NZD/USD breaking the 0.6095 (R1) resistance line and aiming for the 0.6150 (R2) resistance level.

As for the rest of the week:

On Tuesday we get Canada’s PPI rates for September and on Wednesday Eurozone’s preliminary consumer confidence for October. On Thursday we get the preliminary October PMIs for Australia, Japan, France, Germany, the Eurozone as a whole, the UK and the US, as well as France’s business climate for October and the US weekly initial jobless claims figure. On Friday we get from Japan Tokyo’s CPI rates for October, Germany’s Ifo indicators for the same month and Canada’s retail sales for August.