JPY and gold relented some of the gains made in the past few days as market worries about the tensions in the US- Persian relationships tended to ease somewhat in the market. In a latest development the US has denied the Iranian foreign minister visa so as to enter the US for a UN security Council meeting on Thursday. On another note the US Defence Secretary stated that the US has no plans to pull troops out of Iraq. It should be noted that the latest development occurred despite the Iraqi Parliament requesting that US troops are to be completely removed from Iraqi soil. The hit seems to have gotten the market off guard and served as a strong reminder of how fragile stability could be. Analysts tend to highlight that the market sentiment seems to remain risk off as uncertainty about the Iranian response remains uncertain. USD traders are expected to keep an eye out today for the release of the U.S. trade balance, factory orders, and the services sector to measure the strength of the US economy. USD/JPY rose yesterday as it broke clearly above the 108.35 (S1) resistance line, now turned to support. As the downward trendline incepted since the 2nd of January was broken, we switch our bearish outlook for the pair in favour of a sideways motion. Should the pair remain under the selling interest of the market, we could see it breaking the 108.35 (S1) support line and aim for the 107.75 (S2) support level. Should the pair find fresh buying orders along its path, we could see it aiming of not breaking the 109.00 (R1) resistance line.
…while the pound picks up some strength…
The pound rebounded against the USD yesterday as traders seem to be slowly returning to the British currency. According to analysts, an upward revision to a business survey supported the pound, as the PMI for the crucial UK services sector outperformed market expectations for the month of December. It will be interesting to see whether the UK economy has bottomed out, yet more releases will be required for further clues. The market’s attention could be turning to the UK Parliament, as the debate on the Brexit legislation is to begin on Tuesday. According to media, the debate is to include also a clause ruling out any extension of the transition period for negotiations with the EU after 2020. Exactly this ruling out of any extension in the negotiations, should it be confirmed could weigh on the pound as it increases uncertainty. Should there be further headlines about the possibility of an abrupt ending of the negotiations in December 2020, we could see the GBP weakening. Cable rose yesterday, and during today’s Asian session tested the 1.3170 (R1) resistance line. As the pair could be heavily influenced by Brexit headlines today to either direction, yet as cable seems to find substantial resistance at the 1.3170 (R1) level, we tend to keep a door open for the bears. Should the bears actually take control of the pair’s price action, we could see it breaking the 1.3015 (S1) support line and aim for the 1.2820 (S2) support level. Should on the other hand the pair come under the spell of the bulls, we could see it finally breaking the 1.3170 (R1) resistance line and aim for the 1.3340 (R2) resistance level.
Other economic highlights today and early tomorrow
Today during the European session, we get Eurozone’s preliminary HICP rate for December, as well as the area’s retail sales growth rate for November. Late in the European session, we get New Zealand’s milk auction prices. In the American session, we get from the US the international trade balance for November, the factory orders growth rate also for November, the ISM non-manufacturing PMI for December and the API weekly crude oil inventories figure. Also, during the American session, we get from Canada the trade data for November and the Ivey PMI for December. Please note that during tomorrow’s Asian session, we get Australia’s building approval growth rate for November
USD/JPY 4 Hour
Support: 108.35 (S1), 107.75 (S2), 107.05 (S3)
Resistance: 109.00 (R1), 109.70 (R2), 110.35 (R3)
GBP/USD 4 Hour
Support: 1.3015 (S1), 1.2820 (S2), 1.2600 (S3)
Resistance: 1.3170 (R1), 1.3340 (R2), 1.3500 (R3)
