JPY stabilized against the USD yesterday, as some hopes surfaced about the US-Sino negotiations in Washington. US and Chinese officials began two-day talks on Thursday in an effort to prevent any further escalation but the US has imposed additional tariffs on Chinese imports, which came into effect at the US midnight today. The additional US tariffs imposed could be followed by threats on more tariffs on a wider spectrum of Chinese products imported in the US. Also, the newly imposed US tariff hike could be part of wider negotiating tactic of the US, especially as the Chinese side during the negotiations had persisted on the US tariffs being removed, while the US side was quite hesitant. We expect the next episode of the tariff saga, to be the Chinese response, however their options may be getting narrower. We expect that in the long run the two sides will probably be able to reach a deal as both have enough incentives to do that, however we also expect a bumpy rise until then. The uncertainty in the markets is expected to increase and that could lead to some strengthening of the JPY, especially if the Chinese response escalates the situation substantially. USD/JPY rose yesterday, bouncing on the 109.75 (S1) support line, however corrected somewhat lower later on. As the down ward trendline incepted since the 3rd of May was broken, we switch our bearish outlook in favor of a sideways movement. Should the pair’s long positions be favored by the market, we could see it aiming if not breaking the 110.30 (R1) resistance line. Should the pair come under the selling interest of the market, we could see it breaking the 109.75 (S1) support line and aim for the 109.15 (S2) support level.
Oil prices break higher on US-Sino hopes.
Oil prices rose during the Asian session today as hopes for progress in the US-Sino negotiations rose. Analysts point out that the market is rather headline driven and financial releases could be taking a backseat. Especially the statements made by president Trump as well as his tweets remain in the main focus of the markets, however also. Caution is expected to return to the markets as the additional US tariffs have been enacted and we expect argumentation for a possible Chinese slowdown to strengthen, undermining oil prices. Should the US-Sino negotiations break down or should the situation escalate further, we expect oil prices to weaken. WTI prices rose during today’s Asian session, breaking the 62.00 (S1) resistance line (now turned to support). As the downward trendline incepted since the 25th of April was broken, we switch our bearish outlook for the commodity in favor of a sideways movement. Should the bulls take control of WTI’s direction, we could see it breaking the 63.25 (R1) resistance line and aim for the higher grounds. Should the bears take over, we could see WTI prices breaking the 62.00 (S1) support line and aim if not break the 60.50 (S2) support hurdle.
Other economic highlights, today and early tomorrow
In the European session we get the trading data for March from Germany, the UK GDP growth rate for Q1 along with UK’s trade balance and manufacturing output growth rate, both for March. In the American session, we get the US inflation rates, for April and the US Baker Hughes oil rig count. From Canada we get the employment data for April and the building permits growth rate for March. In Monday’s Asian session we get from Australia the housing finance growth rate for March. As for speakers ECB’s Lautenshlager and Coeure, along with Fed’s Brainard, Bostic and Williams speak.
WTI H4
Support: 62.00 (S1), 60.50 (S2), 59.10 (S3)
Resistance: 63.25 (R1), 63.65 (R2), 66.25 (R3)
USD/JPY H4
Support: 109.75 (S1), 109.15 (S2), 108.50 (S3)
Resistance: 110.30 (R1), 110.90 (R2), 111.40 (R3)
