What a week last week was with Brexit and trade negotiations between the US and China taking centre stage. Amazing how both have been making headlines for months and now at almost the same time, both appear to be drawing towards potentially positive solutions.

I’m not even going to bother with a blow by blow as last week saw ‘one direction’ trading. GBP led the way, capitalising on Thursday’s moves to rally from 1.2410 to 1.2707.

USDJPY would move higher from 107.80 to 108.57. EURUSD would touch 1.1062 and AUDUSD poked its head back above 0.6800. USDCAD dropped like a rock on far better-than-expected Canadian employment data, dropping from 1.3280 to a low of 1.3186.
Amidst all the positivity, XAU fell 1503 to 1488 and by the midpoint of the US session, the DJ was up a whopping 400 points, fuelled by a Trump comment that ‘good things are happening’ in trade talks.

As the day progresses the market awaits some news and finally it comes to President Trump saying the US has come to a substantial phase one deal with China and the remainder will come in phases. Treasury Secretary Mnuchin confirms Chinese tariffs won’t go up this week. However, with the DJ up as much as 500 points, we get a sudden reversal into the close, dropping as much as 180 points to close +320. A classic buy the rumour, sell the fact.

Amongst the currencies, USDJPY is the only one to react slipping from 108.55 to 108.35. XAU bounces from a low of 1475 up to 1488. EURUSD closes at 1.1035 and GBP at 1.2635. And to round off last week, some news on the crypto front as eBay, Visa, Mastercard and Stripe all follow on from PayPal in announcing they will no longer be part of Facebook’s Libra project.

The minimal reaction in the markets with BTCUSD at $8,250 and ETH at $180, but this can’t be good for Facebook, nor the broader crypto community.

With the move higher in equities following some positive vibes from the US – Chinese trade talks, USDJPY has been the major beneficiary among major currency pairs.

As we can see from the 2H chart the current level around 108.48 had been a double top with an inconclusive break higher on Friday. An initial high of 108.62 gave way to a dip back to 108.30.

Should we get a clean break higher the next resistance comes in at 109.32 and then just ahead of the psychologically import level of 110. Fail at current levels and it could be a slippery slide back towards 106.50.

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David Hannigan
Author

A graduate of the Cass Business School, Dave's career began with Credit Suisse as an Equity Options Trader on the London Stock Exchange, before moving into the world of FX with Chemical Bank and Citibank. 1994 saw him join National Australia Bank, first as a Senior Dealer, then Senior Vice President and Chief Dealer.

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