The US government is headed for its first partial shutdown in 17 years after a deadlocked weekend between the House and the Senate due to a budget standoff.
Here’s the background information: House Republicans want to delay President Barack Obama’ s Affordable Care Act for a year and make other changes to the health law. The President and Democrats vow not to let that happen. Although the Republicans and Democrats in Congress say they don’t want a shutdown, both sides refuse to budge.
800,000 federal workers would be on furlough and national parks and Internal Revenue Service call centers may close should a shutdown happen.
In a government shutdown, essential operations and programs with dedicated funding would continue. That includes mail delivery, air-traffic control and Social Security payments. According to economists, a shutdown could reduce fourth-quarter economic growth by as much as 1.4 percentage points, depending on its duration. The biggest effect would come from the output lost from furloughed workers.
If the above scenario occurs, there’s a good chance that the Federal Reserve will continue its bond-buying program. Although economists predict that the Fed will probably start scaling back in December this year, an economic slowdown may prevent them from doing so. A clue is noticed in Treasuries, where 10-year yields fell three basis points, or 0.03 percentage point, to 2.60 percent. The yen also gained.
Markets fell as traders contemplated the effects of a political gridlock. Standard & Poor’s 500 Index futures expiring in December dropped 0.7 percent to 1,674.70 as of noon on Monday. Asian stocks fell too, paring the biggest monthly jump in the MSCI Asia Pacific Index regional benchmark gauge which fell 1.1 percent as of noon today, trimming September’s advance to 7 percent. West Texas Intermediate oil fell 1.3 percent, heading for an almost three-month low.
If US politicians do not come to an agreement soon, markets could continue falling. However, even if Congress resolves the spending fight, lawmakers would immediately move to the next fiscal dispute over raising the USD16.7 trillion debt ceiling. That would be a whole new problem altogether.
Australia: Retail Sales m/m. Tuesday, 1st Oct 9.30am.
I expect figures to come in at 0.3% (previous figure was 0.1%).
USA: Non-Farm Payrolls. Friday, 4th Oct 8.30pm.
I expect figures to come in above 160K (previous figure was 169K).
Short USD/JPY at 97.66
On the H1 time frame, USD/JPY opened with a gap-down of about 56 pips. This shows that the US dollar was sold off to buy the safe haven yen. If Congress doesn’t reach an agreement, I expect further weakness in the USD/JPY pair.
We will go short at the same level when prices opened on Monday morning, 97.66. We will have a stop loss of 45 pips which is located between the gap, as we do not expect prices to retrace that far. We will have two targets on this trade, exiting the first position at 97.21 and the second one at 96.76.
Entry Price = 97.66
Stop Loss = 98.11
1st Profit = 97.21
2nd Profit = 96.76