USD/JPY Fundamental Daily Forecast – Pressured by Renewed Safe-Haven Buying

The Dollar/Yen is trading lower on Wednesday after failing to follow-through to the upside following yesterday’s strong performance. On Tuesday, the Forex pair was boosted by strong demand for risky assets and higher Treasury yields. The rise in share prices was fueled by better-than-expected U.S. earnings reports. The move in yields was driven by optimistic news over Brexit.

At 09:28 GMT, the USD/JPY is trading 108.685, down 0.178 or -0.16%.

Today’s early weakness is likely being fueled by some light hedging pressure triggered by China’s threat of countermeasures in response to a U.S. bill supporting Hong Kong protesters.

China Vows ‘Strong Countermeasures’

Three bills were approved in the House of Representatives Wednesday evening, one supporting the right of individuals to protest, another allowing for the U.S. to check on Beijing’s influence over the territory and a third aimed at preventing U.S. weapons from being used by police against protesters.

“If the relevant act were to become law, it wouldn’t only harm China’s interests and China-U.S. relations, but would also seriously damage U.S. interests,” said Geng Shuang, China’s Foreign Ministry spokesperson, in a statement on the body’s website. “China will definitely take strong countermeasures in response to the wrong decisions by the U.S. side to defend its sovereignty, security and development interests.”

Geng said while China was working to restore law and order in Hong Kong, U.S. lawmakers were “disregarding and distorting facts,” by turning criminal acts and violence against police into issues of “human rights or democracy.”

“That is a stark double standard. It fully exposes the shocking hypocrisy of some in the U.S. on human rights and democracy and their malicious intention to undermine Hong Kong’s prosperity and stability to contain China’s development,” said Geng, who urged the U.S. to “stop meddling.”

Brexit Traders Eye Imminent Draft Deal

Perhaps helping to limit losses on Wednesday are optimistic comments on Brexit from European negotiator Michel Barnier were backed up by reports that a draft legal text over the divorce was being drawn up.

IMF Warning

Another factor that could be pressuring the Dollar/Yen is a bearish report from the International Monetary Fund.  The U.S.-China trade war will cut 2019 global growth to its slowest pace since the 2008-2009 financial crisis, the International Monetary Fund (IMF) warned on Tuesday, adding that the outlook could darken considerably if trade tensions remain unsolved.

Daily Forecast

The markets are relatively calm overnight despite the threat of countermeasures by China to the U.S. legislation supporting the Hong Kong protesters. However, investors have taken precautionary steps by buying the Japanese Yen, gold and Treasury bonds for protection.

Keep an eye on this story to see if President Trump responds to the threat. He could trigger a huge break in the Dollar/Yen if he says anything negative about China that would put a trade deal in jeopardy.

Later today, traders will get the opportunity to respond to the U.S. retail sales report for September and the Fed Beige book. Both reports could influence the Fed’s decision on interest rates later in the month.

Bearish numbers will increase the chances of a Fed rate cut, further weakening the Dollar/Yen.

Wrong Response by Trump to China’s Countermeasures Threat Could Blow Up Trade Deal

There’s a breaking story out of Asia early Wednesday that could blow up into something major later in the day if U.S. President Trump decides to exacerbate the issue. The current price action in the financial markets indicates a sense of caution may be developing in the financial markets with safe-haven assets – Treasury bonds, Japanese Yen and gold turning higher, while demand for risky assets is edging lower.

According to reports, China is threatening to take countermeasures against the U.S. in response to a bill that favors the Hong Kong protesters, the Chinese Foreign Ministry said Wednesday.

That is a pretty bold threat to make while the United States and China are trying to finalize the first phase of a partial trade deal agreed upon on Friday. It’s also closely similar to the threat China made against the National Basketball Association (NBA) before it caved to pressure from the Chinese government last week after an NBA team official made comments supporting the Hong Kong protesters.

The Background

Three bills were approved in the House of Representatives Wednesday evening, one supporting the right of individuals to protest, another allowing for the U.S. to check on Beijing’s influence over the territory and a third aimed at preventing U.S. weapons from being used by police against protesters.

China’s Response

“If the relevant act were to become law, it wouldn’t only harm China’s interests and China-U.S. relations, but would also seriously damage U.S. interests,” said Geng Shuang, China’s Foreign Ministry spokesperson, in a statement on the body’s website. “China will definitely take strong countermeasures in response to the wrong decisions by the U.S. side to defend its sovereignty, security and development interests.”

Geng said while China was working to restore law and order in Hong Kong, U.S. lawmakers were “disregarding and distorting facts,” by turning criminal acts and violence against police into issues of “human rights or democracy.”

“That is a stark double standard. It fully exposes the shocking hypocrisy of some in the U.S. on human rights and democracy and their malicious intention to undermine Hong Kong’s prosperity and stability to contain China’s development,” said Geng, who urged the U.S. to “stop meddling.”

Trump’s Problem

Last week, CNN reported, Trump, in a call with Chinese President Xi Jinping, promised that the U.S. would stay quiet on the Hong Kong protests while the two countries continued to negotiate a possible end to the ongoing trade war.

Early Wednesday, traders are taking precautionary positions in response to the comments from China’s Foreign Ministry Spokesperson. Bonds, gold and Japanese Yen are being bought and stocks in the U.S. and Europe are being sold.

What traders could be waiting for is Trump’s response. Will he defy his promise to Chinese President Xi Jinping, or will he remain silent?  It’s highly unusual for Trump to remain silent for too long especially when a foreign country threatens the U.S. with “strong countermeasures.”

Traders should keep an eye on this story because it could develop into something major during the trading session. Somewhere, somehow, somebody in the press may try to push Trump’s button’s to get a response, and if they push the wrong one, Trump could say something to shake up the financial markets.

Trump certainly knows how to pick his battles. He’s usually quick to respond to comments from CEO’s, coaches, athletes, politicians and celebrities. However, if he doesn’t speak up, he’ll show the world that he just gave in to pressure from China, the country he keeps saying is weaker than the United States.

Asian Stocks Climb as US Banks’ Earnings Boost Equities

Gains in riskier assets are coming at the expense of safe havens, with Gold now trading below $1485, 10-year US Treasury yields surging past 1.77 percent before easing, while USDJPY touched the 108.86, its strongest level since the start of August.

Even with the gains in equities, some measure of caution is still warranted, as investors cannot rule out a sudden spike in US-China trade tensions or Brexit risks. While riskier assets are enjoying their time in the sun, they could see a rapid unwinding if any of these risks return to the fore.

Brexit deal optimism keeps Pound elevated

The Pound grazed the 1.28 mark against the US Dollar for the first time since May before moderating, as investors hold out hope that a Brexit deal can be secured with the EU in a matter of days. Sterling has strengthened against all G10 and Asian currencies so far this week.

Should the Brexit deal be approved at the upcoming EU leaders’ summit, that could prompt GBPUSD to claim more upside towards 1.30. The Brexit deal however, is expected to face a sterner political test in Westminster, where previous versions of a deal have failed. Should this Brexit deal fall short in overcoming any of its political hurdles this week, Sterling could then quickly tumble towards 1.22.

UK Prime Minister Boris Johnson may then be forced to ask for a Brexit extension, and in so doing, merely kick the Brexit can down the road once more and string the Pound along its volatile path for longer.

