Daily Commentary | 03/01/2019
Yen strengthens on risk aversion
JPY strengthened against the USD and a number of other currencies yesterday as the risk averse mood was highly charged during the Asian session today. The “flash crash”, as described by a number of analysts, was instigated by a rare revenue warning from Apple Inc. which cited among other reasons for a possible drop in revenue, an economic slowdown of China. The warning caused an immediate reaction by market participants, prompting a strengthening of the JPY and a weakening of the AUD. The effect was magnified as it was a rather quiet time, with Japan having a Bank holiday and the American Session being over. Analysts also point out that the yen could be considered as undervalued currently and should there be further US Dollar weakness, or further downward revisions about the global economy, it could strengthen even further. USD/JPY dropped heavily during the Asian session today, breaking consecutively all support levels and correcting later on below the 107.40 (R1) resistance line. We maintain a bearish outlook for the pair, as uncertainty may continue to prevail over the market. Should the bears continue to reign over the pair’s direction, we could see the USD/JPY breaking the 106.65 (S1) support line and aim for the 106.00 (S2) support barrier. Should on the other hand the bulls take over we could see the pair breaking the 107.40 (R1) resistance line and aim for the 108.25 (R2) resistance level.
USD strengthens against EUR and GBP
USD climbed against the common currency and the sterling during the American session yesterday as lukewarm financial data kept the EUR down. Analysts point out that data from the euro area was generally on the softer side and that the US-Sino trade war may have hit factory activity in the EUR area as well, in December. The greenback strengthened also against the sterling as strong financial data, failed to dispel ongoing Brexit worries. We expect volatility to continue to reign over the two pairs as uncertainty could continue throughout the day. EUR/USD dropped yesterday breaking all support levels, however correcting above the 1.1345 (S1) support line during the Asian session today. We could see the pair continuing to correct, however it may prove sensitive to any financial releases especially regarding the USD side. Should the market favor the pair’s long positions, we could see the pair breaking the 1.1385 (R1) resistance line and aim for the 1.1425 (R2) resistance hurdle. Also should the pair come under the market’s selling interest, we could see it breaking the 1.1345 (S1) support line and aim for the 1.1305 (S2) support barrier.
In today’s other economic highlights:
In today’s European session, we get Turkey’s CPI and UK’s Construction PMI, both for December. In the American session, from the US we get the ADP National Employment figure for December, the initial jobless claims figure, the number of new home sales for November and the ISM manufacturing PMI for December.
What to expect for Tomorrow:
Tomorrow during the European session we get the Eurozone’s preliminary CPI rates for December and UK’s Services PMI also for December. The star of the day though could be the US Employment report with its NFP figure for December.
• Support: 106.65 (S1), 106.00 (S2), 105.30 (S3)
•Resistance: 107.40 (R1), 108.25 (R2), 109.20 (R3)
• Support: 1.1345 (S1), 1.1305 (S2), 1.1265 (S3)
•Resistance: 1.1385 (R1), 1.1425 (R2), 1.1465 (R3)