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Britain exiting the European Union (EU) without a trade deal would be a disaster and must be ruled out, Europe?s biggest business organization said on

Britain exiting the European Union (EU) without a trade deal would be a disaster and must be ruled out, Europe’s biggest business organization said on Monday, according to Reuters. 

Key quotes by BusinessEurope Director General Markus Beyrer 

No deal is a recipe for disaster and should be definitely ruled out. A disorderly, no-deal exit of the UK would be extremely harmful to all sides. It would cause massive damage for citizens and businesses in the UK and on the continent alike.

The negative consequences would not be limited to the exit date but would drag on, endangering the fruitful and positive future relationship we all aim for.

Having twice postponed the date of leaving the EU, Britain is now set to leave the EU on Oct. 31. EU officials have reportedly warned that the no-deal Brexit scenario is looking increasingly likely.
 

AUD/JPY gapped lower in early Asia, courtesy of oil-led risk-off in markets and continues to trade in the red following the release of the horribly we
  • AUD/JPY remains depressed after weaker-than-expected China data.
  • China's industrial production growth hit lowest in 17.5 years in August.
  • China data may add to bearish pressures around equities, pushing JPY higher.

AUD/JPY gapped lower in early Asia, courtesy of oil-led risk-off in markets and continues to trade in the red following the release of the horribly weak China data. 

The AUD/JPY pair is currently trading around 74.00 – the level seen before China released its data at 02:00 GMT – representing 0.47% losses on the day.

China's Industrial Production growth skidded to its weakest pace in 17 years and a half in August, expanding just 4.4% year-on-year, missing the analysts'expectation of a 5.2% rise.

Further, Retail Sales growth slowed to 7.5%, compared with 7.6% in July. Analysts surveyed by Reuters had expected growth of 7.9%.

So far, the data has done little damage to the already weak AUD/JPY pair. However, risk aversion may worsen during the day ahead due to China data, leading to a further rise in demand for the anti-risk Japanese Yen and a deeper decline in AUD/JPY. 

The currency pair gapped lower at 73.75 earlier today as oil gapped higher in Asia by 20%, courtesy of Saturday's attack on Saudi Aramco's plant. Oil has since then trimmed gains but is still up more than 10%. The futures on the S&P 500 are also reporting a 0.64% drop.

Technical levels

 

Politico reports that the US President Trump dismissed earlier media reports that he was ready to meet with the Iranian leadership without any prelimi

Politico reports that the US President Trump dismissed earlier media reports that he was ready to meet with the Iranian leadership without any preliminary conditions.

Trump tweeted out: "The Fake News is saying that I am willing to meet with Iran, No Conditions," the US president stated in his Twitter account. "That is an incorrect statement (as usual!)."

Meanwhile, in response to the weekend’s Houthi attack on Saudi Arabian oil and gas facilities, Trump noted: “Saudi Arabia oil supply was attacked. There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed! PLENTY OF OIL!”

The Saudi oil attack is expected to affect halve the Kingdom’s output and therefore, oil prices surged 20% in the opening trades, currently higher by around 11%.

  • Brent oil trims gains, but is still up 12%
Following the releases of downbeat Chinese activity data, the spokesman for the country?s stats bureau, National Bureau of Statistics (NBS) highlighte

Following the releases of downbeat Chinese activity data, the spokesman for the country’s stats bureau, National Bureau of Statistics (NBS) highlighted the following key points.

The economy faces increasing downward pressure.

Economy sees significantly increasing external uncertainties.

Will step up counter-cyclical adjustments.

Economic operations remain largely steady in August.

China's economic operations within reasonable range in Jan-Aug. 

Expects China's consumer inflation to remain largely stable.

China able to achieve full year growth target.

China will move forward local govt special bond issuance to support infrastructure investment.

Still needs to watch on impact from attack on Saudi oil facility.

Tax cuts and other policy measures will support industrial output growth.

