Volatility to stay high on trades | CMC Markets Daily Commentary
News-driven activities led volatility higher in equity futures, gold and USD/CNH this morning, as sentiment swung alongside with news on the US-China trade talks. So far, there is little concrete detail about what has been reached and we are not sure if Chinese delegates will stay through this Friday or decide to end the talks earlier.
Recent developments on the US’s accusation of China’s human rights practices, and escalated tensions on social media about the NBA created a doomy atmosphere for the trade talks today. And it probably even suggests that opinions are so divided between the US and China on economic, political and ideological levels that a trade deal is essentially impossible for now.
Therefore, prepare for higher volatility in the next 48 hours and watch breaking news carefully. Technical patterns will probably be disrupted by news-driven volatility and thus become no longer valid. Time is key and proper risk management will become even more important.
This morning, data shows that Japan’s machinery orders growth tumbled by 14.5% YoY, slumping to a five-year low. The machinery orders figure is a leading indicator of production in Japan. A decease in orders mean that manufacturers will cut back their activities and demand for machines.
China will release its M2 and new yuan loan figures to be released at 10:00 SGT. Markets expect a mild increase in September loans but credit growth remains modest. It suggests more easing stimulus is probably needed to spur growth against the backdrop of weak demand and trade pressure.
Gold remains a key asset in focus this week, given heightened trade risk and the Fed’s latest move to expand its balance sheet and hints at more rate cuts.
Japan Machinery Orders – YoY
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