USDJPY Forecast Hong Kong Elections Fuel Risk On Appetite

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Yen gains, yuan down as trade woes, Hong Kong strife sap risk appetite

Credit: REUTERS/Yuriko Nakao

The yen rose against the dollar on Thursday after sources close to the White House told Reuters that a U.S.-China trade deal is unlikely this year, shattering investor hopes a partial agreement was imminent and spurring demand for safe havens.

B y Stanley White

TOKYO, Nov 21 (Reuters) – The yen rose against the dollar on Thursday after sources close to the White House told Reuters that a U.S.-China trade deal is unlikely this year, shattering investor hopes a partial agreement was imminent and spurring demand for safe havens.

The yuan fell to a three-week low in onshore trade on worries the failure to reach a deal to roll back U.S. tariffs could further harm China’s stuttering economy.

Political tensions between Beijing and Washington were also keeping investors on edge after a source told Reuters that U.S. President Donald Trump is expected to sign into law two bills intended to support anti-government protesters in Hong Kong.

Hong Kong has been rocked by months of increasingly violent protest against Chinese rule of the former British colony. The passage of a U.S. law supporting the protesters is bound to anger Beijing and potentially undermine efforts to secure a trade deal.

“Friction between the United States and China is starting to spread from trade to questions about China’s human rights,” said Tsutomu Soma, general manager of fixed income business solutions at SBI Securities Co in Tokyo.

“This is the perfect opportunity to book some profits and unwind some risk-on trades, which is supportive for the yen and government bonds.”

The yen JPY=EBS rose 0.15% to 108.46 per dollar on Thursday.

The Japanese currency briefly pared gains after Bloomberg reported Chinese Vice Premier Liu He as saying he is cautiously optimistic about a preliminary trade deal. Markets, however, turned around again when it became clear the comments were made on Wednesday night in Beijing.

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The dollar was steady at $1.1077 versus the euro EUR=EBS and was quoted at $1.2931 against the British pound GBP=D3 .

Completion of a “phase one” U.S.-China trade deal could slide into next year, trade experts and people close to the White House told Reuters on Wednesday, as Beijing presses for more extensive tariff rollbacks, and the Trump administration counters with heightened demands of its own.

Trump and U.S. Treasury Secretary Steven Mnuchin said in an Oct. 11 news conference that an initial trade deal could take as long as five weeks to ink.

Just over five weeks later, a deal is still elusive, and negotiations may be getting more complicated, trade experts and people briefed on the talks told Reuters.

Washington and Beijing have imposed tariffs on each other’s goods in a bitter dispute over Chinese trade practices that the U.S. government says are unfair.

The tariffs have slowed global trade, raised the risk of recession for some economies, and roiled financial markets.

The next date to watch is Dec. 15, when U.S. tariffs on some $156 billion in Chinese goods are scheduled to take effect.

Spot gold XAU= , which like the yen is often bought as a safe-haven during times of uncertainty, tacked on 0.1% to $1,473.93 per ounce, underlining investors’ reluctance to take on risk.

In the onshore market, the yuan CNY=CFXS fell to 7.0450 versus the dollar, the weakest since Nov. 1, before steadying at 7.0400. Offshore, the yuan CNH=D3 slipped to 7.0533 per dollar, the lowest since Nov. 5, and then pared its losses.

Besides the tariff row, Hong Kong has emerged as another flashpoint that some traders say could further worsen U.S.-China relations.

What started as a protest against a proposed China extradition bill has widened into almost daily battles with the Hong Kong police over a perceived erosion of liberties under Chinese rule. The police have come under criticism after one protestor was shot at close range.

Beijing denies meddling in Hong Kong’s affairs and blames foreign governments for fuelling the unrest.

(Reporting by Stanley White; Editing by Lisa Shumaker & Shri Navaratnam)

(([email protected]; +81 (0)3 4563 2799; twitter.com/stanleywhite1 ;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

FOREX Analysis. US-Mexico trade deal fuels risk appetite

Here are the latest developments in global markets:

FOREX: The dollar index was up on Tuesday, albeit by less than 0.1%, attempting to recover some of the losses it recorded yesterday as investors scaled back safe-haven bets on the currency, following headlines of a US-Mexico trade agreement. The euro capitalized on the dollar’s softness, advancing across the board on Monday, and reaching a fresh one-year high against the battered British pound. Meanwhile, the loonie climbed somewhat on the optimistic NAFTA headlines, touching a ten-week high against the dollar.