China reported a horribly weak factory activity and consumer spending figures at 02:00 GMT. So far, however, that has failed to move the needle on the
  • AUD/USD is seeing little action despite dismal China. 
  • Both industrial production and retail sales growth slowed in August. 
  • Risk-off may worsen due to China data, leading to a drop in the AUD. 

China reported a horribly weak factory activity and consumer spending figures at 02:00 GMT. So far, however, that has failed to move the needle on the Aussie pairs. The AUD/USD pair continues to trade largely unaffected around 0.6872. 

Chinese consumer spending, as represented by retail sales, rose 7.5% year-on-year in August, missing the expected figure of 7.9% by a big margin and down from the preceding month's print of 7.6%. 

Industrial production growth also slowed to 4.4% in August, following a 4.8% rise in July. The markets were expecting a print of 5.2%. 

The slowdown in factory activity is not surprising, given the US-China trade tensions re-escalated in August. 

What's more concerning is that consumer spending is weakening and could lead to a deeper economic slowdown in the near future. 

As a result, the already depressed risk assets (due to oil spike) may extend losses during the day ahead, pushing the AUD in the red below 0.6861. As of writing, the futures on the S&P 500 are reporting a 0.65% drop.

Technically speaking, the pair looks overdue for a pullback, having failed to beat key Fibonacci retracement level of 0.6880 in the previous three trading days.  

Technical levels

 

China?s August retail sales YoY, the number arrived at +7.5% vs. +7.9% exp and +7.6% last, with industrial output YoY at +4.4% and +5.2% exp and +4.8

China’s August retail sales YoY, the number arrived at +7.5% vs. +7.9% exp and +7.6% last, with industrial output YoY at +4.4% and +5.2% exp and +4.8 last. China's industrial production growth skidded to its weakest pace in 17 years and a half in August

Meanwhile, urban investment YoY stood at +5.5% vs. +5.6% expected and +5.7% last. 

The downbeat data served had a negative impact on the Australian Dollar, driving the AUD/USD pair a few pips lower to near 0.6870 region.

China Fixed Asset Investment (YTD) (YoY) below expectations (5.6%) in August: Actual (5.5%)
China Retail Sales (YoY) registered at 7.5%, below expectations (7.9%) in August
China Industrial Production (YoY) below expectations (5.2%) in August: Actual (4.4%)
The New Zealand Institute of Economic Research (NZIER) published its latest forecasts on New Zealand?s economy and the domestic currency, with the key

The New Zealand Institute of Economic Research (NZIER) published its latest forecasts on New Zealand’s economy and the domestic currency, with the key highlights found below.

Activity indicators suggest annual GDP growth could slow to around 2 percent over the coming year.

Annual growth in GDP is now expected to be 2.3 percent for the year to March 2020, before picking up to 2.7 percent in the subsequent year.

Upward revision to the outlook for public consumption through to 2021.

Expectations of weaker growth in household spending, investment and exports over the next two years.

Trade war between the US and China far from resolved, the heightened uncertainty is expected to weigh on export demand.

Employment growth forecasts have been revised slightly higher.

Expectations of the unemployment rate are broadly unchanged from the previous quarter.

The New Zealand dollar (NZD) and interest rate outlook has also been revised lower in the wake of the surprise 50 basis point cut to the Official Cash Rate (OCR) in August.

Despite the forecasts downgrade by NZIER, the Kiwi manages to defend the bids near 0.6380 region amid a massive surge in oil prices. Oil prices rocketed as much as 15% in early trades following weekend reports that the Saudi oil and gas facilities were attacked by Houthi drones.

EUR/USD is currently trading at 1.1078, representing marginal gains on the day amid oil price spike. The currency pair on Friday faced rejection at th
  • EUR/USD on Friday failed to confirm a bullish close above 1.1087.
  • Key trendline hurdle is the new level to beat for the bulls.

EUR/USD is currently trading at 1.1078, representing marginal gains on the day amid oil price spike.

The currency pair on Friday faced rejection at the resistance of the trendline connecting June 25 and Aug. 13 highs and closed below 1.1087 – the high of Thursday's bullish engulfing candle.

