The USD rose against the JPY after a further escalation in the US-Sino trade war yesterday. After the US imposed the latest round of tariffs, China vowed to retaliate and sources mention the possibility of tariffs on $60B of US imports, however, additional measures may also be taken. Markets seem to have priced in the latest developments as their reaction was moderate recently. Analysts, point out that until now, “all of the trade manoeuvres have not had any meaningful impact, either on US or Chinese growth”. The USD seems to be the main beneficiary of the trade wars so far and should there be further escalation we could see volatility rising.
USD/JPY rose yesterday breaking the 112.05 (S1) resistance level, now turned to support, reaching a two month high. We could see the pair trading in a sideways manner today however bullish tendencies could persist and the pair could prove sensitive to the financial releases later today, as well as any further headlines about the US-Sino trade relationships. Please note that technically, an upward trend line seems to be forming since the 7th of September as there are a number of consecutive higher peaks (7th, 11th, 14th and 19th of September) as well as a number of higher troughs (7th, 10th, 12th, 18th of September). Should the pair be under buying interest we could see it breaking the 112.80 (R1) resistance line and aim for the 113.60 (R2) resistance area. Should the market favor the pair’s short positions, we could see it breaking the 112.05 (S1) support line and aim for the 111.30 (S2) support zone.
- Support: 112.05 (S1), 111.30 (S2), 110.75 (S3)
- Resistance: 112.80 (R1), 113.60 (R2), 114.75 (R3)
NAFTA negotiations to restart
Canadian foreign minister Freeland is to hold fresh talks in Washington today about NAFTA. The negotiations are to restart in an attempt to sort out the differences between the two countries and reach a trilateral agreement with Mexico. Meanwhile back home, Canada’s PM Trudeau is under growing pressure, to get the NAFTA deal done, by business and political leaders. His bold statement that “no deal is better than a bad deal”, seems to be standing under criticism currently. Should there be further headlines about the issue we could see volatility rising for CAD and USD.
USD/CAD dropped yesterday breaking consecutively the 1.3040 (R2) and the 1.2965 (R1) support lines, now turned to resistance and tested the 1.2965 (S1) support line. We see the case for the bearish sentiment to continue as the NAFTA negotiations progress, however, the financial releases in the American session may favor the USD side. Should the bulls take over we could see the pair breaking the 1.3005 (R1) resistance line, while if the bears take over, we could see the pair breaking the 1.2965 (S1) support line and maybe even the 1.2933 (S2) support hurdle opening the way for the 1.2885 (S3) support barrier.
- Support: 1.2965 (S1), 1.2933 (S2), 1.2885 (S3)
- Resistance: 1.3005 (R1), 1.3040 (R2), 1.3070 (R3)
In today’s other economic highlights:
In the European session we get UK’s CPI data for August and in the American session, from the US, the number of building permits as well as housing starts for August and the trade balance figure for Q2. Later in the American session, we also get the EIA crude oil inventories figure. As for speakers please note that BoE’s Andy Haldane and ECB’s President Mario Draghi speak. Please also note that the BoJ will be holding a press conference about its interest rate decision earlier today.
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