Asian Stocks Talking Points:
- Asia/Pacific shares hesitant following Trump/Juncker trade talks in Washington
- The anti-risk Japanese Yen headed cautiously higher while the Aussie Dollar fell
- Next, USD eyes Mario Draghi’s press conference while AUD/USD tests resistance
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Asia/Pacific stocks showed a rather mixed performance following gains from Wall Street on Wednesday. There, the markets rejoiced US President Donald Trump and European Commission President Jean-Claude Juncker reaching an agreement that moved the two economies further away from a potential trade war.
BACKGROUND: A Brief History of Trade Wars, 1900-Present
Amongst the worst performing shares were in China where the Shanghai Composite declined about 0.63% by Thursday afternoon trade. With the US/EU closer to trade resolution, China is still facing the threat of additional tariffs from across the Pacific Ocean. In addition, the EU agreed on increasing US soybean purchases, an area that has come under pressure since Chinese tariff retaliations.
Things were looking less worse in Japan where the Nikkei 225 was lower by about 0.14%. Heading up the performance ladder, the ASX 200 was little changed while South Korea’s KOSPI rose about 0.59%. Do note that S&P 500 futures were lower following the 20% slump in Facebook shares in after hours trade. Overall, there appears to be some hesitation in the markets. Keep in mind that the US could still proceed with auto import tariffs.
With shares unable to fully capitalize on market rejoice following the Trump/Juncker meeting, the slight deterioration in sentiment took its toll on the FX market as well. The anti-risk Japanese Yen edged cautiously higher. Meanwhile, the sentiment-linked Australian and New Zealand Dollars depreciated across the board.
Ahead, the top tier event risk is the European Central Bank monetary policy announcement. With rates unanimously expected to remain unchanged and an absence of economic projections, the focus will be on Mario Draghi’s press conference afterwards.
Lately, there was been some disagreement between board members over the timing of their anticipated rate hike in the second half of 2019. Depending on how Mr. Draghi answers questions, the Aussie Dollar could be vulnerable if the US Dollar rallies/appreciates at the expense of the Euro.
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AUD/USD Technical Analysis
The rise in stocks from the US trading session saw the Australian Dollar rise against its US counterpart. However, AUD/USD still remains just shy of the July 9th high at 0.7481 which could act as near-term resistance. A break above that will expose the descending trend line from February. On the other hand, immediate resistance appears to be the range of lows form late-June/July around 0.7330.
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--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
