Calm Prevails Ahead of Confidence

A call for calm from China's top trade official stalled risk aversion throughout financial markets on Monday.  A critical report on US consumer confidence is coming up next. Friday is the last trading day of the month in which JPY and CHF are the top FX performers, while silver and gold were the biggest commodity winners. AUD and NZD are the biggest losers of the month. Traders will keep an eye on 106.80 resistance in USDJPY, 105.40s support, while indices may retest 26200 and 2930s on DOW30 and SPX.  A new Premium trade has been issued in early Tuesday Asia trading. The mystery chart below is one of the two charts used to back the Premium trade.

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Short-term trading in 2019 continues to be overwhelmingly driven by trade headlines. Market sentiment turned positive Monday after Liu He called for calm. Trump also revealed that Chinese officials had called their US counterparts in Washington. Chinese media tried to downplay those moves but risk trades cheered for now.

AUD/JPY has been a particularly volatile trade, which is normal in high-risk moments. The pair fell below 70.00 early in Monday trade to a 10-year low but reversed to finish near 72.00 in an impressive reversal. US stocks also rebounded from recent lows with the S&P 500 climbing 31 points. It was an impressive show of resilience that shows a faith in central banks and perhaps some lingering optimism about a trade deal.

Do not forget the 10-2 yield spread, which inverted for the 3rd straight session.

US economic data was mixed. Headline durable goods orders rose 2.1% compared to 1.2% expected. Core orders also rose 0.4% compared to a flat reading forecast. Nonetheless, the core rise came as the prior reading was revised to +0.9% from +1.5%, wiping out any total boost. A soft shipments number also suggests a drag on Q3 growth.

A number of Fed speakers over the past week emphasized consumer spending as a key linchpin for their outlook. One of the best forward-looking indicators is consumer confidence and the August preliminary report from the Conference Board and it's due Tuesday at 10:00 Eastern/14:00 GMT/15:00 London. The consensus is a slide to 129.0 from 135.7. A strong reading – counterintuitively – might cause some risk aversion on fear the Fed won't ease as aggressively.