The pair, therefore, failed to confirm a bullish reversal. Also, now the descending trendline is the level to beat for the bulls.

As of writing, the falling trendline hurdle is seen at 1.1103. A daily close above that level would validate Thursday's bullish candle and open the doors to 1.1164 (Aug. 26 high) and 1.12.

On the downside, key support is 1.1055 (Friday's low), which if violated, would mark the continuation of the retreat from Friday's high of 1.1110.

Daily chart

Trend: Bullish above 1.1103

Technical levels

 

EUR/JPY has gapped to the downside in the open of the week on risk-off news and has broken below the 21-daily moving average and the 200-daily moving
  • EUR/JPY falls below the 200 daily moving average, falling out of the short-term consolidation.
  • Bars eye support below the 117.55/52 August 12 and September 12 lows.

EUR/JPY has gapped to the downside in the open of the week on risk-off news and has broken below the 21-daily moving average and the 200-daily moving average, falling out of the short-term consolidation in the 119.49/120.06 resistance area, made up of the July low, August 6th and 13 highs, 55-day moving average and six-month resistance line. Support below the 117.55/52 August 12 and September 12 lows come in at the 116.58/115.87 area. 

EUR/JPY daily chart

USD/JPY gapped down to 107.44 on Monday?s open as risk appetite is diminished following the attack on Saudi Arabia. USD/JPY is currently trading at 10
  • Risk appetite is diminished following the attack on Saudi Arabia.
  • USD/JPY gapped down to 107.44 on Monday’s open with Fed next in focus. 

USD/JPY gapped down to 107.44 on Monday’s open as risk appetite is diminished following the attack on Saudi Arabia. USD/JPY is currently trading at 107.60 having ranged between 107.44 and 107.91, falling over 0.5%. Saudi Arabia suffered a drone attack on Saturday on the world’s largest crude-processing facility in Abqaiq and the kingdom’s second-biggest oil field in Khurais that saw more than 50% of crude and natural gas production taken offline, representing more than 5% of global crude production.

"The reaction from Pompeo over the weekend means that markets were clearly not correctly priced for geopolitical risks. As such, it is likely that we see markets move to price a risk premium into markets,"

Yields will play a key role in the price of USD/JPY while the US 2-year Treasury yields climbed from 1.71% to 1.80% on Friday, while the 10-year rose from 1.80% to 1.90%. With the Federal Reserve in mind for this wek, markets are pricing 23bp of easing at the 19 September Fed meeting, and a terminal rate of 1.29% (Fed funds rate currently 2.13%).

Fed in focus

However, there is the risk of a deeper cut and St. Louis Fed President James Bullard recently argued in favor of a 50-basis point cut. "There is indeed an argument to be made in favour of such a policy path. Trade uncertainties are still very much an issue and, judging from the latest ISM report, factory conditions are now deteriorating," analysts at NBF Economics and Strategy explained.

On the other hand, analysts at TD Securities expect just a 25bp again and the Fed to leave the door open to further easing. "The dot plot should reflect a number of FOMC voters projecting 75bp of total easing for this year, but not enough to move the median lower to that level. Presidents George and Rosengren should dissent again at the meeting."

USD/JPY levels

Valeria Bednarik, the Chief Analyst at FXStreet, explained that USD/JPY, in the daily chart, has reached a bearish 100 DMA, trading around it for the first time in four months:

Technical indicators in the mentioned chart have eased just modestly from overbought readings, far from suggesting upward exhaustion. Furthermore, the pair has extended its advance above the 61.8% retracement of its August decline at 107.45. In the 4 hours chart, the pair remains above a bullish 20 SMA, which continues advancing beyond the larger ones. Technical indicators, however, are easing within positive ground, not enough to indicate a bearish divergence, but giving a warning sign. The key is the weekly high at 108.25, as an advance beyond it should lead to additional gains toward the August high as 109.31.