US retail sales data could shift Dollar, Fed rate cut expectations

With the Dollar Index (DXY) now trading around the lower 98 levels, DXY’s next move could be triggered by the upcoming September US retail sales data. Investors have been relying on US consumers to keep the momentum in growth intact, seeing as the US manufacturing sector has been feeling the strains from global trade tensions.

Should the retail sales print come in below market forecasts of 0.3 percent, that could prompt some softness in the Greenback as markets ramp up expectations for more Fed policy easing in 2019. At the time of writing, the Fed funds futures point to a 72.9 percent chance of a 25-basis point cut at the end of this month, followed by a 55.4 percent chance of the Fed leaving its benchmark interest rates unchanged in December.

The Dollar could moderate further if the risk-on mode is sustained following a “limited” US-China trade deal. US President Donald Trump may be forced to dilute his hardline stance in order to seal more policy wins in the lead up to the 2020 Presidential elections. Such a scenario could erode support for the Greenback, as global economic conditions and risk appetite draw relief from easing trade tensions.

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Global Equity Markets Roar

Third-quarter results for UnitedHealth group were better than expected and led it to raise profit guidance for the year, with similarly upbeat reports also from Johnson and Johnson and JPMorgan. European equities were mostly up, too. Gold struggle in the face of surging US bond yields and the general risk-on fervour 

Brexit

The Pound galloped higher overnight, leaving the currency around 4% stronger over the past week. RTE News’ Tom Connelly, who broke the original Brexit ‘deal’ story, writes that the EU and UK sides are the closest they have been and that there is some optimism now. He has Irish sources typically, so this is another positive sign.

European stocks rallied to levels not seen in more than a year as speculation that a Brexit deal is imminent prompted traders to scoop up shares across the board.
Of course, any ‘breakthrough’ between the EU and the UK must still face the British house parliament.

But traders remain favourably positioned for the ‘white smoke’ moment hoping for domestic ratification on Brexit.
Framing out the “feel good” risk-on vibe, the US-China trade discussions seem to be making some progress, and the prospect of a genuine truce has risen.
Asia open

While Asian cash market looks set to gain however entering the morning session, traders have hit the pause button possibly awaiting the outline of a Brexit agreement to judge the likelihood of parliamentary approval, which suggest there still much wood to be chopped before pen gets put to paper.

As well, investors are looking for more clarity around the various phases of the US-China trade talks. Individually, Chinas firm commitment to buy $50 billion in US farm goods, details around December tariff detente, possible first-level tariff rollbacks and any signs progress on lifting the US export ban on Huawei, yup lots of wood to chop there also.

Oil market

Crude fell for a second day amid a weakening global growth outlook and as US oil producers defensively hedge against copious crude supplies in the world’s largest economy.

Oil markets continued to struggle overnight under the weight of a dreary macro scrim as back to back miserable China data prints (bad trade data and factory gate inflation) were compounded by a Germany’s sickly ZEW survey which pressured prices.

However, a lower base is being tentatively held in check after OPEC Secretary-General Mohammad Barkindo reiterated his “whatever it takes” to sustain oil market stability mantra.

While corporate earnings reports and phase one of the US-China trade talks is buttressing general risk sentiment, without an implicit rollback of existing tariffs, a tariff detente will have minimal effects on shifting the global growth dial to a more pleasant setting and therefore limited impact on oil prices. In other words, a detente means things may not necessarily get worse, but it doesn’t suggest that global economic conditions will improve any time soon.

But the fact that the losses are very sticky at these downcast levels it could be another worrying sign for oil bulls.

Gold market

The robust US corporate earnings reports coupled with positive developments on the Brexit front has triggered a market rotation out of bonds into equities resulting in US 10-year bond yields significantly rising which is weighing on the opportunity cost of holding gold.

Roaring US equity markets and an upsurge in US bond yields are possibly two of the worst flatmates for gold; as a result, gold toppled nearly $20 top to bottom overnight.

Also, The NY Fed manufacturing survey lifted a better-than-expected 2pts in October, giving the hawks on the FOMC “something to talk about” and perhaps hawkishly influencing their October policy decision process.

Currency markets

Japanese Yen

The “Risk on” environment has propelled the USDJPY higher within reach of the psychological 109 level as the S&P 500 had a peak above the equally cerebral 3000 markers.

Australian Dollar

The market is still debating the RBA’s monetary policy gymnastics. But given the RBA Board is expressing some doubts about the efficacy of dropping rates further operating in what for the RBA is uncharted territory, it could mean slowing the pace of rate cuts but doesn’t necessarily alter their dovish bias. Despite a frothy global “risk-on” environment, the Aussie dollar is trading 20 pips off yesterday’s session tops.

The Yuan

The Yuan may remain stable within the current 7.05-7.10 level while the phase one trade deal gets chiselled out.

Back to back weaker economic data out of China (Trade and factory inflation gate) provided a stark reminder if not a reality check that a weaker Yuan from a pure fundamental landscape may still be in the cards. As such the USDCNH has traded with a better bid overnight.

But given there remains a strong possibility of a Phase 1 deal getting inked, at minimum USDRMB topside should remain capped and we could see the CNH outperform in the weeks ahead assuming phase 2 and 3 of the propose US-China trade deal comes to fruition.

This article was written by Stephen Innes, Asia Pacific Market Strategist at AxiTrader

Brexit and Economic Data Put the GBP and USD in Focus

Earlier in the Day:

It was a relatively busy day on the economic calendar through the Asian session this morning.

New Zealand 3rd quarter inflation figures provided the Kiwi Dollar with direction early in the session.

Outside of the stats, positive updates on Brexit and U.S corporate earnings failed to support risk sentiment early on.

For the Kiwi Dollar

The annual rate of inflation eased from 1.7% to 1.5% in the 3rd quarter, while coming in ahead of a forecast of 1.4%. Quarter-on-quarter, consumer prices rose by 0.7%, following a 0.6% rise in the 2nd quarter. Economists had forecast a 0.6% increase.

According to NZ Stats,

  • Higher prices for rents and cigarettes and tobacco supported the 1.5% increase in the CPI, year-on-year.
  • The increase was partially offset by falling prices for vegetables, petrol, and telecommunications equipment.
  • Quarter-on-quarter, the 0.7% rise in consumer prices came off the back of price rises for local authority rates and payments, vegetables, and meat and poultry.
  • Falling prices for fruit, petrol, and new cars were negatives for the quarter.

The Kiwi Dollar moved from $0.62858 to $0.063125 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.21% to $0.6281.

Elsewhere

At the time of writing, The Japanese Yen was up by 0.14% to ¥108.71 against the U.S Dollar, while the Aussie Dollar was down by 0.21% to $0.6739.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. Finalized Italian and Eurozone inflation figures for September are due out later this morning, along with the Eurozone’s August trade figures.

Barring material deviation from prelims, the Eurozone’s trade data will likely have the greatest influence on the EUR.

Outside of the numbers, Brexit will continue to have an impact throughout the day.

At the time of writing, the EUR was down by 0.02% to $1.1031.

For the Pound

It’s a relatively busy day ahead on the data front. September inflation figures are due out later this morning.

We can expect the Pound to show greatest sensitivity to the annual rate of inflation and the Input Producer Price Index figures.

