Wednesday would be ‘deal signing day’ between China and the US. This day has been awaited with anticipation over many months as traders pondered whether the two superpowers would ever reach an agreement.

Phase 1 has been negotiated and agreed upon, next up will be phase 2. This is where we will see an additional rollback of tariffs according to US Treasury Secretary Mnuchin.

The Chinese Trade Minister, Liu He, added that the US and China will work together to follow through on their commitments. Can’t you just feel the love?

So what else did Wednesday have in store? Well the UK released a particularly weak set of inflation figures which saw GBP weaken against the USD from 1.3040 to 1.2985 and against the EUR from 0.8537 to 0.8577. Keeping in mind the weekend comments from several MPC members about weak data and rate cuts, it would seem there will be increasing pressure for the UK to ease soon.

Elsewhere CHF continued to strengthen, rallying to 1.0743 against the EUR. Not that the SNB will really care, but the revelation that Switzerland has been added to the US FX Manipulation Watchlist, has traders wondering how long the SNB will continue to prevent the CHF from strengthening.

In the US, weak PPI data saw USDJPY drift down to 109.80 and EURUSD up to 1.1150. This is on the back of a weak CPI reading yesterday.

Equity futures would be hit after weak holiday earnings from Target with traders concerned this could be a precursor to a poor retail sales number on Thursday.

US equities open in positive territory despite the futures indicating the opposite.

The DJ would once again head above 29,000 up 65 points in early trading. JPY crosses would benefit with EURJPY back to 122.60 as USDJPY holds the 109.80 level.

As the trade deal is signed, the DJ is up 160 points although FX is more reluctant to get sucked into the euphoria with USDJPY barely registering a pulse.

EURJPY however climbs to 122.71, a few pips shy of Monday’s high. As we head into the Wall Street close, stocks begin to give back some of their earlier gains, but the DJ does close above the 29,000 level up 90 points on the day. The S&P and Nasdaq make marginal gains.

EURJPY drops back to 122.50 and USDJPY to 108.88 as the latter fails to break a 22 point range over the past 24 hours. EURUSD ends the day at 1.1150 and GBPUSD at 1.3030.

Going to keep it real simple today. A 30-minute USDJPY chart. As I pointed a week or so ago, we had some strong resistance at 109.70 to break through, which we finally did going on to make a new high above 110.20.

The US and China sign phase 1 of their historic trade deal As you can see, we have since been in tight ranges with plenty of tightly packed candles which means momentum has been lost – today we had a range of just 22 points. Just be wary if we go back below 109.70, especially if there is a specific catalyst. Enough said.

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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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