Daily Commentary | 11/09/2019
USD remains steady amidst positive climate
The USD maintained a steady course yesterday against a basket of its counterparts despite the positive market sentiment. Market focus seems to be concentrating around ECB’s interest rate decision and whether it will provide further stimulus for the area’s economy. It should be noted that the area may also be given some fiscal support as the German government seems ready to support the country’s economy. Analysts tend to note that the market is also awaiting a series of other interest rate decisions next week, hence is trading in rather tight ranges. Concerns seem also to be building on whether central banks have reached their limitations regarding their stimulus packages. Also, on the trade tensions front, despite markets expressing a substantial optimism about developments in the US-Sino negotiations, US officials cooled down expectations as they are urging patience. Never the less safe havens seem to remain under pressure as trade tensions seem to ease. Especially JPY weakened further, after a report yesterday by Reuters, stating that BoJ policymakers may be open for further stimulus. With a rather slow European session today, we could see the USD maintaining its strength should the positive climate continue. USD/JPY continued to rise yesterday and during today’s Asian session, tested the 107.75 (R1) resistance line. As the upward trendline incepted since the 4th of the month remains intact, we maintain our bullish outlook for the pair. Should the pair find fresh buying orders along its path, we could see it breaking the 107.75 (R1) resistance line and aim for the 108.35 (R2) resistance hurdle. Should the pair come under the selling interest of the market, we could see it breaking the 107.20 support line.
Pound maintains last week’s gains
The pound remained rather steady yesterday as investors seem to maintain a wait and see position. With the UK Parliament suspended, focus seems to be concentrating on whether Boris Johnson will actually try to negotiate Brexit with Brussels. On the one hand, before suspension the UK Parliament had approved a law forcing Johnson to request an extension for the Brexit date should there be no agreement with Brussels, on the other hand the British PM stated that he would not ask for another Brexit delay. Analysts tend to note that the market seems to be more on the cautious side with its main characteristic being anxiety over the outcome. It should also be noted that the pound failed to gather support yesterday, as the UK employment data for July send mixed messages about the UK labor market. Should there be no negative headlines reeling in, we could see the pound maintaining its strength. Cable maintained a sideways movement yesterday, between the 1.2310 (S1) support line and the 1.2400 (R1) resistance line. We could see the pair maintaining its direction also for today, however volatility could return to the pair should there be further headlines about Brexit. Should the bulls dictate the pair’s direction, we could see it breaking the 1.2400 (R1) resistance line and aim for the 1.2510 (Resistance level. Should the bears take over we could see the pair breaking the 1.2310 (S1) support line and aim for the 1.2210 (S2) support barrier.
Other economic highlights today and early tomorrow
There seems to be an empty calendar in today’s European session, yet in the American one, we get the US PPI rates for August and the EIA weekly crude oil inventories figure. In tomorrow’s Asian session, we get Japan’s PPI rate for August and the machinery orders growth rate for July. Both rates are expected to slow down and could weaken JPY if they do so.
• Support: 107.20 (S1), 106.60 (S2), 106.00 (S3)
•Resistance: 107.75 (R1), 108.35 (R2), 108.90 (R3)
• Support: 1.2310 (S1), 1.2210 (S2), 1.2135 (S3)
•Resistance: 1.2400 (R1), 1.2510 (R2), 1.2590 (R3)