Direction for the Pound will ultimately come from Brexit updates, however. With the EU Summit now just 4-days away, time is rapidly running out.

Positive updates from the EU and the Brexiteers delivered more upside for the Pound at the start of the week. Expect plenty of volatility and a reversal should negative updates begin to filter through, however.

At the time of writing, the Pound was down by 0.28% to $1.2751.

Across the Pond

It’s a relatively busy day ahead on the economic calendar. September retail sales figures are due out later today, along with August business inventory numbers.

Retail sales will have the greatest influence on the day. Consumer spending remains a key contributor and barometer to the U.S economy. Any unexpected slide in spending and expect the markets to balk as recession chatter continues to do the rounds.

On the geopolitical front, demand for the Dollar could rise should progress on Brexit negotiations hit a wall. Chatter from the Oval Office also needs monitoring throughout the day.

The Dollar Spot Index was up by 0.02% to 98.312 at the time of writing.

For the Loonie

It’s a busier day on the economic calendar, with September inflation figures due out later today. Expect the Loonie to react to today’s figures, with support likely to kick in should inflationary pressures build. The monthly movement in consumer prices will likely have the greatest impact.

With the BoC holding steady on the monetary policy front, inflation will need to hold steady at best.

The Loonie was down by 0.04% at C$1.3204, against the U.S Dollar, at the time of writing.

USD/JPY Price Forecast – US Dollar Continues To Pressure Japanese Yen

The US dollar pulled back a bit during the trading session on Tuesday, showing signs of resiliency by turning around as we approached the crucial 200 day EMA. At this point, it’s very likely that the market is going to try to break above that level, which of course would be an extraordinarily bullish sign. With this in mind, I believe that the market breaking above the highs from the Friday session could open up the door to the ¥110 level, although there is a significant amount of noise just above the 200 day EMA from previous trading. With that in mind, the market could get an external catalyst, perhaps due to earnings season.

USD/JPY Video 16.10.19

The market should find a bit of support based upon the last couple of candlesticks, but if we suddenly get a shift to a major “risk off” scenario, breaking down below the hammer from the Monday session could open up quite a bit of selling. It certainly looks as if the resiliency is something to be paid attention to though, and therefore a breakout is something that you would have to pay a serious amount of attention to. Ultimately, this is a market that should make a relatively strong move sooner or later, which will certainly have a lot to do with earnings season and the general attitude of traders as far as risk appetite is concerned. Keep in mind that the Brexit, US/China trade talks, and a whole host of other issues could have traders running to the safety of the Japanese yen. All things being equal though, it looks as if the buyers are really pressing their luck.

Please let us know what you think in the comments below

USD/JPY Fundamental Daily Forecast – Investors Shedding Safe-Haven Yen Amid Upbeat Brexit Comments

The Dollar/Yen is trading higher and in a position to take out last week’s high at 108.626 after a string of better-than-expected earnings reports offset concerns over U.S.-China trade relations. A reversal to the upside in U.S. Treasury yields and increased demand for risky assets are also driving investors away from the lower-yielding Japanese Yen.

At 15:33 GMT, the USD/JPY is trading 108.801, up 0.402 or +0.36%.

Upbeat Brexit Outlook

Positive news over Brexit is also reducing demand for the safe-haven Japanese Yen. This move is being fueled by the latest comments on Brexit from European negotiator Michel Barnier sounded an optimistic tone.

“Our team(s) are working hard, and work has just started now today, this work has been intense over the weekend and yesterday, because even if the agreement will be difficult, more and more difficult, to be frank, it is still possible this week,” Barnier told reporters in Luxembourg on Tuesday morning.

Treasury Yields Rise

U.S. Treasury yields are on the rise on Tuesday after opening lower, making the U.S. Dollar a more attractive asset. Traders are saying the move is being fueled as investors dump safe-haven assets like the Japanese Yen amid increasing hopes for a Brexit deal.

U.S. Equities Strengthen

The Japanese Yen is being further pressured by a sharp rise in U.S. equities as corporate earnings season go off to a strong start. The early rally was ignited by strong performances in the banking and health care sectors.

Shares of J.P. Morgan Chase jumped 3.8% after its third-quarter numbers topped analyst expectations. The company’s revenue also hit a record, boosted by home and auto loans along with credit cards.

UnitedHealth posted a quarterly profit that topped analyst expectations by 13 cents per share. The company’s results got a boost from growing pharmacy benefits. UnitedHealth also hiked its full-year earnings guidance. UnitedHealth shares climbed 8%.

Increasing demand for risk is good for the U.S. Dollar because of the carry trade, whereby investors sell borrowed Yen from Japanese banks to buy U.S. equities.

Kuroda Speaks

Earlier today, the Bank of Japan (BOJ) raised its assessment for one of the country’s nine regions and stuck to its sanguine view on the rest, though frail factory production and exports suggested pressure for more stimulus is unlikely to ease anytime soon.

BOJ Governor Haruhiko Kuroda said on Tuesday the central bank would not hesitate to take additional easing steps if risks to the economy grow and threaten momentum toward its 2% inflation target.

“We need to pay closer attention to the possibility that momentum toward achieving our price target will be lost,” Kuroda said in a speech at a quarterly meeting of the central bank’s regional branch managers.

A Fragile State Of Trade War Neutrality

Beyond chiselling out those details, doubts continue to swirl whether China and the U.S. can reach a full trade agreement to end the trade spat. Investors were reluctant to jump on the rally bus while enthusiasm about the potential for a significant U.S.-China trade breakthrough waned.

But this possibly goes well beyond a tariff detente as trade friction has also spread to technology and financial sectors in the past few months. Suggesting, the U.S. administrations attitude towards China does not appear to have improved significantly.

Given the recent economic war escalations, it might suggest we remain in a fragile state of “phase one” trade war neutrality unsure if it may last or even what sweeteners and apparatus have been constructed to ensure both parties compliance.

While bullish momentum has faded somewhat, risk steadied overnight when Treasury Secretary Mnuchin said U.S. and China reached “fundamental agreement” on several trade issues last week and a tweet from the Global Times’ editor-in-chief sketched a more cheerful outlook.

Oil markets

Oil dropped the most in two weeks amid concern that the recent U.S.-China trade talks won’t lead to a deal reinforcing the fact that the outcome of the agreement is probably the most significant near-term factor for oil sentiment.

Indeed, a definite conclusion of trade talks, even a phase one deal, could do a great deal to alleviate those gnawing emotional concerns about global demand as traders continue to wear demand sensitivities on their sleeve.
But oil prices stabilised after calming trade talk comments from Treasury Secretary Mnuchin.

While oil traders are all too knowing that chasing headline risk is fraught with peril. But demand erosion from the trade war is such an overwhelming pervasive bearish skew; it might be impossible for traders to ignore the ebb and flows from headline risk.

Currency market

The Japanese Yen

Risk markets fell under pressure after headlines reported China wants more talks before it signs up to the tentative trade deal announced by the U.S. on Friday.

USDJPY slipped to 108.05 from 108.20 but remained bid on the dip after risk market steadied

The British Pound

The Pound looked a little perky slicing through 1.2600 in the late New York afternoon possibly due to the absence of any negative headline suggesting that the talks are not breaking down.

