The USD weakened yesterday against safe haven Yen, yet was able to find broad support during the Asian session today. Pessimism about the possibilities of a “phase 1” deal with China, seemed to continue to guide the greenback. Indicative of the situation was a Financial Times article, which stated that an agreement may not be reached in time to avoid a new round of U.S. tariffs taking effect on Dec. 15. The news strengthened the cautiousness of traders, yet on the other hand later during the night White house economic advisor Kudlow stated that the trade talks are down to “short strokes” on a partial deal. Overall the issue is to continue to haunt the market, which may be keeping a wait and see position currently, for further developments and reassurance that at least a partial deal may actually be reached, in order for the US tariffs on the 15th of December to be avoided. It should be noted that the number of initial jobless claims released yesterday, reached a 5 month high, weighing also on the USD. On the other hand, Fed’s Chairman Powell signalled optimism about the US economy, yet at the same time underscored the risks stemming from trade uncertainty. USD/JPY dropped yesterday, yet during today’s Asian session, bounced on the 108.35 (S1) support line. We tend to switch our bearish outlook for the pair, in favour of a sideways movement, yet further developments in the US-Sino relationships could switch the direction of the pair. Should the bulls be in control of USD/JPY’s direction, we could see the pair breaking the 109.00 (R1) resistance line, aiming for higher grounds. Should the bears take over again, we could see the pair breaking the 108.35 (S1) support line and aim for the 107.75 (S2) support level.
… the pound strengthens on election hopes…
The pound strengthened against the USD and EUR yesterday, as new hopes arose about the election result clearing the Brexit outlook. Analysts tend to note that expectations about a conservative majority after the elections may have fueled investor’s hopes about the election result clearing the Brexit deadlock. According to polls, the conservatives seem to maintain a clear lead against the main opposition party Labour. However it should also be noted that the same polls do not show a 50%+ majority for the Tories, even should one combine the conservatives and the Brexit party, providing doubt if the election result will be able to actually deliver Brexit. We expect election headlines to continue to fluctuate the pound, yet the currency seems to remain under pressure as long as there is a wide political uncertainty in the UK. Cable rose yesterday, testing the 1.2885 (R1) resistance line. As the pair seems to be moving near the 1.2885 (R1) resistance line, we maintain a bias towards a sideways movement. However financial releases during the American session could favor the USD part of the pair. Should the pair come under the selling interest of the market, we could see the pair once again slowly starting to aim the 1.2760 (S1) support line. Should the pair’s long positions be favored by the market, we could see cable breaking finally the 1.2885 (R1) resistance line and aim for the 1.3015 (R2) resistance level.
Other economic highlights today and early tomorrow
During today’s European session, we get Eurozone’s final HICP rate for October. In the American session, we get the NY Fed manufacturing index for November, the retail sales growth rate for October, the industrial output growth rate also for October. As for speakers please note that ECB’s Mersch is scheduled to speak today.
USD/JPY 4 Hour
Support: 108.35 (S1), 107.75 (S2), 107.10 (S3)
Resistance: 109.00 (R1), 109.70 (R2), 110.50 (R3)
GBP/USD 4 Hour
Support: 1.2760 (S1), 1.2640 (S2), 1.2510 (S3)
Resistance: 1.2885 (R1), 1.3015 (R2), 1.3170 (R3)
