EURUSD, GBPUSD, USDJPY
Weekly Forex Analysis
(December 09 - December 13, 2019)
Hey! This is Philip with our new weekly outlook of the Forex market.
Below I present a preview of the article. To read the full analysis just click the big blue button.
US Dollar Fundamental Outlook – Employment Data Saves USD From Larger Sell-Off; Watching Fed & Inflation This Week
A stellar Non-Farm Payrolls report last Friday breathed a new life into the Dollar and reversed a part of the losses from earlier in the week. The strong employment reports balanced out the weakness in ISM manufacturing and ISM services reports, which were behind the USD’s weakness in the earlier part of the week.
The ISM surveys showed that the US economy is catching up with its peers to the downside and slowing rather than other economies catching up with the US. It is a worrying sign for the global economy, but also negative for the Dollar because the US outperformance related to its peers is one of the main factors behind the USD strength in the past year. The more that advantage is reduced, the more room there will be for the Dollar to weaken.
But, with that now behind us, traders have new USD events to focus on in the week ahead. With the Fed meeting, CPI, and retail sales scheduled on the calendar, it’s easy to see why another big and most probably volatile week is in store for the Dollar.
The Fed is expected to be on hold at the meeting this Wednesday, which is consistent with the neutral to bullish USD trend. Of course, strong numbers in the CPI and/or retail sales data should only help the Dollar further.
And, finally, don’t forget the US-China trade war (read more about that in the JPY outlook section). Another escalation there would be bullish for safe-haven assets, and of course, that would benefit the Dollar to some extent as well.
Japanese Yen Fundamental Outlook - December 15 Tariffs ON or OFF?; US-China Trade War In Front Focus For JPY
Is the US-China trade truce coming to an end? – That is the central question on investors’ minds at the moment when it comes to risk sentiment and risk-sensitive assets.
And the first clue for answering that question will be looked into the scheduled December 15 tariffs on additional 160 billion USD in Chinese goods that the US Government plans to impose. It’s nearly certain that if Trump allows the tariffs to go into effect, it would breakdown the trade truce as the US-China relations would take another step back. This scenario would be harmful for risk appetite, and will surely be bullish for the Yen currency.
If on the other hand, Trump decides to delay the tariffs, that would help to avoid another risk aversion sell-off in markets. But, the Yen is unlikely to weaken much only on a postponement of the tariffs. For more substantial weakness in the JPY currency (that means rally in JPY pairs), a signed and completed US-China deal will be needed. Considering that such an outcome looks highly unlikely in the near future, the risks for the Yen remain skewed to the bullish
side, and for USDJPY to the downside.
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USDJPY Technical Outlook:
USDJPY completed a nice bearish signal on the weekly timeframe.
The appearance of a tall bearish engulfing candle right at the 110.00 resistance band (resistance formed by the group of the 3 long-term moving averages) is a significant signal and clearly confirms that the 110.00 resistance here has held. The path of least resistance for USDJPY is now down.
Furthermore, USDJPY also broke out of the wedge formation that we were monitoring for the past 6 – 7 weeks, which is an additional bearish sign. To the downside, only minor support sits at the 108.50 zone from here, while to the upside 109.00 is the minor resistance that should cap any rallies initially.
The more important support is at 107.00, which is an area that many bears will target. The 105.00 support at the major August lows remains the crucial support for USDJPY in the long-term.
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