The USD weakened against a number of its counterparts, as the signing of the US-Sino initial trade deal may have lowered its importance as a safe haven. Analysts tended to characterize the deal as mainly focusing on a number of purchasing commitments from China’s part which are to include according to media purchases of 186 billion USD of agricultural products along with other products and services. Also, analysts tended to characterize the implementation of the deal as difficult as the targets set could prove to be rather high. It should be noted that structural issues which may have provoked the trade war seem to be omitted and a substantial proportion of the existing tariffs on US imports from China are still in place, despite some being rolled back. Both the US as well as China signalled that the signing of the deal is a step forward, after the lengthy negotiations. Also, the US President stated that the phase 2 deal negotiations are to start soon and should a comprehensive deal be struck tariffs would be removed. The news seemed to weaken USD, yet on the flip side the Aussie got a small boost, should there be doubts of the deals effectiveness in the market we could see the Aussie slipping. USD/JPY maintained a largely sideways movement, remaining above the 109.70 (S1) support line. We maintain our bias for a sideways movement of the pair, however today’s financials and other fundamentals could affect USD/JPY. Should the pair come under the selling interest of the market, we could see it breaking the 109.70 (S1) support line aiming for the 109.00 (S2) support level. On the flip side should the pair’s long positions be favoured by the market, we could see it breaking the 110.35 (R1) resistance line aiming higher.
…while the UK financials don’t favour the pound…
UK financial releases yesterday didn’t make any favours to the pound as the UK inflation rates retreated with a marked slowdown of the main rates. It was characteristic that headline CPI rate which was expected to remain unchanged at +1.5% yoy, slowed down to reach +1.3% yoy the lowest since November 2016, signalling that any possible rate cut by the BoE may come sooner than later. It was characteristic that BoE member Saunders, in statements he made yesterday, stated that an aggressive response to risks is needed by the UK. Analysts note that the number of doves in the BoE tends to increase, while the market seems to price in such a rate cut for the January meeting by 62%. Should financial data and headlines increase even further the possibility of a rate cut by the BoE we could see the pound coming under renewed pressure. GBP/USD maintained a sideways movement yesterday and despite some bearish tendencies provided by the release of the UK inflation measures, the pair rebounded and remained above the 1.3015 (S1) support level. We maintain our sideways bias for the pair, yet we could once again see some bearish tendencies, should there be negative headlines about UK’s economy. Should the bears take control over the pair’s direction we could see it breaking the 1.3015 (S1) support line and aim for the 1.2820 (S2) support level. Should the bulls take over, we could see the pair breaking the 1.3170 (R1) resistance line and aim for higher grounds.
Other economic highlights today and early tomorrow
Today during the European session, we get from Germany the final HICP rate for December and later on from Turkey we get CBRT’s interest rate decision. In the American session, we get from the US the initial jobless claims figure, Philly Fed Business Index for January and the retail sales growth rate for December. In tomorrow’s Asian session we get from China the industrial output growth rate for December, the retail sales growth rate also for December and Q4’s GDP growth rate. As for speakers please note ECB’s Christine Lagarde’s and especially BoE’s Andy Haldane, which are scheduled to speak today.
GBP/USD 4 Hour chart
Support: 1.3015 (S1), 1.2820 (S2), 1.2600 (S3)
Resistance: 1.3170 (R1), 1.3340 (R2), 1.3500 (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)
