Asia Pacific Market Open Talking Points
- Yen gains, USD/JPY may fall as US passes Hong Kong Bill
- Chinese countermeasures may derail hopes of a trade deal
- AUD/USD, NZD/USD may decline as Asia stocks weaken
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Yen May Gain as AUD, NZD Fall on US Passing Hong Kong Bill
The anti-risk Japanese Yen is gaining and may extend its rise ahead after the US Senate passed the Hong Kong Human Rights and Democracy Act. This is a bill that requires a yearly review of whether the city-state has sufficient autonomy from China and comes amid ongoing clashes between protesters and law enforcement. For markets, this also occurs as the US and China attempt to negotiate a trade deal.
The former has expressed opposition to the bill and threatened countermeasures should it come into law. This has created concerns that China could raise tariffs, such as the ones the WTO has granted it to impose against the US. A breakdown in trade talks risks souring investor confidence and overturning recent record highs achieved in the S&P 500 and Dow Jones as well as weakening the pro-risk AUD and NZD.
S&P 500 futures now pointing decidedly lower heading into Wednesday’s Asia Pacific trading session. With the regional economic docket relatively light, market mood will likely be the primary driver for foreign exchange markets. Declines in the Nikkei 225 and ASX 200 could spell disaster for the sentiment-linked AUD/USD, NZD/USD and ASEAN FX. This is as the Yen may extend its recovery against the US Dollar.
Tuesday’s US Trading Session
During the Wall Street trading session the Canadian Dollar plunged, ending the day as one of the worst-performing majors – as expected. Commentary from Bank of Canada’s Senior Deputy Governor Carolyn Wilkins underpinned recent cautious expectations expressed by the central bank. Mr Wilkins noted that the global context worsened, undermining the BoC’s resilience to cutting rates this year despite slowing growth.
Japanese Yen Technical Analysis
The Rising Wedge bearish chart pattern in USD/JPY still remains in play after prices failed to push back into the formation. A daily close under 108.24 opens the door to testing 107.89 and possibly overturning the dominant uptrend that has prevailed since the end of August. Otherwise, pushing above 109.32 would pave the way for resuming the uptrend.
Join me later today at 1:00 GMT as I cover what the prevailing trends in market positioning are revealing about the outlook for the major currencies!
Chart of the Day – USD/JPY
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— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter