Sunday, May 31, 2020
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US may extent trade wars to Japan

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USD/JPY dropped after media suggested that US President Trump may open another front in trade wars, this time in Japan. The nature of the possible trade issues is still unclear regarding Japan, as well as the real motive behind the US President. Analysts note, that “other currencies have weakened against the Yen and that the market seems to have taken notice of the possibility of Japan being affected by trade conflict”. On a different front, the US-Sino trade conflict, last-minute appeals to US President Trump to reverse his decision, for additional tariffs on Chinese imports, seem to have no effect so far. Should there be further headlines on trade wars soon, we could see volatility rising.

USD/JPY dropped yesterday, breaking consecutively the 111.30(R2) and the 110.75(R1) support lines now turned to resistance. We see the case for the pair to trade in a sideways manner today with some bullish tendencies as the USD side may get some support from the financial releases later today. Also, please note that the RSI indicator is near the reading of 30, in the 4 Hour chart implying a rather overcrowded short position. Should the pair continue to be underselling interest, we could see the pair breaking the 110.00 (S1) support line and aim for the 109.35 (S2) support barrier. Should, on the other hand, the market favor the pair’s long positions, we could see it breaking the 110.75 (R1) resistance line and aim if not break the 111.30 (R2) resistance barrier.

Brexit concerns continue to weigh on the pound

Brexit concerns seem to continue to weigh on the pound and keeping it under check. Worries intensified after leaders of core EU countries called the other members not to allow a cherry-picking strategy by the British government. Analysts point out that Brexit negotiations are a focal point for the markets and despite yesterday’s positive developments, uncertainty seems to persist. The Irish Prime Minister stated that he received no indications of dramatic moves by either party, but analysts point out that any headlines could increase volatility for the sterling substantially, especially positive ones.

GBP/USD stabilised and traded in a sideways manner with some bullish tendencies yesterday, testing the 1.2960 (R1) resistance line. We could see the pair continue to trade in a sideways manner, however with some bearish tendencies today, as the USD side might be strengthened by today’s US employment report for August. Should the bulls be in charge, we could see the pair breaking the 1.2960 (R1) resistance line and aim for the 1.3020 (R2) resistance hurdle. Should, on the other hand, the bears dictate the pair’s direction, we could see it breaking the 1.2895 (S1) support line and aim for the 1.2835 (S2) support barrier.

In today’s economic highlights:

During the European session, we get from Germany the industrial output growth rate and the trade balance figure, both for July, while from the UK we get the Halifax housing prices growth rate for August. In the American session, we get the US employment report with its NFP figure and should the forecasts be realised we could see the USD getting some support as the picture would be of a rather tight US labour market, supportive of the Fed’s plans regarding the upcoming rate hikes. At the same time, we get the employment data from Canada. As for speakers today, we have ECB’s Benoit Coeure, Boston Fed President Eric Rosengren, Cleveland Fed President Loretta Mester, and Dallas Fed President Robert Kaplan speaking. Please note that European finance ministers are to meet in Vienna and discuss further regulation for the crypto market and a possible taxation of the gains associated with it. Should you be interested in what next week has in store for us, please refer to our weekly outlook later today.


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This information is not considered as investment advice or investment recommendation but instead a marketing communication. This material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.

source: FXGiants

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