Market News

Oil carries the risk premium into the new week. A reported Iranian cruise missile strike on a vessel in the Strait of Hormuz, still unconfirmed by independent sources, is the kind of headline that can gap crude higher at the open regardless of how it is ultimately verified, given the volume of global supply that transits the chokepoint. Iran's insistence that any reopening of Hormuz stays contingent on its own conditions, combined with Trump's rejection of Tehran's offer, points to a blockade and shipping disruption that persist rather than ease this week. Saudi Arabia's deepening exposure, with Houthi advances now threatening its oil exports through the Red Sea, adds a second, broadening front to the supply risk.

Equity and FX markets…

• Trump will meet with Xi again in November
• Xi: US-China relationship will be one of strategic stability based on respect, fairness and reciprocity
• September final UMich consumer sentiment 48.1 vs 47.6 expected
• USTR's Greer: We have reached agreements with China on a sub-set of goods we can trade
• US August durable goods orders 0.0% vs -0.4% expected
• Plan for your new trading week ahead in the forex with a technical look at some of the major pairs

Markets:

• US 10-year yields up 2.6 bps 5.16%
• WTI crude oil down $2.15 to $92.44
• Gold up $8 to $4286
• JPY leads, NZD lags
• S&P 500 up 0.5%

The main market moving events were verbal intervention on the yen, sending USD/JPY down more than 150 pips on the day. That didn't appear to be followed by any actions so it's…

Trump says he will meet with Xi again in November and then again at the G20 in DDecember in Miami. Trump said the meeting was one of friendship, strength and success for both the USA and China.

The US dollar has moved higher against all the major currencies this week. Today, however, the greenback is lower against most of them as some traders take profits and oil prices ease. That pullback has given the other currencies some breathing room, but it has not, by itself, changed the technical bias. For most of the pairs I follow, the charts still favor the dollar.

So what should traders watch as this week ends and a new one begins?

In the video above, I look at five currency pairs:

• EURUSD
• USDJPY
• GBPUSD
• USDCHF
• USDCAD

For each pair, I identify the current bias, the levels that would begin to turn that bias the other way, and the next targets if the prevailing move continues. Those levels give traders a way to judge whether today’s dollar…

Xi:

• Agreed with Trump to add new substance to US-China relationship

Trump on China:

• We've made tremendous strides for both countries in meetings
• We will be speaking a lot

It's not like we're breaking any new ground here but this is a nice departure from the constant China fighting that has characterized much of Trump's tenure, and his entire public persona since he entered into politics. 

Talk of progress adds pressure to oil

Adam Button posted that the atmosphere surrounding Iran–US talks in New York is becoming more positive, according to Al Jazeera’s Tehran bureau chief, Nourddine Dgheir. The report says the discussions have moved beyond initial diplomatic contacts into a more detailed technical phase. More Iranian officials have traveled to New York, and Qatar continues to mediate. Adam notes that an Axios report carries a similar message.

That is welcome news if it leads to an agreement, but talks are still talks. For oil traders, the possibility of easing tensions can reduce the geopolitical risk premium built into the price. The market’s reaction is worth watching, but progress in negotiations would need to turn into…

Al Jazeera's bureau chief in Tehran, Nourddine Dgheir, citing sources in the city, says the atmosphere around talks is increasingly positive.

He writes that Iran-U.S. negotiations, which are ongoing in New York, have moved beyond initial diplomatic contacts into a more detailed technical phase, with technical experts joining the discussion. More Iranian officials have travelled to New York for the talks.

The report says Qatar continues to mediate.

There has been some lift in risk appetite on the latest reports and the S&P 500 is at the highs of the day.

Update: An Axios report is similar in content. I wouldn't rule out this is a Friday ruse to knock oil down a couple bucks but hope springs eternal.

Bitcoin is trading modestly lower after an earlier attempt to move higher lost momentum. The price reached a high of $85,238 before falling to $83,161. It is currently near $83,787, down about $600, or 0.71%, on the day.

The technical question is whether buyers can defend the breakout from earlier this week.

Buyers defend the breakout area

On Tuesday, Bitcoin moved above a swing area between $81,517 and $82,833 and extended its gains to about $87,335. That upside momentum faded, and the price has since rotated back toward the area it broke through.

Yesterday and again today, buyers stepped in near the top of that zone. Today’s low of $83,161 remained above $82,833.

Why the retest matters

A retest after a breakout gives traders a chance to see…

• Prelim was 47.8
• Prior was 51.7
• Current conditions 50.9 vs 50.9 prelim (51.9 prior)
• Expectations 46.3 vs 45.8 prelim (51.5 prior)
• One-year inflation expectations 4.6% vs 4.6% prelim (prior 4.0%)
• Five-year inflation expectations 3.4% vs 3.4% prelim (prior 3.4%)

These 'beat' the consensus but these are thinly-forecast indicators so the prelim numbers are a better metric to go by. There was a slight improvement on the headline and expectations but the inflation numbers -- more important right now -- stayed high. That's not a surprise given there's a correlation with gasoline prices.

In any case, US 10-year yields are at the highs of the day, up 4.2 bps to 5.20%.

The major US stock indices opened higher, but the gains faded as Treasury yields moved up. The 10-year yield is now up 5 basis points at 5.212%, putting renewed pressure on stocks.

The economic data offered a mixed message. Headline durable goods orders were virtually unchanged in August, although orders excluding transportation rose 0.3%, pointing to some underlying strength. The University of Michigan sentiment readings also came in above estimates, but one-year inflation expectations remained elevated at 4.6%, up from 4.0% last month. For stock traders, that combination matters: signs of growth are welcome, but persistent inflation can keep yields higher.

In the video above, I look at the technical picture for:

• The S&P 500
• The Nasdaq…

USD/JPY fell to 157.00 from 157.75 after fresh undervaluation talk from a variety of officials.

This is the second round of jawboning today. Earlier, Katayama took the unusual step of disclosing that Trump raised the weak yen with Takaichi at their UN meeting this week, and that Takaichi told him, "as a general principle," that an undervalued yen is a problem. That got about 30 pips. Now Katayama says she and Bessent "reaffirmed the point that the undervaluation of the yen is a problem" and that she expects the "excessive" yen selling to be corrected. She even suggested the market "misunderstood" something.

The language isn't new. "Substantial undervaluation" has been Treasury's phrase since the July 31 joint intervention, when USD/JPY was…