The markets seem to be in the edge of their seat for the signing of the US-Sino phase 1 trade deal in Washington later today, by US President Trump and Chinese Prime Minister Liu He. It should be noted that media seem to provide some details which may not be so encouraging for global growth, as US tariffs on Chinese imports are to stay unchanged for at least a period of 10 months and be linked to the progress made in compliance with the agreement by China. Market analysts tend to note that the signing of the deal may already have been priced in by the markets, which could limit reactions to the actual signing. Also, the fact that the tariff roll back is reported to stop for a considerable time may take the winds of the sails of commodity currencies such as the Aussie, which have a high amount of exports of raw materials to China. On the flip side, please note that safe haven JPY seems to hold its ground after considerable weakening. USD/JPY switched direction yesterday moving in a sideways motion with some slight bearish tendencies during today’s Asian session aiming for the 109.70 (S1) support line. Since the pair’s price action has broken the upward trendline incepted since the 10th of January, we switch our bullish outlook for the pair, in favour of a sideways movement. Should the pair find fresh buying orders along its path, we could see the pair breaking the 110.35 (R1) resistance line and aim for the 111.00 (R2) resistance level. Should the pair come under the selling interest of the market, we could see the pair breaking the 109.70 (S1) support line and aim for the 109.00 (S2) support level.
…while the Swissie strengthens further
The Swiss Franc continued to strengthen against the common currency pushing the pair to its lowest level since April 2017. It should be noted that the US yesterday added Switzerland to its watchlist of currency manipulators and also encouraged Switzerland to publish all intervention data more frequently, increasing pressure on the Alpen country. Such an inclusion could discourage the country’s central bank to intervene in the markets directly, as it had in the past ad at the same time maintains one of the lowest negative interest rates among developed economies. We expect the latest development to encourage CHF bulls for further advances as a possible intervention by the SNB to weaken CHF seems more remote. EUR/CHF continued to weaken yesterday breaking the 1.0785 (R1) support line, now turned to resistance and bounced on the 1.0750 (S1) support line. We maintain a bearish outlook for the pair and for it to change we would require a clear breaking of the downward trendline incepted since the 13th of December. Should the bears maintain control over the pair’s direction we could see it breaking the 1.0750 (S1) support line and aim for the 1.0710 (S2) support level. Should the bulls take over, we could see the pair breaking the 1.0785 (R1) resistance line and aim for the 1.0830 (R2) resistance level.
Other economic highlights today and early tomorrow
Today during the European session, we get from France the final CPI rate for December, from Sweden the also the CPI rate for December, Germany’s full year GDP growth rate for 2019, UK’s CPI and PPI rates, both for December as well as Eurozone’s industrial production growth rate for November. In the American session we get for the US the PPI final demand rate for December and the EIA crude oil inventories. During Thursday’s Asian session, we get Japan’s corporate goods prices growth rate for December and Japan’s machinery orders growth rate for November. As for speakers BoE’s Saunders, BoE’s Cunliffe (not cross referenced), Philadelphia Fed President Harker, Dallas Fed President Kaplan and BuBa president Weidman speak. We tend to focus on the speeches of the BoE officials as monetary policy of the BoE is crucial for the pound’s direction, as well as Philadelphia Fed President Harker’s speech.
EUR/CHF 4 Hour chart
Support: 1.0750 (S1), 1.0710 (S2), 1.0670 (S3)
Resistance: 1.0785 (R1), 1.0830 (R2), 1.0870 (R3)
USD/JPY 4 Hour chart
Support: 109.70 (S1), 109.00 (S2), 108.35 (S3)
Resistance: 110.35 (R1), 111.00 (R2), 111.70 (R3)
