Merkel victory adds to risk positive tone

<p>The FX markets have continued to trade with a slight bias to the risk on trade helped by stronger Chinese data and a resounding victory […]</p>

The FX markets have continued to trade with a slight bias to the risk on trade helped by stronger Chinese data and a resounding victory for Angela Merkel in Germany’s election on Sunday. The Chinese HSBC flash manufacturing data for September rose to a 6-month high of 51.2 versus the August reading of 50.1.

There were no shocks from the German election results as Angela Merkel’s Christian Democrat secured 42% of the votes which is the highest majority since Helmut Kohl reunification era of the 1990’s although as common in the European politics a coalition with the SPD looks likely as this outcome strengthens the German opposition to a common euro bond.

I expect the FOMC tapering theme to continue this week as the market focuses on speeches from various Fed members following Bullard’s comment on Friday that tapering could begin in October but for me this would need an extremely robust US jobs report on the 4th of October especially with the market being cautious as the US budget and debt ceiling showdown draws closer.

Today’s data highlights are PMI readings from the EU and US as the CFTC position data showed that USD longs were reduced by 50% last week pre the FOMC no tapering outcome.

 


EUR/USD

Supports 1.3500-1.3450-1.3380 | Resistance 1.3580-1.3630-1.3715


USD/JPY

Supports 98.85-98.45-97.80 | Resistance 99.45-99.80-100.00


GBP/USD

Supports 1.5950-1.5925-1.5885 | Resistance 1.6080-1.6125-1.6165

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