Canada’s Ivey PMI due out today

The main event of the day is set to be Canada’s Ivey PMI figure.

MORNING OVERVIEW

Canada’s Ivey PMI figure is due to be released during today’s American trading session. It’s set to garner attention for Loonie traders.

MARKET SNAPSHOT

KEY MARKET THEMES

01 — Canada’s Ivey PMI figure

Canada’s Ivey PMI figure for September is set to be released during the American trading session. The figure is expected to come in at 65.2 versus 64.3 previously. The Ivey PMI measures the month-on-month change in economic activity across the Canadian economy as reported by a panel of purchasing managers, with a reading above 50 indicating expansion and below 50 indicating contraction. As a broad gauge of business activity, the figure is of significance as a stronger-than-expected reading points to a healthier Canadian economy, which could support the case for tighter Bank of Canada policy. Should the figure print above expectations, CAD may find support as the data reinforces expectations of a more hawkish BoC stance, which could also weigh on gold and Canadian equities. On the flip side, should the figure undershoot expectations, CAD may lose ground as it points to a softening economy, while gold and Canadian stock markets could rise.

Market implication (CAD): N/A

02 — France’s woes continue

France faces continued nationwide protests this week, with students and trade unions demanding fixes to underfunded public services, following a fortnight of demonstrations that have spread from Paris’s suburbs across the country. The government has responded with riot police deployments, leading to mass arrests and clashes. The unrest adds further pressure on a government already struggling to narrow its budget deficit ahead of elections to replace President Macron, with right wing candidate Marine Le Pen using the moment to pitch her own fiscal credentials via proposed spending cuts. French 10-year government bond yields have already surged to around 4.9%, the highest level since 2002, with the yield premium over German Bunds widening to a 14-year high of 131 basis points. Should the unrest escalate further or the government fail to present a credible fiscal consolidation plan, French bond yields could extend their rise, which may weigh on EUR and European equities while supporting gold and other safe havens. On the flip side, should protests ease and the government deliver a credible budget plan that reassures investors, French yields could stabilise or pull back, offering some support to EUR and French/European equities.

Market implication (EUR): Bearish

03 — US Atlanta Fed GDP Now preliminary rate due today

The Atlanta Fed is due to update its GDPNow estimate for Q3 growth today, release at 18:30 local time, with the model’s latest tracking estimate standing at 3.7%, unchanged from its prior reading. As a rea-time model-based estimate rather than a survey-based forecast, GDPNow tends to move with each new data input throughout the quarter, so a steady reading at 3.7% points to continued resilience in the US economy. Should the estimate be revised higher, it may reinforce expectations of robust US growth, which could support the USD and US equities while weighing on gold. On the flip side, should the estimate be revised lower, it may raise concerns over slowing momentum, which could weigh on the USD.

Market implication (USD) : N/A

WHAT MATTERS TODAY

Canada’s Ivey PMI figure for September

Time (GMT+2): 17:00

Expected: 65.2
Previous: 64.3

Potential market reaction:
Could support the CAD

US AtlantaFedGDP Now preliminary rate (Q3)

Time (GMT+2): 18:30

Expected: 3.7%
Previous: 3.7%

Potential market reaction:
Any rate > 3.7% could support the USD

ASSET FOCUS

[Gold / Commodities]

XAU/USD appears to be moving in a downwards fashion. We opt for a bearish outlook  for the bullion’s price. Supporting our case is the RSI indicator below our chart which currently registers a figure below 40 implying a strong bearish market sentiment, in addition to the MACD indicator below our chart. For our bearish outlook to continue we would require a break below our 4080 (S1) support level, with the next possible target for the bears being our 3945 (S2) support line. On the other hand, for a bullish outlook we would require a clear break above our 4200 (R1) resistance line with the next possible target for the bulls being our 4350 (R2) resistance level. Lastly, for a sideways bias we would require gold’s price to remain confined between our 4080 (S1) support level and our 4200 (R1) resistance line.

KEY LEVELS

• Resistance (R1): 4200
• Resistance (R2): 4350
• Support (S1): 4080
• Support (S2): 3945

Technical View: Bearish

CROSS-ASSET VIEW

TRADING SPHERE VIEW

Bearish for OIL

Our base case:
G7 and the Yemen’s Governments actions could alleviate concerns about oil supply and possible disruptions by the rebel’s which may weigh on oil prices.

What would change our view:
Strikes on oil refineries and oil pipelines

RISKS TO THE VIEW

US-Iran escalation

Should the US and Iran trade blows it may aid oil prices.

TODAY’S WATCHLIST

01 Canada’s Ivey PMI figure

02 US AtlantaFedGDP Now rate