The Chinese Yuan

The Yuan may remain stable while the phase one trade deal gets chiselled out within the current 7.05-7.10 level While the Yuan rallied convincingly in Asia yesterday down to 7.05 USDCNH level , the weaker China trade data provided a stark reminder if not a reality check that a weaker Yuan from a pure fundamental landscape may still be in the cards.

But given the extremely high probability of a Phase 1 deal getting inked, a subsequent Yuan currency accord and China’s ongoing commitment to stabilising the Yuan, 6.90 USDCNH now appears to be a reasonable target for USDCNH at the end of 2019 assuming phase 2 and 3 remain on target.

Of course, this view differs wildly by 30 “big figures” from some banks analyst who are pegging year-end USDCNH at 7.20 expecting no significant developments from the phased-in trade talks.

ADXY

Yesterdays USDAsia selling flows were reversed overnight after a run of not so friendly trade talk headlines. But with markets zeroing in on ADXY 103.70 resistance which has thwarted several rallies in 2019, the reversal may also have been compounded by some profit-taking.

While positive momentum is building and the rally in local currencies may extend further particularly on the basket of THB/SGD/IDR/MYR/KRW, traders may be waiting for this fundamental level (103.7 ADXY) to breach on a closing basis to confirm the next bullish leg higher.


Bloomberg

Gold markets

Gold is trading firmer this morning but off overnight highs. Headline risk will continue to dominate, but at the end of the day, what matters most for gold is lower interest rates. And through all this tangled web of headline and phased in confusion, there is one essential narrative that seems to be getting lost.

There is a difference between detente and a deal. A detente means things don’t get worse, but it doesn’t implicitly suggest that global economic conditions get better at once. So, with the latest run of weaker financial data implying that central banks may keep interest rates lower for longer, gold could remain supported short term.

And despite hopes building on a trade truce and a Brexit breakthrough, defensive positioning remains high. And predictably so as if trade talks are struggling at this soft-pedalled level, discussions may not get more comfortable when the complicated intellectual property and technology transfer issues get tabled.

But over the near term, gold could face significant fundamental headwinds in the form of higher US yields and improved equity market risk sentiment especially as we move through to phase 2 and 3 of the US-China trade deal. And if a comprehensive trade deal is inked in November, then the extremely extended long gold positions might be prone to a significant correction lower.

FX Traders who are caught offside may look for opportunities to pare back currency risk aversion trades, as such gold investors need to respect the underlying movement on the Yuan and Yen. USDCNH 7.0 and USDJPY 109.00 are a hugely critical “risk-on” sentiment level

This article was written by Stephen Innes, Asia Pacific Market Strategist at AxiTrader

Brexit and Economic Data Keep the GBP and the EUR in Focus

Earlier in the Day:

It was a relatively busy day on the economic calendar through the Asian session this morning.

China’s September inflation figures provided direction ahead of finalized August industrial production figures out of Japan due out later this morning

In the early part of the day, the RBA also released its meeting minutes from last Tuesday’s meeting.

On the geopolitical front, sentiment towards the latest on the U.S – China trade talks and Brexit also influenced early on.

For the Aussie Dollar

Following last week’s rate cut, the RBA meeting minutes had limited influence on the Aussie Dollar. Salient points from the October Minutes included:

  • Risks to the global growth outlook remained tilted to the downside.
  • Businesses scaled back investment plans as a result of the technology and trade disputes between the U.S and China.
  • Further monetary policy easing was delivered to support employment and income growth and greater confidence that inflation would be consistent with the medium-term target.
  • Members noted that the unemployment and inflation outcomes were likely to fall short of forecasts in the near-term.
  • Subdued wage growth also suggested that spare capacity remained in the economy.
  • In spite of strong employment growth, however, the spare capacity remained, with employment growth expected to slow.
  • While lower interest rates could affect confidence, it would also support household cash flows and spending.
  • It was also noted that members were prepared to ease monetary policy further if needed.

The Aussie Dollar moved from $0.67694 to $0.067703 upon release of the minutes that preceded China’s inflation figures.

From China

The annual rate of inflation picked up from 2.8% to 3.0%, coming in ahead of a forecast of 2.9%. Month-on-month, consumer prices rose by 0.9%, coming in ahead of a forecasted and August 0.7%.

Wholesale fell further in September, however, with wholesale prices falling by -1.2% compared with September 2018. While in line with forecasts, the pace of deflation picked up from August’s 0.8%.

The Aussie Dollar moved from $0.67865 to $0.67849 upon release of the figures. At the time of writing, the Aussie Dollar was flat at $0.6775.

Elsewhere

At the time of writing, The Japanese Yen was up by 0.09% to ¥108.30 against the U.S Dollar, while the Kiwi Dollar was up by 0.11% to $0.6306.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. Germany and the Eurozone’s ZEW economic condition figures are due out later this morning.

French finalized September inflation figures and Germany’s ZEW current conditions figures will likely have a muted impact on the EUR.

Outside of the numbers, we can expect direction to also come from Brexit as the Brexit clock ticks away.

At the time of writing, the EUR was up by 0.04% to $1.1031.

For the Pound

It’s a busy day ahead on the data front. August earnings and unemployment figures are due out along with September’s claimant count numbers.

We can expect the Pound to show greatest sensitivity to the wage growth and claimant count figures. Any unexpected rise in the unemployment rate, coupled with larger than anticipated increase in claimant counts would weigh heavily, however.

While we expect the stats to influence, Brexit will continue to be the key driver. A further pullback from Friday’s recent high should be expected should little progress be made on a deal.

At the time of writing, the Pound was up by 0.06% to $1.2616.

Across the Pond

It’s a relatively quiet day ahead on the economic calendar. October’s NY Empire State Manufacturing Index figures are due out later today.

With tariffs still in place, any further deterioration in manufacturing sector conditions would be negative.

Chatter from the Oval Office would require monitoring, however. There’s also Brexit to factor in, with any negative news considered Dollar positive.

The Dollar Spot Index was down by 0.04% to 98.417 at the time of writing.

For the Loonie

It’s a quiet day on the economic calendar. There are no material stats out of Canada to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of crude oil prices later in the day.

The Loonie was up by 0.02% at C$1.3232, against the U.S Dollar, at the time of writing.

USD/JPY Price Forecast – US Dollar Runs Into 200 Day EMA

The US dollar has gone back and forth against the Japanese yen during trading on Monday, as the 200 day EMA has offered far too much in the way of resistance to get above. By doing so, it shows that perhaps the market is ready for a bit of a pullback. Overall, this is a market that continues to be very sensitive to risk appetite, and of course the US/China situation is going to continue to be first and foremost among the thoughts that drive this pair.

USD/JPY Video 15.10.19

After the Chinese left Washington DC, they have suggested that the deal that was talked about will be signed until there is more talks. In other words, it was essentially a big “nothing burger” which is something that the market probably should have known to begin with. However, hope springs eternal and traders are now waiting to see some type of conclusion to the situation. It doesn’t look very likely anytime soon though, so at this point it makes sense that the market would pull back just a bit and reach towards the ¥107 level underneath, which is massive support.

The market will move on the next headline coming out of either Trump or China, so that has to be taken into account but the ¥108.50 level has been reliable as far as its resistance, so it does make even more sense that we pull back from here. A break above this level of course would be rather strong on a daily close, perhaps sending this market towards the ¥110 level, but that would need some type of positive catalyst to make it happen.

