The emerging progress in trade negotiations between the US and China has led to a weakening of demand for protective assets and, accordingly, to increased investor interest in risky financial instruments.
On Friday, as American President D. Trump stated, the first "phase" of the negotiation was positive, and he hopes that the second will lead to a new trade agreement and settlement of trade disputes. It seems that there really is some progress, since the Chinese side also confirms it. This is really good news, which may cause investors to continue to maintain interest in company stocks and commodity assets, which will also cause a weakening growth in demand for government bonds of economically developed countries and gold quotes, which were previously actively bought in the wake of the uncertainty of the prospects for trade negotiations between Washington and Beijing, as well as future Fed action in relation to stimulate measures for the national economy.
In the foreign exchange market, the dollar ended last week in the red against major currencies, with the exception of the Japanese yen and the Swiss franc. In addition, the single European currency and the British pound received good support. The reason for this was the shift in the balance of power in London towards Brexit's new postponement. On this wave, the pound grew against the US dollar by more than 2.5% at the moment, and the single currency grew by almost 1.0%.
Commodity currencies, in turn, were in favor in the wake of demand for commodity and commodity assets, where, of course, the reason was the outlined progress in the US-China trade negotiations.
On Monday, partial profit taking is continuing on the foreign exchange and gold markets, as investors seem to want to hear something new about the negotiations between the United States and China, as well as see the latest economic statistics before taking new actions. If we talk about China, I demonstrate mixed dynamics.
Thus, today, data on the volume of exports, imports and trade balances of China were published. The volume of exports fell in September in annual terms by 3.2% against 1.0% and expectations of a decrease of 3.0%. The volume of imports fell even more noticeably, by 8.5% versus 5.6% and the forecast of a decrease of 5.2%. However, at the same time, the trade balance increased in September by $ 39.65 billion against $ 34.84 billion and a forecast of a decrease to $ 33.3 billion.
Assessing the general market sentiment, we believe that the consolidation today with some local strengthening of the dollar in the foreign exchange markets will continue.
Forecast of the day:
AUD/USD is trading above support level 0.6770. If it does not resist, and profit taking continues at the trading in Europe, the pair may continue to decline to 0.6730. At the same time, its consolidation above the level of 0.6770 and the continuation of positive sentiment will lead to the continuation of price growth to 0.6810.
Gold on the spot also corrected upwards after a strong fall on Friday and is currently trading below the level of 1488.75. If this level persists, then it will continue its local recovery to 1505.00. At the same time, the continuation of demand for risky assets will unfold the price and quotes may fall to 1473.50 with the prospect of a decrease to 1461.90. We consider the second option as more realistic.