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January 9, 2019

Markets buying on optimism for US-China relations

USDJPY and Yen crosses have remained buoyant amid a backdrop of firm global equity markets. USDJPY retested 109.00 but has so far left yesterday’s 1-week peak at 109.08 untroubled.

Stocks continue to rally on hopes for a breakthrough in the US-China trade standoff. Both sides agreed to extend talks into an unscheduled third day amid reports of progress on Chinese imports of US goods and increased access to Chinese markets, and Bloomberg cited sources reporting that President Trump, who tweeted that “talks are going very well,” is now eager to strike a deal.

The MSCI Asia-Pacific (ex-Japan) index has gained over 1.5%, reaching a 26-day high. The USA500 index closed on Wall Street yesterday with a 0.97% gain, and USA500 futures are showing an 0.4% advance in overnight trading. In Japan today, wages data came in on the warm side of expectations, rising 2.0% y/y versus the median forecast for 1.2% y/y.

Despite USDJPY, EURJPY and AUDJPY, have posted fresh 1-week and 11-day highs, respectively.

AUDJPY retrace more than 50% of December’s losses, after falling dramatically to its low area first established in 2009, at 70.60, last Thursday. The pair is for a 3rd coscecutive day above 50% Fib. level and the 77.00 level.

Momentum indicators are still negatively configurated, showing that the overall weakness of Aussie does not seem to have faded yet. However, the short-term technical indicators along with the move above the month midpoint, imply buying pressure and the possible retest of  78.80 barrier.

This barrier is the confluence of 61.8% Fib. retrecament level, 20-day SMA but also 2-year’s Support, which could provide now strong Resistance for the asset. Support for the day holds at 77.08-77.20 area.

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Andria Pichidi

Market Analyst


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