STOCKS: US markets enjoyed another day of robust gains, with the S&P 500 (+0.77%) and the Nasdaq Composite (+0.91%) both closing at new record highs for a second session in a row, propelled higher by news the US and Mexico reached a trade deal. The Dow Jones surged by 1.01% as well, edging closer to its own all-time peak. Meanwhile, futures tracking the S&P, Dow, and Nasdaq 100 are all flashing green, pointing to a marginally higher open today as well. Asian markets took their cue from their US counterparts on Tuesday, though the magnitude of the gains was modest. Japan’s Nikkei 225 (+0.06%) and Topix (+0.16%) barely advanced, as did the Hang Seng in Hong Kong (+0.09%). In Europe, all the major indices were set to open higher today, according to futures.

COMMODITIES: Oil prices are marginally lower on Tuesday, giving back some of the gains they posted in the previous session. WTI was down by 0.17% at $68.77 per barrel, while Brent was practically flat at $76.25 a barrel. Although the precious liquid benefited somewhat yesterday on signals trade tensions are subsiding, news that OPEC compliance with its output-cut deal is slipping kept a lid on any major gains. While OPEC compliance was at 109%, meaning members cut production by 9% more than agreed, that still represents a decline from last month’s 120% – implying production is rising. In precious metals, gold was down by 0.10% at $1,211 per troy ounce on Tuesday. The dollar-denominated yellow metal inched higher yesterday despite the risk-on sentiment, buoyed by a weaker greenback.

The US and Mexico reached an agreement on trade yesterday that is expected to replace NAFTA, though crucially, this deal does not include Canada yet; the Mexican peso advanced considerably on the news though it later gave back some of those gains. Both sides said they would welcome Canada joining in as well, but hinted that if the nation does not, then they may proceed regardless – raising pressure even further on Canadian officials. As for the details of the new accord, it requires 75% of auto content to be made in NAFTA countries, from 62.5% previously. Moreover, it calls for 40-45% of auto content to be produced by workers earning a minimum of $16 an hour, which is likely to bode well with workers in manufacturing-heavy US states ahead of the midterm elections.

The headlines likely sent the message that a full-blown “trade war” may indeed be avoided, and that the endgame is still the US striking new deals with its partners, thereby boosting risk appetite across markets. Stocks got a lift, with the S&P 500 and the Nasdaq Composite breaking new all-time highs, while safe-havens like the Japanese yen retreated. The dollar – which had also been acting as a haven asset in recent months – tumbled as well.

Meanwhile, although the loonie surged, the magnitude of its gains was relatively modest – smaller than one would have expected on concrete signs that NAFTA may be resolved soon. This suggests investors likely took the news with a grain of salt, as there is still some uncertainty involved with whether Canada will join the deal immediately, or perhaps opt to negotiate better terms beforehand. In this respect, Canada’s foreign minister Chrystia Freeland will head to Washington today for talks, and any remarks hinting at her country’s intentions could provide short-term direction to the loonie.

Apart from NAFTA, news flow was relatively light on Monday and during the Asian session Tuesday. The euro was once again the main beneficiary of the dollar’s underperformance, with euro/dollar currently trading just a few pips below the 1.1700 zone. The euro’s gains were more pronounced versus the battered British pound, though. Euro/sterling touched a fresh one year high earlier today, currently hovering near the 0.9070 territory and looking set to post the fifth day of advances in a row.

The economic calendar is relatively light on Tuesday, featuring consumer confidence and housing data out of the US.

Data on lending and money supply for July will be released out of the European Central Bank at 0800 GMT.

The Conference Board’s consumer confidence index for August will be made public at 1400 GMT. The gauge is anticipated to weaken a bit after rising in July on the back of consumers’ optimism about the jobs market. One hour earlier, June’s CaseShiller indices, gauging US house prices, will be hitting the markets.

After yesterday’s NAFTA deal between Mexico and the US, the attention now perhaps turns to Canada: will it consent to new terms to preserve the trilateral trade agreement or will it enter into long discussions, pushing to keep the terms that it deems are instrumental for its interests?

