Asia Pacific Market Open Talking Points
- British Pound depreciates as BoE policymaker hints dovish bias
- US drops China’s FX manipulator title ahead of phase one deal
- USD/JPY soars through 110 to levels not seen since May 2019
British Pound and Japanese Yen Sink, US Removes China as FX Manipulator
The British Pound and Japanese Yen were some of the worst-performing major currencies on Monday. Over the weekend Bank of England’s Gertjan Vlieghe - a member of the monetary policy committee – noted that he would vote for a cut if there is no economic improvement. Then on Monday, he got just that. UK GDP unexpectedly shrunk -0.3% m/m in November. Local bond yields fell as dovish BoE bets rose.
The anti-risk Yen depreciated as investor sentiment improved at the onset of the new week despite Wall Street ending on a sour note Friday. Some of that optimism could be traced to the United States removing China’s currency manipulator designation (among other countries) after 5 long months. Treasury Secretary Steven Mnuchin noted that China had made enforceable commitments on the Yuan.
Moreover, this comes as a welcome note ahead of the anticipated “phase-one” trade deal signing between the two nations on Wednesday. The markets are also speculating on incoming earnings reports for the fourth quarter. After gaining on overall GBP weakness earlier, the US Dollar succumbed to late-day selling pressure as demand for havens weakened. Anti-fiat gold prices fell to their weakest since early this month.
Tuesday’s Asia Pacific Trading Session
A lackluster offering of key economic event risk places the focus for foreign exchange markets on risk trends. To that end, regional bourses may follow the S&P 500 higher after it rose 0.7% on Monday. That may further dent the Japanese Yen and allow room for the sentiment-linked Australian Dollar and New Zealand Dollar to press higher.
Japanese Yen Technical Analysis
USD/JPY soared to its highest since May 2019, taking out a couple of key psychological barriers. The first is a falling trend line from November. The second is composed of highs from the last two months of 2019. This makes for a horizontal range between 109.49 to 109.72. A further upside confirmatory breakout close opens the door to extending the dominant uptrend from August as prices eye 110.67.
| Change in | Longs | Shorts | OI |
| Daily | -2% | 2% | 0% |
| Weekly | 12% | -16% | -6% |
USD/JPY Daily Chart
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
