“D-Day” For US Politicians To Get Their Act Together It is coming to two weeks since the US government partial shutdown and it is remaining so due to the failure of US politicians in coming to an agreement on raising their debt ceiling. In order to avoid a default, US politicians need to get their act together fast before their borrowing authority lapses in a few days time on 17th Oct.
If the world’s largest economy defaults on its debt, it could well trigger a domino effect in the entire financial world. The first “domino” in line could well be China, who has about 60% of its USD3.5 trillion foreign currency reserves invested in U.S. assets. This is the reason why China’s Premier Li Keqiang said at the recent Asian summit that China paid “great attention to the U.S. debt ceiling issue” which represents the highest concern from Beijing.
The deadlock between President Obama and House Republicans over the weekend caused the safe haven Yen to strengthen with a significant gap against all its major counterparts during market opening of this week. We are expecting uncertainties to loom in the next few days while the US politicians are getting their act together. The Dollar and the Yen is going to enjoy themselves on a seesaw this week.
China announced a weaker than expected Trade Balance of USD15.2B (expectation was USD25.2B) over the weekend. This resulted in the Aussie Dollar losing ground during the market opening, however, it was quick to regain the lost ground after a better than expected CPI figure of 3.1% versus the expectation of 2.8% was announced this morning.
If the US politicians are able to come to an agreement, which they usually do based on past experience, and averts a default; we do expect the Aussie Dollar to continue with its bullish momentum since 1st Oct.
Top News This Week
US: Unemployment Claims. Thursday, 17th Oct 8.30pm.
I expect figures to come in around 360K (previous figure was 374K).
China: GDP q/y. Friday, 18th Oct 10.00am.
I expect figures to come in at 7.6% (previous figure was 7.5%).
Short EUR/AUD at 1.4265
EUR/AUD has been in a consolidation for the past few trading days, if US avert its default, we expect the Aussie Dollar to continue its bullish momentum.On the H1 time frame, we will go short once prices close below the support of 1.4275. We will go Short at 1.4265 and place a stop loss of 50 pips. We will have two targets on this trade, exiting the first position at 1.4215 and the second one at 1.4165.
Entry Price = 1.4265
Stop Loss = 1.4315
1st Profit = 1.4215
2nd Profit = 1.4165