There are days as a commentary writer you just love to put pen to paper (ok, fingers to keyboard these days) and there are days that you don’t.

Today is feeling a little like the latter. Why?

A lack of real clarity behind the days moves. Usually, there is an economic data release or maybe a global event which gets things going. Not today.

The Asian session was dominated by a continuation of JPY cross buying which saw a break of the band of resistance in EURJPY, which I highlighted in yesterday’s commentary between 122.50 and 122.65.

A high of 122.76 had me believing we were on the way to even higher levels. But it was not to be, and the European session saw a market caught long drop to 122.19. USDJPY similarly broke higher in Asia to 110.21 only to drop back to 109.89 in Europe.

It’s always healthy to keep in mind short-term market positioning!

So aside from the fun and games in JPY crosses, what else did we have? The CHF caught trader’s attention as Switzerland was added to the US FX manipulation watchlist.

EURCHF traded down to 1.0760, levels not seen since April 2017. EURUSD would move lower, down to 1.1104 from 1.1140 although this was as much due to the cross flows as anything else.

The US session would begin with a weaker-than-expected CPI number. This caused a slight drop in equity futures which had earlier been buoyed by better than expected earnings from JP Morgan.

However, in the absence of any real negative news stocks would rally with the DJ finally breaking the 29,000 level to be up over 130 points. Back comes USDJPY to 110.10 and EURJPY to 122.60.

EURUSD also rallies up to 1.1135 and GBPUSD recovers much of yesterday’s losses, bouncing to 1.3030. All good.

Then we get the headline about a ‘report’ that the US will keep China tariffs in place through the 2020 election.

USDJPY dipped on the headlines, but I think there is some confusion here. In December when the deal was agreed, the US postponed planned tariffs for December and reduced the rate on about $120B in Chinese products.

That part of the deal isn’t in jeopardy and there were few expectations about a further immediate or near-term cut in tariff rates. Regardless the DJ cuts most of its gains and the S&P and Nasdaq turn mildly negative.

EURJPY dips back to 122.35 and USDJPY to 109.92. Then it’s announced that President Trump’s impeachment trial could start as early as Tuesday of next week.

As we head into the close on Wall Street the DJ recovers to end up 32 points on the day but the S&P and Nasdaq both ended slightly lower. USDJPY is back to 110. and EURJPY to 122.40 with EURUSD at 1.1125. A noisy day, but overall little change on yesterday’s close.

Well, I could re-post the EURJPY chart from yesterday just to highlight the lack of follow-through and subsequent reversal after breaking key resistance. But I won’t!

US equities close mixed as Chinese Tariff headlines have traders a little nervous. Let’s take a quick look at an hourly AUDUSD chart. What sticks out here is a potential head and shoulders formation with an approximate neckline at 0.6840. Keep an eye on this over the next couple of sessions to see if it plays out.

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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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