Pepperstone logo
Pepperstone logo
  • English
  • عربي
  • Ways to trade

    Pricing

    Trading accounts

    Pro

    Premium clients

    Refer a friend

    Active trader program

    Trading hours

    24-hour trading

    Maintenance schedule

  • Trading platforms

    Trading platforms

    TradingView

    Pepperstone platform

    MetaTrader 5

    MetaTrader 4

    cTrader

    Integrations

    Trading tools

  • Markets

    Markets to trade

    Forex

    Shares

    ETFs

    Indices

    Commodities

    Currency Indices

    Cryptocurrencies

    Dividends for index CFDs

    Dividends for share CFDs

    CFD forwards

  • Market analysis

    Market news

    Navigating Markets

    The Daily Fix

    Meet the analysts

  • Learn to trade

    Trading guides

    CFD trading

    Forex trading

    Commodity trading

    Stock trading

    Crypto trading

    Bitcoin trading

    Technical analysis

    Day trading

    Scalping trading

    Upcoming IPOs

    Gold trading

    Oil trading

    Webinars

  • Professional Clients

  • Partners

  • About us

  • Help and support

  • English
  • عربي

Daily Fix: A day for traders to navigate huge event risk

Chris Weston
Chris Weston
Head of Research
2 Sep 2019
Share
The lead for Asian equities comes from a 0.2% gain in the EU Stoxx index. And with the S&P 500 cash market closed for US Labor Day, the best way to visualise the Asia open is to assess the net change in the S&P 500 futures. Here, we see S&P 500 futures 0.2% lower from 16:10 AEST (the official close of the ASX 200), with Aussie SPI futures closing 15 points lower in this same period.

This suggests a tight open in what’s due to be an action-packed economic data day, amid our calls for a weaker open in Hong Kong and Japan.

The focus in equity world remains on the setup in S&P 500 futures, where we see the market stuck between the 50-day SMA (2945) and the 200-day SMA (2814). This is confining the cash index into 2945 to 2822. A break of these levels should define the ensuing trend, not just the US markets. It could also have a bearing on risk in FX markets and commodities, with the VIX index so influential on broad portfolio management.

Strong gold flow

Our biggest flow has been in gold. There seems to be a view that the yellow metal takes out the 1550 supply zone soon enough. Friday’s low of 1517 needs to hold; otherwise, we pull back quickly into trend support at 1502. As a catalyst, at 00:00 AEST tonight we get the US ISM manufacturing report, with the consensus calling for an unchanged read at 51.2. We watch for the subcomponents, such as new orders and new export orders. But with this tier-one data point correlated to bond yields, this is a clear event risk for traders.

With a 19% chance of a 50bp cut priced into the Fed funds futures for the September FOMC meeting, and the speculative community running a record net long position of 2,127,352 contracts (see histogram below), if the manufacturing report comes in above, say, 51.5, with improvements in the forward-looking components, then a number of the rates bulls will do a quick assessment.

Daily Fix: A day for traders to navigate huge event risk

"Source: Bloomberg"

That could keep the bullish momentum in the USD rolling on despite sentiment among institutional traders already sky-high. This could also cause a reasonable sell-off in front-end bonds, with bear flattening the curve and gold sellers in the mix. Of course we could see a weaker ISM manufacturing print (than consensus), and the reverse kicks in, although the trend in the regional prints suggests upside risks to ISM print, with better numbers seen in Chicago, Dallas and New York while Kansas City was poor.

UK election risks are ever rising

GBPUSD has been well traded, too, with the pair breaking the bear flag pattern (on the daily) and the eyes falling on the 12 August low of 1.2015 — where a break takes us to the 16 January 2017 low of 1.1986.

GBPUSD, daily

It won’t surprise that implied vols have picked up in all the GBP crosses, with GBPUSD one-month implied vol now at 11.78% — the highest levels since April. We look at GBPUSD two-month options and the skew of put volatility over call volatility at -1.64, but that’s only the 40th percentile. It feels like GBP bears still have work to do here. Most will look at the weekly Commitment of Traders (CoT) report and see the near record 89,028 short GBP futures position. However, the skew in demand for bearish downside structures (puts) versus bullish (calls) tells me a lot about semantics, too. Right now the options market is paying up for downside, but it’s by no means extremes.

Let’s see how that goes, but the wheels are in motion as Parliament resumes in earnest today, where a cross-party group are looking to pass legislation that’d require British Prime Minister Boris Johnson to extend Article 50 until 31 January. If this passes, which is going to be hit-and-miss recalling the Copper Bill that facilitated the March Brexit extension that only passed by a single vote, then Johnson has vowed to call a snap election for 14 October. There’s no certainty he’ll even get the blessing here to hold an election, as he needs two-thirds of Members of Parliament to agree, and that’ll require Labour to be on board.