Please let us know what you think in the comments below

USD/JPY Fundamental Daily Forecast – ‘Risk-off’ Session Driving Investors Into Safe-Haven Assets

Lower Treasury yields and a drop in demand for higher-risk assets are helping to drive the Dollar/Yen lower on Monday as a report surfaced saying China wants to continue trade talks before signing ‘phase one’ of the partial trade deal announced on Friday by President Trump.

Despite Friday’s stock market rally and the shedding of safe-haven assets like Treasury Bonds, Gold, U.S. Dollar and Japanese Yen, the reaction by investors to the announcement of the trade deal was muted with most of the price action being fueled by the rumor than the fact. This may have been the first sign of a lack in confidence in the initial agreement.

At 11:52 GMT, the USD/JPY is trading 108.209, down 0.218 or -0.20%.

Analysts Didn’t Like Deal from Start

Morgan Stanley says President Trump’s partial deal with China is an “uncertain” arrangement at best and there does not appear to be a viable path to reduce existing tariffs at the moment.

Without a durable dispute settlement mechanism in place, another round of tariff increases cannot be ruled out, according to Morgan Stanley.

“There is not yet a viable path to existing tariffs declining, and tariff escalation remains a meaningful risk,” the bank said in a note. “Thus, we do not yet expect a meaningful rebound in corporate behavior that would drive global growth expectations higher.”

Evercore wrote in a note, “Trump’s statement that ‘We are near the end of the trade war’ is not plausible to us. We do not expect tariff cuts in 2020 – but are ready to be favorably surprised. And as long as such punitive tariffs remain, we would describe US-China economic relations as bad, not good.”

Daily Forecast

A “risk off” day on Monday should keep the pressure on the USD/JPY. This is already being fueled by a report from Bloomberg News that said China needed to have further discussions before it would sign off on the so-called “phase one” trade deal President Donald Trump announced on Friday.

Traders will also be watching for a reaction from President Trump to the Bloomberg news, since he has a tendency to overreact to situations like we have at this time.

Furthermore, investors aren’t sure if his means the previously suspended tariffs that were supposed to kick in on October 15 are back in play. The USD/JPY could plunge if Trump says “yes” to the new tariffs. This will also likely lead to retaliation by China with additional tariffs.

USD/JPY Forex Technical Analysis – 108.235 Potential Trigger Point for Downside Acceleration

The Dollar/Yen is trading slightly lower on Monday with the Japanese market closed due to a bank holiday. We’re probably looking at profit-taking following last week’s solid performance following the announcement of the partial trade deal between the United States and China. Higher Treasury Note futures (lower rates) are also contributing to weaker Forex pair.

At 05:40 GMT, the USD/JPY is trading 108.318, down 0.110 or -0.10%.

The early trade suggests a “buy the rumor, sell the fact” move may be developing. This doesn’t mean the trend is down, but aggressive profit-taking could contribute to a 50% to 61.8% retracement of the last rally.

USDJPY
Daily USD/JPY

Daily Technical Analysis

The main trend is up according to the daily swing chart. The main trend changed to up on Friday when buyers took out the previous main top at 108.405. The main trend changes to down on a move through 106.485.

The main range is 109.317 to 104.463. Its retracement zone at 107.463 to 106.890 is support.

Daily Technical Forecast

Based on the early price action and the current price at 108.318, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to the uptrending Gann angle at 108.235.

Bullish Scenario

A sustained move over 108.235 will indicate the presence of buyers. The first upside target angle comes in at 108.505, followed closely by 108.626.

Overtaking 108.626 will signal a resumption of the uptrend. This could lead to a test of the uptrending Gann angle at 107.360.

Crossing to the strong side of the angle at 107.360 will put the USD/JPY in a position to challenge the August 1 top at 109.317.

Bearish Scenario

A sustained move under 108.235 will signal the presence of sellers. This could trigger the start of an acceleration to the downside with the next target angle coming in at 107.463 to 107.360.

Side Notes

Basically, Monday’s session begins with the USD/JPY inside a small triangle, formed by a downtrending Gann angle at 108.505 and an uptrending angle at 108.235.

The triangle chart pattern tends to indicate volatility to start preparing for a breakout move. Also start watching for increased volume as this will be necessary to verify the breakout.

A Light Economic Calendar Puts the GBP and Brexit in the Limelight

Earlier in the Day:

It was a relatively quiet day on the economic calendar through the Asian session this morning.

China’s September trade figures provided direction at the start of the week.

On the geopolitical front, the Asian equity markets responded to the positive updates on Brexit and trade negotiations.

In the FX markets, however, the mood was less bullish. Existing punitive tariffs remain that suggest more doom and gloom before any pickup in economic activity.

From China

The U.S Dollar trade surplus widened from $34.84bn to $39.65bn in September. Economists had forecast a narrowing to $33.30bn.

  • Year-on-year, exports fell by 3.2%, which was worse than a forecasted 3.0% fall. In August, exports had fallen by 1.0%.
  • Imports fell by 8.5%, year-on-year, in September, which was worse than a forecasted fall of 5.2%. Imports had fallen by 5.6% in August.

The Aussie Dollar moved from $0.67760 to $0.67861 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.15% to $0.6784.

While the trade surplus widened, a slide in imports suggests waning demand that could spell trouble in the months ahead.

Elsewhere

At the time of writing, The Japanese Yen was down by 0.03% to ¥108.32 against the U.S Dollar, while the Kiwi Dollar was down by 0.49% to $0.6306.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. The Eurozone’s August industrial production figures are due out of the Eurozone.

Following an unexpected pickup Germany, forecasts are EUR positive.

Outside of the numbers, we can expect direction to also come from Brexit and any chatter on trade.

At the time of writing, the EUR was down by 0.13% to $1.1028.

For the Pound

It’s a quiet day ahead on the data front. There are no material stats due out of the UK to provide the Pound with direction.

The lack of stats will leave the Pound in the hands of Brexit chatter throughout the day. The EU Summit is now within sight and Boris Johnson has just days to finalize a deal with the EU.

Expect Pound sensitivity to Brexit chatter to remain heightened at the start of the week.

At the time of writing, the Pound was down by 0.59% to $1.2593. A lack of progress from the weekend weighed on the Pound early on.

Across the Pond

It’s also a quiet day ahead on the economic calendar. There are no material stats to provide the Greenback with direction on the day.

The lack of stats will leave geopolitics in focus. Any further easing in geopolitical risk would be considered Dollar negative.

The Dollar Spot Index was up by 0.14% to 98.436 at the time of writing. Support kicked in early as trade talks failed to lead to a removal of existing tariffs.

For the Loonie

It’s a quiet day on the economic calendar. There are no material stats out of Canada to provide the Loonie with direction.

We can expect market risk sentiment through the day to influence. Trade data out of China and no suggestion of the removal of existing tariffs were negatives early on.

The Loonie was down by 0.05% at C$1.3209, against the U.S Dollar, at the time of writing.

Phase One: Too Much Uncertainty to Call It a ‘Good Deal’

It’s tough to say whether investors liked the first phase of the trade deal between the United States and China announced on Friday because of what was contained in the details, or because something was finally accomplished after months of waiting.