The World Trade Organization (WTO) on Friday ruled in favor of the US in the long-running transatlantic dispute, opening doors for President Trump to

The World Trade Organization (WTO) on Friday ruled in favor of the US in the long-running transatlantic dispute, opening doors for President Trump to impose billions of Euros in punitive tariffs on EU products in retaliation for illegal subsidies granted to European aerospace giant Airbus, according to Politico.

One EU official told Politico that Trump had won the right to collect a total of between €5 billion and €8 billion, while another said the maximum sum was close to $10 billion.

EU officials have warned that such a move would end up destroying US jobs. Also, EU's compliant alleging illegal US subsidies for Boeing is also being examined by the WTO and the ruling is expected in about eight months.

The People's Bank of China (PBOC) has set the Yuan reference rate at 7.0657 vs Thursday's fix of 7.0846.

The People's Bank of China (PBOC) has set the Yuan reference rate at 7.0657 vs Thursday's fix of 7.0846.

A barrel of Brent oil is currently changing hands at $67.20. Prices are up 11.8% on the day, having hit a high of $71.62 earlier today. At that level,
  • Brent has backed off sharply from session highs but is still reporting double-digit gains. 
  • Oil prices could continue to rally in the near-term if the Saudi outage lasts for more than six weeks. 

A barrel of Brent oil is currently changing hands at $67.20. Prices are up 11.8% on the day, having hit a high of $71.62 earlier today. At that level, the "Black Gold" was reporting 20% gains on the day. 

Oil gapped substantially higher from Friday's close of $60.22, courtesy of Saturday's drone attack on Saudi Aramco's oil facility - one of the world's most important oil processing plant. 

The attack has resulted in the single-world disruption in oil markets ever, surpassing the impact of Iraq's invasion of Kuwait in August 1990 and many observers fear that the Saudi outage could last for months. 

If Saudi's confirm these fears, Brent prices may end up rising to $75 per barrel, according to Goldman Sachs. However, if the outage is very short, prices may surrender a major part of the gains seen today. 

A prolonged outage and the resulting rise in oil prices will likely push up inflation across the globe, complicating matters for the central banks trying to boost growth via rate cuts. 

Brent technical levels

 

The British Chamber of Commerce (BCC) on Monday released its latest economic forecast, downgrading growth expectations for the UK in 2019 to 1.2% (fro

The British Chamber of Commerce (BCC) on Monday released its latest economic forecast, downgrading growth expectations for the UK in 2019 to 1.2% (from 1.3%) and to 0.8% (from 1.0%) for 2020. 

The leading group cited Brexit stalemate and the resulting drop in business investments and productivity as reasons for downgrading growth forecasts. 

key points (source: britishchambers.org.uk)

Business investment is now forecast to decline by 1.5% this year and by 0.1% in 2020, which together with the decline of 0.4% in 2018, would be the longest period of sustained full-year declines in business investment for 17 years.

The UK’s net trade position is forecast to weaken over the period as companies face the combined headwinds of relentless uncertainty on the UK’s future relationship with Europe, weakening growth in key international markets and mounting global trade tensions.

The BCC’s economic forecast assumes a messy and disorderly Brexit is avoided. A no-deal exit would lead to major, sudden and unanticipated changes for the UK economy and would lead to revisions in our next forecast.

UK GDP growth forecast for 2019 is downgraded from 1.3% to 1.2%and from1.0% to 0.8% in 2020 and remains unchanged at 1.2% in 2021.

The quarter-on-quarter GDP growth is forecast to pick-up to 0.3% in Q3 2019, up from the 0.2% contraction in Q2.

UK official interest rates are expected to remain at 0.75% throughout 2019 and 2020, before rising to 1.0% in 2021, a year later than in our previous forecast.

GDP growth forecast of 1.2% remains unchanged for 2021.

The Chinese economy is facing downward pressure due to slowing global growth and the rise of trade protectionism and maintaining an economic growth of

The Chinese economy is facing downward pressure due to slowing global growth and the rise of trade protectionism and maintaining an economic growth of 6% or more is becoming difficult, China's Premier Li said on Monday.