Trading GBP is for the brave

Trading UK assets is clearly for the brave, as we’re fighting headlines and that’s always a tough ask. The market is obviously discounting a lot already and a decent element of no-deal Brexit risk even if it’s impossible to model.

Eyes on CNH and AUD

Staying in FX land as we head through the session, we continue watching USDCNH with the bull trend continuing. A break of 7.20 is looking like a matter of time. The CNY fix has been a source of volatility suppression and inspiration for a couple of weeks now, with the People’s Bank of China lifting the USDCNY midpoint by far less than the streets models time after time, and risk assets have taken heart in that. As long as the PBoC doesn’t bring the fix into the mix, then vols don’t spike. We’ll also be focused on all thing Aussie today. While we’ve kept a beady eye on moves in USDCNH, it’s the domestic side of the external/domestic debate that’ll see AUDUSD test key support into 67c or move back into the middle of the 68c – 67c trading range it’s held since 1 August.

Overnight AUDUSD implied volatility sits at 12.6%, but that should move higher as the session grinds on, as this vol reading is only 47th percentile (over the past 12 months), so it isn’t overly high. The market is pricing a 38-pips move (with a 68.2% degree of confidence) on the session, and that accounts for a whole plethora of event risk. First up, net exports are expected to contribute 30bp to tomorrow’s Q2 GDP. And after yesterday’s inventory data, one’d be highly surprised if the consensus of 0.5% QoQ isn't closer to 0.2% to 0.3%.

The implied move also accounts for July retail sales (also 11:30 AEST), with calls for a 20bp increase here. We watch for the Q2 balance of payments print, where the consensus is we see a surplus of AUD $1.5bn, which not only will be used as a political accolade. But for those who model a currencies long-term valuation, current accounts do matter.

The Reserve Bank of Australia meeting (14:30 AEST) is the central focus, though, even if the market places a 12% chance of a cut. The bigger driver of the AUD will likely be the statement and whether it’s dovish enough to meet the 54bp of cuts priced in over the coming six months or 62bp of cuts over the coming 12 months.

Most read

1

The disinflationary message seen in commodities and rates markets

2

Will the BOJ be the last dovish domino to fall?

3

Trader thoughts - the conflicting forces dictating EURUSD flow

Ready to trade?

It's quick and easy to get started. Apply in minutes with our simple application process.

Get startedSubscribe to The Daily Fix

The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.

Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.

Other sites

  • The Trade Off
  • Partners
  • Group
  • Careers

Ways to trade

  • Pricing
  • Trading accounts
  • Pro
  • Premium clients
  • Active trader program
  • Refer a friend
  • Trading hours

Platforms

  • Trading platforms
  • Trading tools

Markets and Symbols

  • Forex
  • Shares
  • ETFs
  • Indicies
  • Commodities
  • Currency indicies
  • Cryptocurrencies
  • CFD forwards

Analysis

  • Navigating Markets
  • The Daily Fix
  • Pepperstone Pulse
  • Meet the Analysts

Learn to trade

  • Trading Guides
  • Videos
  • Webinars
Pepperstone logo
support.ae@pepperstone.com
+97145734100
Al Fattan Currency House
Level 15, Office 1502 A, Tower 2
P.O.Box 482087, DIFC
Dubai, United Arab Emirates
  • Legal documents
  • Privacy policy
  • Website terms and conditions
  • Cookie policy
  • Whistleblower policy

© 2025 Pepperstone Financial Services (DIFC) Limited

Risk warning: Trading CFDs and FX carries significant risk. Trading OTC derivatives may not be suitable for everyone so please ensure that you fully understand the risks involved and take care to manage your exposure. You have no ownership of the underlying asset. Pepperstone Financial Services (DIFC) Limited does not issue advice, recommendations or opinion in relation to acquiring, holding or disposing of OTC derivatives nor is Pepperstone a financial advisor. All services are provided on an execution only basis. Pepperstone Financial Services (DIFC) Limited only provides information of a general nature and does not take into account your financial objectives, personal circumstances. We recommend that you seek independent personal financial or legal advice.

Pepperstone Financial Services (DIFC) Limited is registered at Al Fattan Currency House, Tower 2, Level 15, Office 1502 A, P. O. Box 482087, DIFC, Dubai, United Arab Emirates and is regulated by the DFSA under license number F004356.

The product issuer is Pepperstone Group Limited registered at Level 16, Tower One, 727 Collins St, Docklands, Victoria 3008, Australia and is licensed and regulated by the Australian Securities and Investments Commission, AFSL 414530. You should consider whether you are part of the product issuer’s target market by reviewing the TMD, and read the PDS and other legal documents to ensure you fully understand the risks before you make any trading decisions.