I have to admit, I didn’t think anything would be accomplished at the two-day meeting because I became caught up in the headlines throughout the week that seemed to be leaning toward the negative side. However, I quickly came to my senses on Thursday night when I saw the five indicator markets – Treasurys, Gold, U.S. Dollar, Japanese Yen, S&P 500 Index – starting to make noticeable moves.

When Treasurys, Gold, U.S. Dollar and Japanese Yen all started moving in the same direction, I knew something was up because this was unusual. It was especially odd seeing gold and the dollar both breaking sharply. These are the markets that investors were using to hedge risk. So when they all started to break, I sensed investors were trimming positions against the worst outcome of the trade talks.

Trump’s Flip-Flop Source of Tension

President Trump was actually the source of most of the recent tension in the markets.

On September 20, he signaled that he would consider an interim trade deal with China, even though he would not prefer it.

The president told reporters he would like to ink a full agreement with the world’s second largest economy. However, he left the door open to striking a limited deal with Beijing.

“If we’re not going to do the deal, let’s get it done,” he told reporters. “A lot of people are talking about it, I see a lot of analysts are saying an interim deal – meaning we’ll do pieces of it, the easy ones first. But there’s no easy or hard. There’s a deal or there’s not a deal. But it’s something we would consider, I guess.”

Later that day, a White House official then said the U.S. is “absolutely not” considering such a deal.

A few days later on September 24, Trump said he will not accept a “bad deal” in trade talks with China. “Hopefully we can reach an agreement that will be beneficial for both countries. But as I have made very clear I will not accept a bad deal for the American people.”

But Did Trump Make a Bad Interim Trade Deal?

No interim deal, check. Bad deal, check. Morgan Stanley says President Trump’s partial deal with China is an “uncertain” arrangement at best and there does not appear to be a viable path to reduce existing tariffs at the moment.

Without a durable dispute settlement mechanism in place, another round of tariff increases cannot be ruled out, according to Morgan Stanley.

“There is not yet a viable path to existing tariffs declining, and tariff escalation remains a meaningful risk,” the bank said in a note. “Thus, we do not yet expect a meaningful rebound in corporate behavior that would drive global growth expectations higher.”

Evercore wrote in a note, “Trump’s statement that ‘We are near the end of the trade war’ is not plausible to us. We do not expect tariff cuts in 2020 – but are ready to be favorably surprised. And as long as such punitive tariffs remain, we would describe US-China economic relations as bad, not good.”

JP Morgan said the first phase of the deal is a positive development after months of trade escalation, but that the outcome is not a surprise for the market. It expects that US-China tension could escalate again, especially during the 2020 presidential election.

“Investors had high hopes for some form of mini-deal in the weeks before the meeting, and Friday’s announcement has at least been partially, if not fully, priced in” the firm wrote.

Near-Term Expectations

Trader focus over the near-term should be on one or all of the following markets – Treasurys, Gold, U.S. Dollar, Japanese Yen and S&P 500 Index. If it proves to be too much then watch Treasury yields.

There is still risk to the economy because the initial series of tariffs still exist. Once traders trim their hedges placed in anticipation of the October 15 tariffs that have now been suspended, yields should flatten and traders will start pricing in the possibility of a Fed rate cut.

Traders aren’t changing sentiment, per se. They are just making adjustments to the suspension of the October 15 tariffs so don’t expect too much more downside action in gold, the U.S. Dollar and Japanese Yen. All should find support at or near their September 11 levels, the day Trump announced the October 15 tariffs.

USD/JPY Fundamental Weekly Forecast – Partial Trade Deal Means Risk Still Exists

The Dollar/Yen rose sharply last week with the buying driven by a rise in Treasury yields and increased demand for higher-yielding assets. The catalyst behind the rally was speculation and the actual announcement of a partial trade deal between the United States and China. Treasury yields rose as investors sold their bond hedges. Stocks were up on the hopes that additional trade deals in the future would ease concerns over a possible U.S. recession.

Last week, the USD/JPY settled at 108.427, up 1.516 or +1.42%.

The dollar was also underpinned against the Japanese Yen as the chances of a 25-basis point rate cut at the end of October dipped from 93.5% to 75.4%.

Dollar/Yen Rise Driven by Higher Yields, Demand for Stocks

The USD/JPY rose last week as the spread between U.S. Government bonds and Japanese Government bonds widened, making the U.S. Dollar a more attractive currency than the Japanese Yen. Furthermore, investors sold long positions in Japanese Yen placed as a hedge against a risky global economy.

Rising stock prices also contributed to the Japanese Yen’s weakness as it kicked off the carry trade whereby investors borrow in Japanese Yen then converted the proceeds into U.S. Dollars to invest in U.S. equity markets.

Partial Trade Deal the Catalyst

The Dollar/Yen was relatively flat for about three days last week before speculation over a potential partial trade deal started to drive it higher last Wednesday/early Thursday. The Forex pair accelerated to the upside after President Trump tweeted at the midday on Friday that “Good things are happening at China Trade Talk Meeting.”

Near the end of the trading session, President Trump said China and the U.S. reached the first phase of a substantial trade deal that delays tariff hikes that were set to kick in this week.

Late in the session on Friday, Trump told reporters at the Oval Office that phase one of the trade deal will be written over the next three weeks.

As part of this phase, China will purchase between $40 billion and $50 billion in U.S. agricultural products. Trump also said the deal includes agreements on foreign-exchange issues with China. In exchange, the U.S. agreed to hold off on tariff hikes that were set to take effect Tuesday.

Additionally, Treasury Secretary Steven Mnuchin said both sides struck an “almost complete agreement” on currency and financial services issues. Phase two of the deal will “start almost immediately” after the first one is signed, Trump said.

Weekly Forecast

The announcement of the first phase of a substantial trade deal was obviously bullish for the Dollar/Yen, but since there was so much long speculation ahead of the announcement, most of the good news was probably priced into the Forex pair.

Now traders have two weeks to mull over a potential rate cut by the Fed, and the Bank of Japan, on October 30 and October 31 respectively. Additionally, investors have about 3 weeks to decide the outcome of the second partial trade deal. This carries some risk so I don’t think the USD/JPY is poised to just take off to the upside.

Furthermore, Morgan Stanley says President Donald Trump’s partial trade deal with China is an “uncertain” arrangement at best and there does not appear to be a viable path to reduce existing tariffs at the moment.

As long as the current tariffs remain in place, the global economy can continue to weaken so chasing the USD/JPY higher at current levels on the news is a risky buy in my opinion. Continue to monitor Treasury yields. They are the best indicator. Higher yields will be supportive. Lower yields could encourage Dollar/Yen traders to reduce their long positions.

The Week Ahead – Brexit, Earnings, Stats and the IMF and EU Summit in Focus

On the Macro

For the Dollar:

It’s a busier week ahead on the economic calendar.

NY Empire State Manufacturing figures for October get the week going on Tuesday. The focus will then shift to September retail sales figures due out on Wednesday.

With a heavy reliance on consumer spending, the numbers will need to be in line with forecasts to provide Dollar support.

On a busy Thursday, September building permit and housing start figures are due out along with October’s Philly FED Manufacturing numbers.

September industrial production and the weekly jobless claims figures are also due out.

