Good morning all!
The yen continues to hold its small gains at the start of the week, with USD / JPY moving close to the psychological level of 109.00 as the US and China and their trade talks continue to dictate trading – as it did for much of last week .
The ever-changing rhetoric is already beginning to strain the nerves of market players so let’s see what happens today. Economic calendars remain vastly empty, with the sole focus on the Gross Domestic Product in the UK at 11:30.
Again, of course, the risk tone will be the main character, with last week’s risk-on sentiment pushing the indexes to a new record every day. We may also see a withdrawal of cash flows in support of gold as a hedge target. This is also supported by the chart, because the precious metal is on a horizontal and diagonal support, from which it can easily restore its position as long as the buyers intervene.
In the Forex market, the US dollar is beginning to awaken from lethargy, in full resonance with our expectations. The Fed appears to have ended a series of interest rate cuts for at least this year, and on the other hand, confidence in the ECB is at stake. Christine Lagarde, will assume the post of President of the Central Bank, but at the beginning she will be quite limited in actions, inheriting the monetary policy already in force. Strong economic data across the ocean contrasts sharply with Old Continent data, which shows that the manufacturing sector is rapidly shrinking and that this weakness has begun to infect the much larger services sector. The Japanese yen is under pressure as a result of the risk appetite and abandonment of safe havens. We find a balanced trade opportunity for the EUR / JPY cross. The trend is still downward, but we are seeing a key breakthrough, which is a prerequisite for changing the downward trend or at least for a deep correction. NZD and AUD continue in a downward direction after encountering technical levels of key resistance.
Trader Aleksandar Kumanov