Asia Pacific Market Open Talking Points
- US Dollar gains as British Pound sinks, leaving behind bullish technical signal
- Pro-risk Australian Dollar, New Zealand Dollar fall on European risk aversion
- Anti-risk Japanese Yen and Swiss Franc gained, equities mixed eyeing Asia trade
US Dollar Gains as British Pound, Australian Dollar, New Zealand Dollar Fall
The US Dollar generally aimed higher over the past 24 hours, largely thanks to pronounced weakness in the British Pound. Sterling has been under pressure after UK Prime Minister Boris Johnson alluded to ruling out an extension of the post-Brexit transition period beyond 2020. This has raised fears of a no-deal Brexit as there is some doubt whether the country can reach an agreement with the EU by the beginning of 2021.
A pessimistic session from European equities on Tuesday helped prop up the anti-risk Japanese Yen and similarly-behaving Swiss Franc against their major counterparts. Around market open, EU Senior Trade Official Sabine Weyand noted that the regional bloc takes the US tariff threat on France “very seriously”. After US-China trade optimism, investors still have to worry about a new front opening across the Atlantic.
Wall Street managed to shrug off this “risk-off” tone from Europe, allowing the S&P 500 to end the session mostly unchanged from Monday’s close. Investors had better-than-expected US housing starts and industrial production to bolster sentiment. Output in the latter during November increased by the most since October 2017 as the world’s largest economies approached an interim trade agreement.
Wednesday’s Asia Pacific Trading Session
S&P 500 futures are little changed heading into Wednesday’s Asia Pacific trading session, pointing to a mixed start for regional bourses. The pro-risk Australian and New Zealand Dollars were on the back foot yesterday amid a general deterioration in risk appetite as the USD soared. These two are awaiting key economic data due later this week. NZD to local GDP and AUD to Australian employment figures tomorrow.
| Change in | Longs | Shorts | OI |
| Daily | 2% | 3% | 2% |
| Weekly | 29% | -46% | 0% |
Chart of the Day – Majors-Based US Dollar Index
My majors-based US Dollar index clocked in its best day since the end of September, leaving behind a Morning Star candlestick pattern. This is usually a bullish formation that with confirmation, could translate into a reversal of the near-term downtrend. Prices paused their ascent on the outer boundary of former support, now resistance (1.2792 – 1.2818). A daily close above this area opens the door to testing falling resistance from October.
Chart Created Using TradingView
--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