In terms of policymakers’ appearances, ECB chief economist Peter Praet will be participating in a panel discussion on “monetary and macroprudential interactions” at 1100 GMT.

In energy markets, weekly API data on US crude stocks are due at 2030 GMT.

USDCAD hit a two-and-a-half-month low of 1.2949 earlier on Tuesday. The short-term bias is titled to the downside as indicated by the negatively-aligned Tenkan- and Kijun-sen lines. Still, the stochastics are giving a bullish signal in the very short-term as the %K line has moved above the slow %D one.

If Canada is seen as getting closer to a NAFTA deal then the loonie may come under buying interest, pushing USDCAD lower. Support to a declining pair may occur around today’s low of 1.2949, with steeper losses bringing into scope the 1.29 round figure.

On the other hand, if the US and Canada are seen as drifting away on the NAFTA front, then USDCAD is likely to head higher. Resistance to a rising pair may come around the current levels of the Tenkan- and Kijun-sen lines at 1.3008 and 1.3026, including the 1.30 handle. Further above, the region around the current level of the 50-period moving average at 1.3052 would be eyed.

USD/JPY Forecast: Hong Kong Elections Fuel Risk On Appetite

In our USD JPY section of the Japanese Yen exchange rate forecast, we offer for traders an up-to-date trade forecast for USD/JPY, an original analysis and forecast of the Japanese yen rate for today as part of the analysis of the current situation on the FOREX market with simple tools. The forecast USD/JPY is updated every day.

Forecast Dollar to Japanese Yen

The USD/JPY currency pair is the value of the US dollar, expressed in terms of the value of the Japanese yen on FOREX. The pair is quite popular and attracts interest among traders and analysts around the world due to their technology, on the pair often there are currency interventions.

Japanese Yen: USD/JPY (JPY=X) Strong Appetite for Risk

By HEFFX Australia on March 4, 2020 Comments Off on Japanese Yen: USD/JPY (JPY=X) Strong Appetite for Risk

Japanese Yen: USD/JPY (JPY=X) Strong Appetite for Risk

The Dollar/Yen posted a strong gain last week on the back of a sharp rise in U.S. Treasury yields. This widened the spread between U.S. Government bond yields and Japanese Government bond yields, making the U.S. Dollar a more attractive investment. After posting a mostly sideways trade for two weeks, the Dollar/Yen broke out to the upside to its highest level since December 20. The catalyst behind the rally was the stronger-than-expected U.S. Gross Domestic Product report, which helped drive up the chances of at least one rate hike by the Fed in 2020.

The direction of the USD/JPY this week is likely to be primarily influenced by U.S. Treasury yields and appetite for risk. Rising yields and equity prices should continue to make the safe-haven Japanese Yen a less-desirable asset.

Optimism over a trade deal between the United States and China is the wildcard this week. According to a report from Bloomberg on Friday, the two economic powerhouses are close to completing a deal which will essentially end the year-long trade dispute. However, investors could turn cautious if the agreement lacks clarity or important details.

On Friday, all eyes will be on the U.S. Non-Farm Payrolls report. Last week, Fed Chairman Powell said the labor market is strong. This report is expected to show the economy added 185K jobs in February. The Unemployment Rate is expected to dip to 3.9% and Average Hourly Earnings are estimated to have risen by 0.3%, up from 0.1%.

Overall, the bias in prices is: Upwards.

The projected upper bound is: 113.22.

The projected lower bound is: 110.60.

The projected closing price is: 111.91.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 2 black candles for a net of 5 white candles. During the past 50 bars, there have been 29 white candles and 19 black candles for a net of 10 white candles.

Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 89.5880. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 12 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 67.63. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 41 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 209.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 4 period(s) ago.

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 34 period(s) ago.

Rex Takasugi – TD Profile

FOREX JPY= closed down -0.020 at 111.880. Volume was 60% below average (consolidating) and Bollinger Bands were 18% narrower than normal.

Open High Low Close Volume___
111.760 112.010 111.710 111.880 41,247

Technical Outlook
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish

Moving Averages: 10-period 50-period 200-period
Close: 111.06 109.84 111.34
Volatility: 5 8 7
Volume: 90,366 93,915 105,154

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FOREX JPY= is currently 0.5% above its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of JPY= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on JPY= and have had this outlook for the last 25 periods.

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