China's gross domestic product grew 6.2% in the June quarter, marking its slowest pace since the first quarter of 1992.

Last week's underperformer, NZD, that fell from 0.6410 to 0.6372 on Friday has started out the week gapping to the downside and then bouncing back to
  • Kiwi started out the week gapping to the downside and then bouncing back to trade 0.16% higher.
  • The Federal Reserve will cut benchmark rates this week.

Last week's underperformer, NZD, that fell from 0.6410 to 0.6372 on Friday has started out the week gapping to the downside and then bouncing back to trade 0.16% higher at 0.6387 at the time of writing having travelled between a low of 0.6368 and a high of 0.6389.

Weekend events lead to a risk-off start to the week following Saudi Arabia suffering a drone attack on the world’s biggest crude-processing facility in Abqaiq. "The kingdom’s second-biggest oil field in Khurais that saw more than 50% of crude and natural gas production taken offline - This represents more than 5% of global crude production," analysts at Westpac explained:

"Trump has announced that he has authorised the release from the strategic petroleum reserve “if needed”; and going into the major event, global markets were well supplied with crude and reserves were high, so even if the facilities are not back to full capacity for much of the week, we should not see major supply disruptions. However, given the ease with which Houthi rebels managed to inflict this damage, and the reaction from Pompeo over the weekend means that markets were clearly not correctly priced for geopolitical risks. As such, it is likely that we see markets move to price a risk premium into markets."

Fed in focus

Meanwhile, yields will be a key focus this week with the Federal Reserve interest rate decision while market pricing for RBNZ is for 3bp of easing on 25 September, with a terminal rate of 0.64%. 

The Federal Reserve will cut benchmark rates this week, the question is by how much. "We are therefore calling for a 25-bps cut on Wednesday to be followed by another similarly-sized move before the end of the year," analysts at NBF Economics and Strategy explained:

"Reinforcing our view is the fact that, in his final public address before the Fed’s meeting, Chairman Powell painted a rather upbeat picture of the economy, thereby opting to pass on his last chance to gear market expectations towards a large cut. The dot plot and participants’ economic projections will be updated at the meeting."

NZD/USD levels

 

 

Australian intelligence determined China was responsible for a cyber-attack on its national parliament and three largest political parties before the
  • Australian intelligence determined China was responsible for a cyber-attack.
  • Chinese foreign ministry says China resolutely opposes.

Australian intelligence determined China was responsible for a cyber-attack on its national parliament and three largest political parties before the general election in May, five people with direct knowledge of the matter told Reuters:

The report, which also included input from the Department of Foreign Affairs, recommended keeping the findings secret in order to avoid disrupting trade relations with Beijing, two of the people said. The Australian government has not disclosed who it believes was behind the attack or any details of the report.

In response to questions posed by Reuters, Prime Minister Scott Morrison’s office declined to comment on the attack, the report’s findings or whether Australia had privately raised the hack with China. The ASD also declined to comment.


Chinese foreign ministry says China resolutely opposes and cracks down on any form of internet attacks, is also a victim of hacking.

AUD/USD opened the week with a bearish gap on the reaction to the increased tensions in the Middle East following the attack on Saudi Arabia?s oil and
  • Commodities complex was heavily impacted by the attack on Saudi Arabia’s oil facilities.
  • AUD/USD opened the week with a bearish gap on the knee jerk.

AUD/USD opened the week with a bearish gap on the reaction to the increased tensions in the Middle East following the attack on Saudi Arabia’s oil and gas facilities in Abqaiq which has suspended half of the kingdom’s processing, corresponding to 6% of world supply. AUD/USD is currently trading at the highs of the day at 0.6879 having recovered from the drop to 0.6861. 

The commodities complex was heavily impacted on the news that Saudi Arabia’s oil production was cut in half after explosive drones attacked Aramco’s Abqaiq plant and set it ablaze. Oil spiked a whopping 15% in the open causing ripples across commodity-related asset classes. 

