The USD strengthened yesterday against the Yen and a number of its counterparts as a number of financial releases were quite favourable. Among the highlights of yesterday’s financial releases were the headline durable goods orders as well as the 2nd estimate of the GDP growth rate for Q3 which outperformed expectations giving a pleasant surprise to the USD. During today’s Asian session though, USDJPY corrected as the US President Trump signed Hong Kong bill into law, provoking Chinese government’s protests. In response China’s foreign ministry, stated that it decisively opposed the new US law and threatened to take strong counter-measures. The new tension created worries in the markets for the issue to overspill its negative influence in the US-Sino trade negotiations and undermined the USD during the Asian session. We see the market sentiment for the USD being pulled by opposite forces, which on the one hand include the positive data confirming the Fed’s decision and support USD, while on the other worries about the US-Sino relationships increase and undermine USD. All of that in a period when the US has its Thanksgiving holiday with some thin trading being possible. USD/JPY continued to rise yesterday aiming for the 109.70 (R1) resistance line, yet during today’s Asian session corrected somewhat lower. We maintain a bullish outlook for the pair and for our outlook to change, we would require the pair to break the upward trendline incepted since the 22nd of the month. Please bear in mind that the RSI indicator in the 4-hour chart has reached the level of 70, which on the one hand tends to confirm the dominance of the bulls, while on the other could imply a rather overcrowded long position. Should the pair find fresh buying orders along its path we could see it breaking the 109.70 (R1) resistance line and aim for higher grounds. Should on the other hand the pair come under the selling interest of the market, we could see it breaking the prementioned upward trendline and aim the 109.00 (S1) support line.
… while the pound is lifted from election hopes…
The pound got a lift yesterday as a new poll, predicting a seat by seat result by YouGov, was released. The poll showed that the Conservative party is about to win with a majority of 62 seats, which could be considered as comfortable. Should such a majority be materialized for the Tories, it could actually enable Boris Johnson to deliver on his promise to get Brexit done, while at the same time provide him also with a cushion for some retreats in the subsequent negotiations with the EU. It should be noted that the YouGov poll bears special weight as it was able to predict quite close the hung parliament of the 2017 elections. We could see the GBP remaining supported, however little volatility is expected as there is still lots of uncertainty surrounding the UK elections. Cable rose yesterday and during today’s Asian session, breaking the 1.2885 (S1) resistance line, now turned to support. Never the less, we maintain the view of a sideways motion for the pair, as the support provided for the pound by yesterday’s fundamentals was limited and the pair remains for the time being in the corridor formed by the 1.2760 (S2) support line and the 1.3015 (R1) resistance line. Should the bulls come in control of the pair’s direction, we could see cable breaking the 1.3015 (R1) resistance line and aim for the 1.3170 (R2) resistance level. On the flip side, should the bears take over, we could see the pair breaking the 1.2885 (S1) support line and aim if not break the 1.2760 (S2).
Other economic highlights today and early tomorrow
Today during the European session, we get Eurozone’s economic sentiment indicator, while later on, we get Germany’s HICP rate, both for November. In the American session we get Canada’s current account balance for Q3, while just before the Asian session starts, we get New Zealand’s building permits growth rate for October. In the Asian session we get a number of releases from Japan, yet we tend to focus on the industrial output growth rate for October. As for speakers we have ECB’s De Galhau, Coeure and Lane speaking.
USD/JPY 4 Hour
Support: 109.00 (S1), 108.35 (S2), 107.75 (S3)
Resistance: 109.70 (R1), 110.50 (R2), 111.30 (R3)
GBP/USD 4 Hour
Support: 1.2885 (S1), 1.2760 (S2), 1.2640 (S3)
Resistance: 1.3015 (R1), 1.3170 (R2), 1.3340 (R3)
