Market Brief: Sentiment Perks Up Ahead Of Sino-US Trade Deal

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FX Brief:

  • Risk sentiment was given a gentle boost with traders anticipating that US and China will sign the much-touted phase one trade deal on Wednesday.
  • The British pound was weaker following further hints from BOE that they may ease.
  • AUD and NZD are the strongest majors, GBP and JPY are the weakest.
  • Volatility remained low overall due to a lack of economic data.

Price Action:

  • DXY’s advance has stalled at the 200-day eMA, with the index closing the week with a 2-bar reversal pattern below this key level.
  • A bearish pinbar has formed on USD/CHF and bullish engulfing candle on EUR/USD underscores the potential for the dollar to mean revert
  • USD/JPY traders are keeping a close eye on 109.73 resistance to see if it can finally break. Whilst Friday’s bearish pinbar shows a hesitancy to push high, today’s price action is testing its highs on the back of the weaker yen and positive trade deal sentiment.
  • We’re keeping a close eye on GBP/USD to see how it reacts around 1.30. Price action is drifting lower to this key support level and, if it breaks, opens up a run for the lows around 1.2900.
  • NZD crosses are perking up, reinforcing the analysis that perhaps we’ve seen a trough on NZD/CHF, NZD/JPY, NZD/USD (and a peak on EUR/ZD).

Equities Brief: 

  • Most Asian stock markets are trading in the green ahead of the official sign-off of the U.S-China Phase One trade deal that is scheduled to take place in Washington on 15 Jan. Meanwhile, Japan’s Nikkei 225 is closed today for a public holiday
  • Interestingly, the USD/CNH (offshore Yuan) has continued to inch lower and in today’s Asian session, it has managed to breach below 6.90 for the first time since Jul 2019 that has added impetus to maintain the on-going positive sentiment seen in Asian equities in general.
  • Australian’s ASX 200 has dipped slightly by -0.37% but the Index is still holding at its previous range resistance/all-time high area of 6890/880. Today’s lacklustre performance has been dragged down by healthcare related stocks where the Healthcare sector is downed by-1.23%.
  • Other than U.S-China diplomatic trade relations, the other significant focus will be the start of U.S. Q4 2019 earnings session. Overall, the consensus is set for another second consecutive drop in earnings for Q4 at -1.6% y/y. The major banks will kickstart the reporting session where Q4 earnings report cards for Wells Fargo, Citigroup and JP Morgan will be out on Tues, 14 Jan.

Matt Simpson and Kelvin Wong both contributed to this article

Data from Refinitiv. Index names may not reflect tradable instruments and not all markets are available in all regions.


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