"We expect the market to quickly price in a sizeable geopolitical risk premium," analysts at ANZ Bank explained. "Any expectation that the market had about the US easing sanctions on Iran following President Trump’s dismissal of John Bolton will quickly dissipate. This should see Brent crude test the US70/bbl mark in the short term. Any further upside will depend on the length of the disruption."

All eyes turn to the Fed

Meanwhile, the week ahead holds the Federal Reserve interest rate decision where 25 basis point cut is already priced into the markets. However, we will also get new forecasts from the central bank and analysts at ING Bank said we are likely to see some modest downward revisions to growth from the numbers published in June. "On balance, the median forecast of Federal Reserve officials is likely to signal one additional rate cut in the current cycle, maybe in 2020, but this will matter little to markets. After all the June median forecast had no rate cuts for 2019 and by the end of Wednesday, the Fed will have conducted two 25bp cuts within three months of publishing that prediction."

AUD/USD levels 

Valeria Bednarik, the Chief Analyst at FXStreet, noted that the AUD/USD pair has stalled its recovery around the 50% retracement of its July/August decline, having failed to break above it throughout the week:

"Still, technical readings in the daily chart maintain the risk skewed to the upside, as the pair is developing above a bullish 20 SMA, while technical indicators hold on to weekly highs, lacking directional strength but well into positive ground. In the shorter term, and according to the 4 hours chart, the pair is giving signs of upward exhaustion, as it has spent the last couple of days resting above a flat 20 SMA, while technical indicators ease within positive levels. The pair could begin correcting lower once below 0.6830, but bearish won’t take the lead unless it loses 0.6770."

 

Indonesia Trade Balance registered at $-0.06B above expectations ($-0.42B) in August
United Kingdom Rightmove House Price Index (YoY) fell from previous 1.2% to 0.2% in September
United Kingdom Rightmove House Price Index (MoM) increased to -0.2% in September from previous -1%
Gold prices have shot higher in the open this week due to the increased tensions in the Middle East following the attack on Saudi Arabia?s oil and gas
  • Gold spikes to $1,506 from $1,488.75 the low on  Saudi Arabia headlines. 
  • 6% of world oil supply cut off following the attack on Saudi Arabia’s oil and gas facilities.

Gold prices have shot higher in the open this week due to the increased tensions in the Middle East following the attack on Saudi Arabia’s oil and gas facilities in Abqaiq which has suspended half of the kingdom’s processing, corresponding to 6% of world supply. Gold jumped 1.2% in the open, travelling to a high of $1,506 from $1,488.75 the low following a weekly decline of 1.1%. last week. 

"Saudi Arabia’s oil production was cut in half after explosive drones attacked Aramco’s Abqaiq plant and set it ablaze," analysts at ANZ Bank explained:

"The plant is a major source of supply and a prolonged outage as a result of the attack has the potential to negatively impact global energy markets. That said, Saudi Arabia and US officials are reportedly prepared to dip into their reserves to offset supply impacts in the interim. Saudi Arabia’s oil fields have been the target of a number of drone attacks over the past year, with Yemen’s Houthi rebels claiming responsibility for the latest attack."

However, while the news alone is a blow for risk appetite, gold was already poised to the upside considering the underlying global economic weakness, dovish central banks and shortages of safe-haven assets which still suggests the path of least resistance for gold is higher.

Fed in focus

This week will be critical for Gold with the Federal Reserve in mind, priced in by the market to cut a further 25 basis points. " It will be justified as insurance to mitigate the trade and global headwinds facing the economy. Rising inflation and a strong consumer mean anyone expecting a more dovish message will be left disappointed," analysts at ING Bank argued.

Gold levels

Gold has been offered below the 21-day moving average around a 38.2% Fibonacci retracement around the 1490 mark. However, bulls are back in lay while on the 1,500 handle but will need to get back above 1,550 which then guards prospects for 1,590 as the 127.2% Fibo target area. 

