US-China Trade Talks Improve Risk Appetite Especially in Asian Equities

Nikolas Papas

Nikolas has been involved in the finance industry for over fifteen years spanning across Europe and USA with a depth of knowledge and experience within many aspects of the financial markets. Nikolas gained several years experience with some of the Europe’s leading Brokers, as equity analyst, and trader managing accounts for both Private and Corporate Investors. He enjoys both the fundamental and technical aspects of trading focusing on stock markets and all FX majors. Currently Nikolas provides analysis and comments to online financial publications. Educational background in Economics (BSc), and Finance (MSc).

US-China Trade Talks Improve Risk Appetite

January 9, 2019

US President Donald Trump tweeted overnight that “talks with China are going very well” while the meetings were extended for a third day in Beijing, this gave Asian stocks a boost to three-week high. This combined with no surprises in President Trump’s Oval Office address earlier in the day seemed to help push equities higher in the Asian session. Japan’s Nikkei rose 1.1% to 20,427, Hong Kong’s Hang Seng index gained 2.4% while the Shanghai Composite advanced 1.5%. The Australian stocks extended its winning streak to three days, with the ASX 200 index higher by 1% and approaching two-month highs thanks to improved sentiment. In forex markets the Kiwi emerged the strongest, followed by the Loonie and Aussie, USD is trading lower against EUR at 1.1465.

On the Lookout: The euro calendar remains relatively quiet today, the Germany Trade Balance s.a. came in at €19B, above expectations (€18B) in November while Germany Imports (MoM) below expectations (0%) in November: Actual (-1.6%). In Switzerland, Consumer Price Index (YoY) came in at 0.7% below forecasts (0.8%) in December.

us In France Consumer Confidence released by INSEE came in at 87 below forecasts (90) in December, that’s the lowest print in consumer confidence since November 2014, and it keeps sending warning signals for the second largest economy of the common currency. I believe that France will be the next big problem for the Euro in the coming months.

We have the speech by the Bank of England (BOE) Governor Carney at 1530 GMT. Carney is due to participate in an online question and answer session about the future of money at the Bank of England’s Future Forum.

The focus remains on the Bank of Canada (BOC) rate decision (1500 GMT) and Governor Poloz’s speech at the post-policy presser at 1515 GMT.

The main event risk for today remains the December FOMC meeting minutes release that will offer fresh cues on the Fed’s 2019 rate hike outlook, prompting fresh US dollar repositioning.

Trading Perspective: Investors will look into the minutes of the last Fed policy rate meeting in December to get any clues to the FOMC’s thinking on interest rates and the US economy. While short term momentum is positive the common currency (EURUSD) facing first resistance at the 100-day moving average, in 1.1478 an area which the pair rejected yesterday. On the flipside, 1.1309 the low of January 2, 2019, is the immediate support and then 1.1268 the monthly low will attract some technical buying.

usUSDCAD is trading to one-month lows at 1.3242, as higher oil prices support Canadian Dollar. The pair has reached short term oversold level, and a rebound can’t be ruled out. The 1.32 round figure is the immediate support while a break below that line will drive the prices to 1.3160 level. Bulls have to recapture the 1.3275 level in order to retake control.  Traders have started repositioning for today’s key risk events, the latest BoC monetary policy update and the release of FOMC meeting minutes for the next major leg.

Analysts at Danske Bank suggest that in the US, the minutes from the December FOMC meeting are due out and are going to be the key economic release for today’s session.

“We will look for differences in the FOMC members’ views on the economy and markets, especially after indications last week that the Fed may go about its monetary tightening more gradually. Members of the board Evans and Rosengren are due to speak today.”

GBPUSD: The UK macro news calendar remains empty today, but the Brexit-related headlines will continue to drive the sentiment around the GBP markets. The pair is consolidating around mid 1.27. The pair needs to break above the 50-day moving average in order to attract further buying to the next resistance at 1.2815. First support for the pair is at 1.2695 while further support can be found around 1.2655 area. Open interest in GBP futures markets dropped by around 2.5K contracts on Tuesday from Monday’s 212,424 contracts, according to preliminary data from CME Group. On the other hand, volume increased by more than 3.1K contracts following three drops in a row.

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