Market News & Analysis

Top Story

USDJPY recovery continues

The positive news flow that started midway through last week has continued today. After U.S. President Trump tweeted that “at the request of the Vice Premier of China, Liu He, and due to the fact that the People's Republic of China will be celebrating their 70th Anniversary on October 1st.” the proposed 5% tariff increase from 25% to 30% on U.S. $250bn of imports from China would be delayed from October 1 to October 15.

Trumps tariff back down comes ahead of U.S. - China trade talks scheduled to take place in early October and after China elected not to retaliate to the latest U.S tariff hikes. Also helping to calm frayed nerves, Chinese authorities have continued to guide USD/CNY to a lower daily fix than expected, in effect de weaponising their currency the Yuan.

Highlighting this observation USD/CNY is currently trading ~7.08. Below the level, it was trading on August the 23rd, the day that Trump announced that the 25% tariff on U.S 250bn of Chinese goods would increase to 30% on Oct 1.

One of the chief beneficiaries of the positive news flow has been USD/JPY building this morning on its impressive recovery from the August 104.45 low. Currently it is testing important resistance in the form of the 200-day ma at 108.15.

While I would expect to this resistance level cap at least in the initial instance, I am mindful that USD/JPY generally displays a positive correlation with U.S. 10-year yields. Yields are trading another 5bp higher today at 1.76%, providing a headache to the momentum type funds positioned for yields to trade lower.

Supported by the prospect of further gains in U.S. 10-year yields, it appears to be only a matter of time before USD/JPY does break and close above 108.15. However, from a trading perspective, we are not inclined to buy USD/JPY upon such an important technical level.

Instead, the preferred strategy is to buy USD/JPY on a corrective pullback to 107.50/30 with a sell stops placed below 106.30. The target for the trade would be a move to 109.00/30.

USDJPY recovery continues

Source Tradingview. The figures stated are as of the 12th of September 2019. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

Disclaimer

TECH-FX TRADING PTY LTD (ACN 617 797 645) is an Authorised Representative (001255203) of JB Alpha Ltd (ABN 76 131 376 415) which holds an Australian Financial Services Licence (AFSL no. 327075)

Trading foreign exchange, futures and CFDs on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange, futures or CFDs you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss in excess of your deposited funds and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange, futures and CFD trading, and seek advice from an independent financial advisor if you have any doubts. It is important to note that past performance is not a reliable indicator of future performance.

Any advice provided is general advice only. It is important to note that:

  • The advice has been prepared without taking into account the client’s objectives, financial situation or needs.
  • The client should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation or needs, before following the advice.
  • If the advice relates to the acquisition or possible acquisition of a particular financial product, the client should obtain a copy of, and consider, the PDS for that product before making any decision.

From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.