The USD strengthened yesterday during the European session, as the US-Sino trade tensions eased somewhat. Media report that US President Donald Trump had stated that Chinese officials had contacted US officials and offered to return to negotiations. It should be noted that China’s Vice president Liu He said that China was willing to resolve the issue through “calm” negotiations. However, the USD relented some of the gains made during the Asian session today as investor’s optimism was moderated. The lack of a clear path on how to reach a resolving of the issue along with a slipping of the US treasury yields caused some pressure on the USD. Also, the fact that the Chinese Foreign ministry spokesman stated that he had not heard of a phone call between the two sides may have increased doubts. Analysts tend to note that there is a sense that the market may have gotten ahead of its self and pointed out that there are still a lot of issues which could cause another confrontation between the two parts. We expect the situation to remain volatile and should there be further tensions, we could see the USD weakening once again. EUR/USD dropped yesterday and is currently testing the 1.1100 (S1) support line. The pair could continue to drop yet it should be noted that the pair seems to find considerable support at the 1.1100 (S1) support line. Should the pair’s long positions be favoured by the market, we could see the pair breaking the 1.1140 (R1) resistance line once again and aim for higher grounds. Should the pair come under the market’s selling interest, we could see it breaking the 1.1100 (S1) support line and aim for the 1.1050 (S2) support level.
Yen monitored by Japanese government
According to media Japan’s Finance minister stated during today’s Aso stated that he was monitoring currency moves of the JPY “with a sense of urgency”. Japan’s finance minister underscored the importance of stability for the JPY, which is perceived by a safe haven by investors. Analysts noted that Japan’s policymakers may tend to weaken the JPY with their statements to prevent it to strengthen as such a development could undermine the competitiveness of the Japan’s exports. It should be noted that the statements were made after a recent spike in JPY’s value against the USD. The finance minister also stated that the Japanese government plans to go ahead with the planned sales tax hike in October, despite market volatility. We expect Yen’s value to remain dependent to safe haven flows in the near future and any further tensions could boost its value. USD/JPY rose during the European session yesterday breaking temporarily the 106.00 (R1) resistance line, yet later on relented some of its gains aiming for lower grounds. Should the bears maintain control over the pair’s prices we could see them breaking the 105.30 (S1) support line and aim for the 104.65 (S2) support barrier. Should the bulls take over, we could see the commodity’s prices rising again and breaking the 106.00 (R1) resistance line, aiming for the 106.60 (R2) resistance hurdle.
Other economic highlights today and early tomorrow
Today we expect Germany’s 2nd release of the GDP rate for Q2 in the European session and during the American session we get the US consumer confidence reading for August. Later on, we get the API weekly crude oil inventories figure. Also please note that BoE’s Tenreyro and ECB de Guindos are scheduled to speak, while at the same time BoE will be publishing its research on the consequences of Brexit on the UK economy.
USD/JPY H4
Support: 105.30 (S1), 104.65 (S2), 104.00 (S3)
Resistance: 106.00 (R1), 106.60 (R2), 107.20 (R3)
EUR/USD H4
Support: 1.1100 (S1), 1.1050 (S2), 1.1000 (S3)
Resistance: 1.1140 (R1), 1.1190 (R2), 1.1230 (R3)