 

The price of West Texas Intermediate has leapt an impressive 15% at the open as tensions in the Middle East skyrocket following the attack on Saudi Ar
  • The price of oil has surged following the attack on Saudi Arabia’s oil and gas facilities.
  • Tensions in the Middle East skyrocket sending oil on spike high of $63.19.

The price of West Texas Intermediate has leapt an impressive 15% at the open as tensions in the Middle East skyrocket following the attack on Saudi Arabia’s oil and gas facilities in Abqaiq, which has suspended half of the kingdom’s processing corresponding to 6% of world supply. WTI is currently trading at $61.54, down from the opening spike high of $63.19, up from the low of $59.95.

One of the main oil arteries of the global economy cut off

The price of oil has surged considering implications of one of the main arteries of the global economy being cut off.  The Houthi rebels in Yemen have claimed responsibility but there’s also the belief that Shiite militias in Iraq could have been the culprits. U.S. Secretary of State Mike Pompeo has put the blame squarely on Iran, saying that there “is no evidence the attacks came from Yemen.” The Trump administration will be quick to present proof of Iran’s culpability before the international community, seeking unified response from world powers and will presumably use the United Nations General Assembly this week in New York to marshal a global response.

"The market seemed to be disappointed that OPEC+ didn’t consider deepening production cuts as they gathered in Abu Dhabi. However, this is likely to be forgotten, this week, after the weekend’s attack by Houthi rebels on Saudi Arabian oil facilities. This has resulted in the kingdom’s capacity being cut by half or 5.7mb/d," analysts at ANZ Bank exlained.

WTI levels

A daily doji in the week was followed by a swift and aggressive sell-off of over 6.5% down to trendline support. The 38.2% Fibonacci retracement of the July swing highs to May-July horizontal support has so far held up which guards 53 the figure and the 23.6% Fibo of the same range. The upside target is the 78.6% Fibo and Sep highs in the 58.70s. 

 

While CAD was the notable underperformer in the G10 space, slipping -0.5% to 1.328, the currency has opened strongly at the start of the week sending
  • CAD opens strongly at the start of the week sending Funds down some 0.5% to a low of 1.3216.
  • An attack on Saudi Arabia’s key oil facilities has significantly raised tension in the Middle East.

While CAD was the notable underperformer in the G10 space, slipping -0.5% to 1.328, the currency has opened strongly at the start of the week sending Funds down some 0.5% to a low of 1.3216 on news of facilities at the Abqaiq and Khurais oil fields being attacked which has cut Saudi Arabia’s oil capacity in half becomes the major focus and likely to see oil prices surge higher.

An attack on Saudi Arabia’s key oil facilities has significantly raised tension in the Middle East with Houthi rebels in Yemen reported to have launched a fleet of drones on Saturday.

"The heightened geopolitical risk should override market concerns about weaker demand for the foreseeable future," analysts at ANZ Bank explained:

"The timing of this attack is no accident. It comes only a week after Saudi Arabia’s appointment of Prince Abdulaziz bin Salman as Energy Minister and shortly after news of a restart in initial public offering of Aramco."

"We expect the market to quickly price in a sizeable geopolitical risk premium. Any expectation that the market had about the US easing sanctions on Iran following President Trump’s dismissal of John Bolton will quickly dissipate. This should see Brent crude test the US70/bbl mark in the short term. Any further upside will depend on the length of the disruption."
 

Fed and Candian data in focus

Meanwhile, the Loonie will be in focus this week with Retail Sales as well as inflation data on tap where headline inflation is expected to creep lower to 1.7% y/y as weaker gasoline prices contributed to a 0.3% m/m decline. "Airfares will add another source of downside on a partial correction of the 14% gain in July, while the Bank of Canada's core measures are expected to hold at 2.0% y/y on average," TD Securities.  As for the Dollar, the Federal Reserve interest rate decision is priced in with markets expecting the central bank to lower rates by 25bp again next week and leave the door open to further easing. 

