ASIC and FCA licensed Retail FX broker AETOS Capital Group have provided their daily commentary on traditional markets for May 7, 2019.
USD/JPY
The USD slipped to a five-week low against the JPY yesterday and fell versus other currencies after U.S. President Donald Trump said he would sharply raise tariffs on Chinese goods this week, risking the derailment of trade talks between Washington and Beijing.
The on-going trade tensions between Washington and Beijing have generally been supportive of the dollar as investors view the United States to be in better shape than its rivals to weather a trade war. Against the Japanese yen, which tends to benefit during geopolitical or financial stress as Japan is the world’s biggest creditor nation, the dollar fell 0.2% to 110.88 yen. The greenback dipped to a five-week low of 110.29 earlier in the session (Reuters).
USD/JPY Daily Chart
USDJPY broke the key 110.70 level but failed to close below this support line. The technical traders can use this as a bearish indicator for the pair. The risk to shorts is whether Trump’s rhetoric becomes less escalatory where China doesn’t bite back, generating a reversal in price action, supporting risk, and pushing USD/JPY higher.
Further, the break of 111 denies a bullish view, instead suggesting an eventual drop to 109.70, the 161.8% Fibo target off the April 24-25 top and March’s low.
Due to holidays for the UK and Japan, volumes remained thin and a pick-up will be expected today. Sterling fell 0.6% to $1.3101 and reversed some of Friday’s gains, after the opposition Labor Party accused Prime Minister Theresa May of leaking details of the compromise under discussion and jeopardizing talks.
The timing of Trump’s comments are confusing because as recent as Friday he praised the relationship with Chinese President Xi Jinping. The comments slammed China over its trade practices, saying the United States was losing billions on trade with threats to increase tariffs on $200 billion worth of imports from China, even as ongoing talks between Washington and Beijing were set to continue this week.
This could all be a political strategy designed to accelerate decision-making in the hopes of getting a deal done without further delay.
GBP/USD Daily Chart
Recently, the pair hit a new top at 1.3180, however the pullback from that level was swift and hints at a major demand fade. Long trades could be in trouble on close below the daily cloud (1.3077). Bears will gain upper hand if it closes below 10/100-DMA (1.2990). A buy on dips but tight stops needed as RSI is also flat.
Major Economic Events happening this week (AEDT Time Zone)
| Economic event (Date) | Previous | Forecasted | Actual |
| AU – Balance of Trade (7 May) | A$4.801B | A$4.25B | – |
| AU – RBA Interest Rate Decision (7 May) | 1.5% | 1.5% | |
| CA – Ivey PMI (8 May) | 54.3 | 51.1 | – |
| CN – Balance of Trade (8 May) | $32.67 | $35 | – |
| CN – Exports YY (8 May) | 14.2% | 2.3% | – |
| CN – Imports YY (8 May) | -7.6% | -3.6% | – |
| CN – Inflation Rate YY (9 May) | 2.3% | 2.5% | – |
| CA – Balance of Trade (9 May) | C$-2.9B | C$-2.3B | – |
| US – Balance of Trade (9 May) | $-49.4B | $-51.4B | – |
| DE – Balance of Trade (10 May) | €17.9B | – | – |
| GB – Balance of Trade (10 May) | £-4.86B | – | – |
| US – Core Inflation Rate YY (10 May) | 2% | 2.1% | – |
| US – Inflation Rate YY (10 May) | 1.9% | 2.1% | – |
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