With no material stats due out on Friday, Wednesday’s retail sales and Thursday’s Philly FED numbers will have the greatest impact.

Outside of the stats, trade war chatter will continue to be a factor, as will any further talk of impeachment.

The Dollar Spot Index ended the week down by 0.55% to $98.301.

For the EUR:

It’s also a relatively quiet week ahead on the economic data front.

Industrial production figures on Monday and German and Eurozone economic sentiment figures on Tuesday will influence early in the week.

The Eurozone’s September inflation and industrial production figures due out on Wednesday will also provide direction.

We would expect finalized inflation figures out of France and Italy to have a muted impact on the EUR, however.

With no material stats due out in the latter part of the week, geopolitical risk will remain in focus.

Any talk of U.S tariffs on EU goods and chatter on Brexit ahead of the 19th October EU Summit will also need considering.

The EUR/USD ended the week up by 0.58% to $1.1042.

For the Pound:

It’s another busy week ahead on the economic calendar.

Key stats include employment figures due out on Tuesday, inflation figures on Wednesday and retail sales numbers on Thursday.

On the data front, claimant counts, inflation and retail sales figures will be the key drivers in the week.

On the Brexit front, there would be more upside for the Pound should Johnson finalize a deal ahead of next weekend’s EU Summit.

The GBP/USD ended the week up by 2.73% to $1.2668.

For the Loonie:

It’s a relatively busy week ahead on the data front.

Key stats include September inflation figures due out on Wednesday and August manufacturing sales numbers due out on Thursday.

On the data front, we would expect the inflation figures to be the key driver in the week.

From elsewhere, trade data, industrial production and 3rd quarter GDP numbers out of China will also influence.

The Loonie ended the week up by 0.83% to C$1.3203 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s another relatively quiet week ahead.

Key stats are limited to September’s employment numbers due out on Thursday.

On the monetary policy front, the RBA minutes are due out on Tuesday and could pressure the Aussie Dollar should there be suggestions of more rate cuts to come.

From elsewhere, economic data out of China on Monday and Friday will also influence.

The Aussie Dollar ended the week up by 0.34% to $0.6794.

For the Japanese Yen:

It’s a relatively quiet week ahead on the economic calendar.

Key stats are finalized industrial production figures due out on Tuesday and inflation and trade data on Friday.

We would expect the stats to have a relatively muted impact on the Yen, however.

Geopolitics and economic data out of the U.S and China will likely have the greatest impact in the week.

The Japanese Yen ended the week down by 1.26% to ¥108.29 against the U.S Dollar.

For the Kiwi Dollar:

Stats are on the quieter side in the week ahead.

Economic data is limited to 3rd quarter inflation figures that are due out on Wednesday. We can expect the Kiwi to be particularly sensitive to the numbers.

From elsewhere, stats from China will also influence in the week.

The Kiwi Dollar ended the week up by 0.27% to $0.6337.

Out of China:

It’s a busy week on the economic data front. Economic data includes trade data due out on Monday and inflation figures on Tuesday.

The focus will then shift to a busy Friday. Stats on Friday include fixed asset investment, industrial production and 3rd quarter GDP numbers.

We expect trade data, industrial production, and the GDP numbers to have the greatest impact on market risk sentiment.

The impact of any weak numbers could be buffered, however, by any further positive chatter on trade.

The Yuan ended the week up by 0.83% to CNY7.0892 against the Greenback.

Geo-Politics

Impeachment: With the U.S and China making progress on trade, impeachment chatter could return in the week ahead.

Trade Wars: 15th October U.S tariffs on Chinese goods have been postponed as progress was made last week. For real progress to be made, however, the U.S would need to remove existing tariffs that continue to hurt the Chinese economy. Expect more chatter in the week, which will influence risk sentiment.

UK Politics: Brexit talks continue, with a deal now needed to support further the Pound ahead of the EU Summit. Any suggestions that the latest proposal is inadequate and expect the Pound to slide.

The Rest

Earnings:  It’s a big week ahead, with U.S banks Citi, Goldman, JPMorgan, and Wells Fargo announcing.

EU Summit: It is make or break for Boris Johnson and the Brexiteers. Will there finally be an agreement for the British PM to take back to parliament?

IMF Annual Meeting: Chatter on the global economy and what can be done to drive growth will influence. Will there be any agreements to ramp up fiscal spending to offset the effects of the ongoing U.S – China trade war?

The Weekly Wrap – Progress on Brexit and Trade Delivered in the Week

The Stats

It was a quieter week on the economic calendar in the week ending 11th October.

A total of 44 stats were monitored throughout the week, following 74 stats from the week prior.

Of the 44 stats, 17 came in ahead forecasts, with 22 economic indicators coming up short of forecast. 5 stats were in line with forecasts in the week.

Looking at the numbers, 19 of the stats reflected an upward trend from previous figures. Of the remaining 25, 20 stats reflected a deterioration from previous.

While the economic data was skewed to the negative, the Dollar struggled in the week, as demand for the dollar eased off the back of positive updates from trade talks and Brexit.

The U.S Dollar Index (“DXY”) fell by 0.55% to end the week at $98.301.

Out of the U.S

It was a relatively quiet week on the economic data front. Wholesale inflation figures on Tuesday and September inflation figures on Thursday provided direction early in the week.

wholesale and consumer prices were on the softer side in September, pinning back the greenback.

On Friday, positive Michigan’s consumer expectations and sentiment figures failed to support the Greenback.

Off less influence in the week, were JOLTs job openings, initial jobless claims and import and export price index figures.

Outside of the stats, the FOMC meeting minutes revealed some debate on when to end the current rate path. Rising concerns over the economic outlook suggested that more cuts could be on the way.

The reality was, however, that just 7 of 17 FOMC members foresaw a further rate cut before the year-end.

Downside for the Dollar ultimately came from an easing in geopolitical risk, with most of the damage coming at the end of the week.

In the equity markets, a Friday rebound pulled the majors into the green for the week. The Dow and S&P500 ended the week up by 0.91% and 0.62% respectively, with the NASDAQ up 0.93%.

Out of the UK

It was a busy week on the economic calendar.

Key stats included GDP, industrial and manufacturing production and trade data on Thursday.

While production was on the slide, quarter-on-quarter GDP numbers continued to show the UK economy dodging a recession. The numbers were ultimately Pound positive.

Of less influence in the week were housing sector figures, labor productivity, and retail sales numbers.

While the stats were supportive of the Pound, the upside ultimately came from Brexit news.

Progress towards a possible trade deal, ahead of next week’s EU Summit, drove demand for the Pound.

The Pound ended the week up by 2.73% to $1.2668.

For the FTSE100, a stronger Pound failed to pressure the 100, with the index rising by 1.28%.

Out of the Eurozone

It was particularly quiet week on the economic data front.

Germany’s factory orders and trade data provided little support in the week, with factory orders falling again and the trade deficit narrowing.

On the positive, however, was an unexpected rise in industrial production.

At the end of the week, finalized September inflation figures out of Germany and Spain had a muted impact on the EUR.

On the monetary policy front, the ECB monetary policy meeting minutes also left the EUR unscathed.

The upside in the week ultimately came from positive updates on Brexit and progress on the U.S – China trade talks.

For the week, the EUR rose by 0.58% to $1.1042.

