JPY strengthened against most of its counterparts yesterday, as trade tensions between the US and China continue strengthening safe haven assets. The US President stated yesterday that China broke the deal which was negotiated, also stating that he would be comfortable to hike tariffs. At the same time the White House stated that China has signaled that it hopes to make a deal in the coming visit of Chinese officials in Washington. On the other hand, China threatens to retaliate if the US actually imposes a higher tariff. We see the case for the two sides to reach a deal, yet the road ahead may still have some bumps. Should the two sides find common ground again, we could see optimism returning and the Yen retreating. USD/JPY retreated yesterday, nearing the 109.75 (S1) support line. As the downward trendline remains intact, we maintain a bearish outlook for the pair. Should the bears maintain control over the pair’s direction, we could see it breaking the 109.75 (S1) support line and aim for the 109.15 (S2) support level. Should the bulls take over, we could see the pair rising, breaking the prementioned upward trendline, as well as the 110.30 (R1) resistance line, aiming if not breaking the 110.90 (R2) resistance level.
Oil prices under pressure despite surprise drawdown of inventories
Oil prices maintained a sideways movement yesterday, remaining under pressure, as the trade dispute between the US and China continues. It was indicative that oil prices didn’t rise, despite the EIA crude oil inventories showing a surprise -3.963m barrels drawdown yesterday and thus implying a tightness of the US oil market. Analysts point out that the demand from Asia remains robust, yet fears of a possible slowdown of China and globally, in case the US and China do not find a deal, could be undermining oil prices. On the other hand, the supply side seems to remain tight, on the back of production cuts by OPEC and Russia and could provide some support for black gold’s price action. We expect oil prices to continue to be under pressure as the current escalation in the US-Sino relationships continues. WTI prices maintained a tight range movement yesterday, constantly testing the 62.00 (R1) resistance line. We maintain the view of a sideways movement for the commodity’s prices as the market seems to be in a wait and see position for the outcome or further developments in the US-Sino negotiations. Technically speaking, WTI’s price action since Monday, seems to be forming a symmetrical triangle, which still could let the next leg open in any direction (up or down), yet may also be indicative of some support for oil prices. Should the commodity’s prices be supported by the market, we could see them breaking the 62.00 (R1) resistance line and aim if not break the 63.25 (R2) resistance level. Should on the other hand, WTI be under the selling interest of the market, we could see its price action, breaking the 60.50 (S1) support line.
Other economic highlights, today and early tomorrow
In the European morning, we get from Norway, Norgesbank’s interest rate decision. In the American session, the US trade balance for March the US PPI rates for April and Canada’s trade balance for April are due out. During tomorrow’s Asian session, Japan’s household spending growth rate for March is to be released. Also please note that Fed Chair J. Powell, Atlanta Fed President R. Bostic and Chicago Fed President C. Evans speak and during tomorrow’s Asian session, BoJ April meeting minutes and RBA’s monetary statement are to be released.
WTI H4
Support: 60.50 (S1), 59.10 (S2), 57.75 (S3)
Resistance: 62.00 (R1), 63.25 (R2), 64.65 (R3)
USD/JPY H4
Support: 109.75 (S1), 109.15 (S2), 108.50 (S3)
Resistance: 110.30 (R1), 110.90 (R2), 111.40 (R3)