USD/CAD levels

For a technical perspective, Funds has fallen to the 50 and 21 4-hour moving average convergence which guards a run back to the 50% line of the July-September range at 1.32 the figure. The 61.8% Fibonacci target comes in the 1.3150s ahead of the 200-day moving average and confluence of a 23.6% Fibo.

 

Weekend events were centred around the energy market following an attack on Saudi Arabia?s oil and gas facilities in Abqaiq. Bloomberg news writes tha
  • An attack on Saudi Arabia’s oil and gas facilities in Abqaiq.
  • Responsibility for the attacks has been claimed by the Houthi rebels in Yemen.

Weekend events were centred around the energy market following an attack on Saudi Arabia’s oil and gas facilities in Abqaiq.

Bloomberg news writes that the responsibility for the attacks has been claimed by the Houthi rebels in Yemen, who say they used a swarm of drones to inflict great damage, "which has suspended half of the kingdom’s processing, corresponding to 6% of world supply, is a blow to one of the main arteries of the global economy. The Trump administration should use the United Nations General Assembly this week in New York to marshal a global response."

"In geopolitical terms, it might not make much difference: The Houthis and Iraq’s militias are both proxies for Iran, which supplies them with money and materiel, including weapons capable of striking deep into Saudi territory. The Islamic Republic denies any role in the attacks, but it has a long history of using proxies and cutouts to attack its regional rivals. U.S. Secretary of State Mike Pompeo has put the blame squarely on Iran, adding that there “is no evidence the attacks came from Yemen.”"

"The Trump administration should act swiftly to present proof of Iran’s culpability before the international community, and press for a unified response, especially from the other major world powers: China, Russia, Germany, France and Britain."

In word and deed, they should put Tehran on notice that its behavior will no longer be tolerated.

The General Assembly this week provides the perfect platform from which to do this. A resolution from the Security Council condemning Iran’s actions would be a good start. The other signatories should also reimpose economic sanctions on the regime, and be prepared to join a U.S.-led naval force protecting the Persian Gulf.

 

In an article written in The Telegraph, UK PM Johnson has stated that he passionately believes that he can strike an EU deal within weeks, giving the
  • Boris Johnson believes that he can strike an EU deal within weeks.
  • Boris Johnson heads to Luxembourg for his first face to face meeting with European Commission President Jean-Claude Juncker on Monday.

In an article written in The Telegraph, UK PM Johnson has stated that he passionately believes that he can strike an EU deal within weeks, giving the clearest indication yet that an agreement is close.

"As he heads to Luxembourg for his first face to face meeting with European Commission President Jean-Claude Juncker on Monday, the Prime Minister says he is working “flat out” to avoid a no deal exit.

Writing in The Daily Telegraph, Mr Johnson says he wants to “get this thing done” so that Britain can emerge from Brexit “on a brighter, more cheerful, more confident and global path”.

 

Here is what you need to know on Monday, September 16th: EUR?s rally offset by better-than-expected US data, attention shifts to the Fed announcement

Here is what you need to know on Monday, September 16th:

  • EUR’s rally offset by better-than-expected US data, attention shifts to the Fed announcement later this week.
  • The Pound rallied on renewed hopes the UK may get a way to modify the Irish backstop, despite on Thursday, EU’s top negotiator Michel Barnier said that there are no grounds for reopening formal negotiations.  Optimism was underpinned by a leaked report suggesting that the EU is prepared to grant another extension on Brexit to avoid a no-deal.
  • UK PM Boris Johnson is planning to secure a deal with the EU at the EU summing in Brussels mid-October.
  • US Treasury yields were firmly up. The yield on the benchmark 10-year Treasury closed the week at 1.90%,  its largest weekly rally since November 2016.
  • Safe-havens remained under selling pressure, with USD/JPY above 108.00 and Gold sub-1,500.00.
  • During the weekend, news showed that one of the world’s largest oil facilities in Saudi Arabia was attacked by drone, and estimates indicate that it cut as much as  5mbpd of Saudi oil production. Houthi rebels claimed they were behind the attack. Such news could affect crude prices at the weekly opening.
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