For the European major indexes, the DAX30 rallied by 4.15%, with the EuroStoxx600 and CAC40 up by 3.23% and 3.00% respectively.

Elsewhere

It was another positive week for the Aussie and Kiwi Dollars.

The Aussie Dollar rose by 0.34% to $0.6794, while the Kiwi Dollar gained 0.27% to $0.6337.

For the Aussie Dollar

It was a quiet week for the Aussie Dollar.

Economic data was limited to September’s business confidence and October consumer sentiment figures.

Both business and consumer confidence figures disappointed in the week, pinning back the Aussie Dollar.

Of less influence were home loan figures that continued to reflect improved housing sector conditions.

In spite of the negative bias on the stats, a Friday rally in the Aussie Dollar delivered the gains for the week. Positive updates on trade talks delivered the upside on the day.

For the Kiwi Dollar

The stats were, once more, skewed to the negative in the week.

September’s Business PMI held steady at 48.4, coming up short of a forecast of 49.0. Electronic card retail sales also came up short of forecasts, whilst up by 0.4% in September.

While the stats were skewed to the negative on Friday, a 0.27% gain on the day gave the Kiwi Dollar the upside for the week.

For the Loonie

Through the 1st half of the week, housing sector figures impressed, proving some support.

Employment figures on Friday were the key driver, however, with the unemployment rate falling from 5.7% to 5.5%. A 53k rise in employment, following an 81.1k increase in August, delivered on the day.

Positive updates from trade talks also delivered provided support late in the week, with WTI and Brent gaining 3.58% and 3.54% respectively.

The Loonie ended the week up by 0.83% to C$1.3203 against the Greenback.

For the Japanese Yen

It was a relatively quiet week on the data front. Stats were limited to August household spending figures that came in worse than forecasts.

While the stats were Yen negative, the downside from the Yen came from an easing in geopolitical risk.

Safe-haven demand waned as progress on Brexit negotiations and trade talks spurred demand for riskier assets.

For the week, the Japanese Yen fell by 1.26% to ¥108.29.

Out of China

It was a quiet week on the economic data front.

September’s service sector PMI, which reported slower sector growth, tested risk sentiment on Monday.

A lack of stats through the remainder of the week left updates from the U.S – China trade talks to influence risk sentiment.

The Yuan rose by 0.83% to CNY7.0892 against the Greenback.

USD/JPY Weekly Price Forecast – US Dollar Rallies Significantly For The Week

The US dollar has rallied rather significantly during the week, reaching towards the ¥108.50 level. That’s an area that will cause quite a bit of resistance, and at this point it’s very likely that we need to see some type of resolution with the US/China trade situation to get this market going to the upside. If not, then the market is very likely to roll over towards the ¥107 level. Breaking below the bottom of the weekly candle stick should send this market down to the ¥105 level, which was even more supportive.

USD/JPY Video 14.10.19

At this point, the market is likely to be a headline driven more than anything else, which should not be surprising considering that all markets are behaving like that right now. The market will be choppy to say the least, but at this point it comes down to whether or not the Americans and the Chinese can get it together. It does not look promising for a longer-term trade, so disappointment could very well be in the cards. Longer-term, we will eventually make a decision but longer-term traders will probably continue to be exacerbated by the volatility and choppiness found in this very risk sensitive pair. Ultimately, we will eventually make a decision but it comes down to headlines at this point so it’s difficult to put longer-term money to work in this type of scenario.

Please let us know what you think in the comments below

USD/JPY Price Forecast – US Dollar Hitting Resistance

The US dollar has rallied significantly against the Japanese yen during the trading session on Friday, crashing into the 100 a ¥0.50 level. This is an area that attracts a lot of attention because quite frankly the 200 day EMA is sitting right there. At this point, we are also testing the major selloff candlestick from late July, as the trend is being threatened. What’s even more interesting is that the US/China trade talks are going on right now, so that will of course attract a lot of attention as well.

USD/JPY Video 14.10.19

If we do pull back from here, it doesn’t necessarily mean that it’s going to be a major selloff, but it could send this market down towards the ¥107 level. That’s an area that has offered significant support and resistance recently. This would be a simple continuation of the overall consolidation that we have been in. However, if we do get some type of good news out of the US/China trade situation, then the market will more than likely close above the 200 day EMA, which should send this market much higher.

Another thing to keep in mind is that the trade talks may not end until after the markets close. If that’s the case then I would fully anticipate seeing some type of gap higher on Monday. Obviously, the exact opposite can happen if there is some type of breakdown in talks. The most likely scenario is that there some extension of what seems to be a never ending drama. At that point, it may be relatively quiet. Earnings season is next week and that can also have an influence on this pair.

Please let us know what you think in the comments below

USD/JPY Fundamental Daily Forecast – Investors Placing Big Bets on Some Sort of Trade Deal

The Dollar/Yen is trading sharply higher on Friday on hopes of progress in U.S.-China trade talks. Meanwhile, geopolitical tensions have also eased in Europe amid optimistic comments from Ireland on Brexit.

Helping to fuel the rally is increasing demand for risky assets due to the carry trade, where investors sell Yen and buy dollars to invest in U.S. stock markets.

Rapidly rising U.S. Treasury yields are also helping to widen the spread between U.S. Government bonds and Japanese Government bonds, making the U.S. Dollar a more attractive investment.

At 12:55 GMT, the USD/JPY is trading 108.395, up 0.463 or +0.43%.

On Thursday, President Donald Trump said he’s meeting with Chinese Vice Premier Liu He on Friday, fueling optimism about a positive outcome from this week’s high-level trade talks.

“Big day of negotiations with China. They want to make a deal, but do I? I meet with the Vice Premier tomorrow at The White House,” Trump said in a tweet Thursday.

Additionally, top U.S. and Chinese negotiators wrapped up their first day of trade talks, with U.S. President Donald Trump welcoming what he called a “very, very good negotiations with China”.

Possible Outcomes

“To affirm a temporary trade truce, the second day of trade talks (Friday) will need U.S. President Trump to suspend or cancel the U.S. tariffs that are scheduled to hit on Chinese goods October 15 and December 15,” strategists at Singapore’s DBS Group Research wrote in a note.

Still, in the longer term, the strategists said: “The broader China-US trade war remains unresolved,”

Analysts at J.P. Morgan said in a note they expect four possible scenarios could emerge from the trade negotiations.

First, an “ice-breaking meeting that will lead to a major deal” in the coming months, second, a “mini-deal” focusing on China’s purchase of U.S. products and some structural reforms while new tariffs get postponed indefinitely, third, a no-deal status quo where new tariffs come into play, but negotiations continue, and finally, a break-up scenario, where there’s no deal and no further dialogue between the U.S. and China.

J.P. Morgan analysts said they are expecting a no-deal status quo while “market investors also have high hopes for a mini-deal.”

Daily Forecast

The USD/JPY is going to continue to more higher and could even accelerate to the upside if buyers can take out the recent top at 108.478. This could create the upside momentum needed to challenge the August 1 top at 109.317. A breakout will be triggered by the announcement of any positive news from the trade talks.

However, if the talks end without at least a “mini-deal”, or if Trump says the new tariffs will start on October 15 then look out to the downside. We could see an immediate break into 107.463, followed by 106.890 and 106.471.

Taking out 106.485 will change the main trend to down.