Daily Commentary | 12/02/2018
Inter Korean relationships improve during winter games
• North Korean athletes, Kim Jong Un’s sister and the North Korean head of state seem to be leaving good impressions in the winter Olympics. On the other hand, there has been talk about a possible negative impact in S.Korean-Japanese relationships after media reports suggested that the common US-S.Korean military exercises maybe postponed ahead of possible North-South Korean meeting in Pyongyang. We stand by our view that the charm offensive maybe a result of the extended sanctions imposed to North Korea. We also, see the case for S. Korea not to alienate from its traditional allies, as it could be the case that N.Korea is trying to buy time and ease the sanctions imposed on it. It could be that South Korean President Moon may be walking on a very thin line. Should Japan and S.Korea relationships deteriorate we could experience a weakening of JPY, other than that, improved North- South Korean relationships could stabilize the region for a while, supporting JPY in the long run.
• USD/JPY moved in a sideways manner on Friday testing the 108.30 (S1) support line. We see the case for the pair to continue to trade in a sideways manner for the short term, however there could be some bearish tones in line with the downward trend-line incepted on the 8th of January. Please also note that the US fundamental stock market news and sentiment are expected to play a significant role in the pair’s direction as JPY acts also as a safe heaven and could be influenced by both a risk on as well as a risk off sentiment. Also Kuroda’s reappointment could play some role. Should the bears take the driver’s seat we could see the pair breaking the 108.30 (S1) support line and aim for the 106.95 (S2) support barrier. Should the bulls take the reins we could see the pair breaking the 109.20 (R1) resistance line and aim for the 110.40 (R2) resistance hurdle.
Teresa May attempts to bring unity to the conservative party
• Teresa May and other UK senior ministers will deliver a series of six speeches in the coming days regarding Brexit. The speeches aim to outline the “Road to Brexit”, according to media outlets. EU officials had set in doubt the transition period lately, as they find unclear what the UK Brexit aims actually are and the speeches could provide answers to various questions. The fore coming speeches are also aiming at uniting the Conservative party though. It would be indicative that the first speech is to be delivered by Boris Johnson, UK’s Foreign Minister and Brexit advocate, on Wednesday. We see the case for the actions to incept new discussions and headlines, however we consider it as a positive step for achieving inner UK unity and the pound could be supported somewhat.
• Cable dropped during the European morning on Friday, aiming for the 1.3750 (S1) support level, however did not break it. The pair could trade in a sideways manner in the short term and we could experience some bullish tones, in an effort to test or meet the downward trend line incepted since the 2nd of February. Technically, the fact that the pair is trading just above the 200 average could support, as well as the rising RSI could strengthen the prementioned argument. Should the pair find new buying orders we could see it testing or even breaking the 1.4040 (R1). On the other hand should the pair come under selling interest, it could break the 1.3750 (S1) support line and aim for the 1.3590 (S2) support zone.
As for today’s and coming weeks economic highlights:
• No major economic events are expected today, however:
• On Tuesday we expect the UK CPI rate for January to be released, on Wednesday Japan’s and Germany’s GPD growth rate for quarter 4 and keep an eye out for the US CPI rate for January. On Thursday, Australia’s Unemployment Report.
• Support: 1.3750(S1), 1.3590(S2), 1.3338(S3)
• Resistance: 1.4040(R1), 1.4168(R2), 1.4325(R3)
• Support: 108.30(R1), 106.95(R2), 105.65(R3)
• Resistance: 109.20(S1), 110.40(S2), 111.30(S3)