Wall Street to Open Flat amid Mixed Cues & Escalating Sino-U.S. Tensions

Asian markets are trading mostly on negative foot the last trading day of the week as investors await a press conference by President Donald Trump on China and the developments in Hong Kong. China’s Foreign Ministry warned that it would retaliate against any sanctions imposed.

sanction
Sanctions against China

China is planning to impose a new stricter security law in Hong Kong. The move might spark a new round of protests and a stand-off. Hong Kong officials in a move to calm investors said that the new law would not alter the civil liberties. The House of Representatives passed legislation for sanctions against Chinese officials for the detention of Uighur Muslims. 

The sanctions might range from cancelling the Phase 2 trade deal, new tariffs on Chinese products to travel and financial restrictions on Chinese officials. 

In Wall Street, the major indices after a strong start slide to negative territory as the economic data continue to disappoint. The U.S. Initial Jobless Claims came in at 2123K above the expectations of 2100K in May as the layoff in the USA continues. The four-week moving average was 2,608,000, a decrease of 436,000 from the previous week’s average. The U.S. jobless claims have surpassed 40 million since the lockdown. 

Bank of England member Michael Saunders said the central bank (BOE) should expand its asset purchase program to offset the impact on the economy from the coronavirus crisis

Nikkei 225 index finished 0.18% lower at 21,877. The Hang Seng index trades lower for one more day and as of writing gives up 0.60% at 22,991, while the Shanghai Composite index is 0.11% higher at 2,849. In Singapore, the FTSE Straits Times Index is 0.19% lower at 2,510.

European stocks started sharply lower on Monday morning; the German DAX is 3.46% lower at 10,484. CAC 40 index is 3.98% lower at 4,390, while the FTSE MIB in Milan is 3.10% lower at 17,141. In London, the FTSE 100 is 0.19% lower at 5,751.  

In commodities markets, the crude oil rebound stalled at two-month highs. Brent crude oil traded 0.69% higher at $35.53 per barrel, while the WTI crude oil futures contract for July delivery is 2.02% lower at 33.01. The gold price traded slightly higher as the tension between China and the USA escalates, as of writing is 0.06% higher at 1,719. The gold first resistance stands at $1,765 the high from May 18, while the first support stands at $1,700 round figure. Silver price is 0.02% higher at $17.36. 

Cryptocurrencies trade lower after the two days rally, Bitcoin (BTCUSD) price is 0.53% lower at $9,526, hitting the daily low at $9,405 and the daily high at $9,615. Bitcoin’s (BTCUSD) technical picture is bullish, as the price holds above the 200 and 100-day moving average, while a credible close above the 10,000 mark would attract more bids. The first support for Bitcoin is seen at the $9,000 psychological mark. On the other side, initial resistance stands at $10,065, the high from May 8.

Ethereum is 0.26% higher, at $221.15. The initial resistance for Ethereum stands at 224.90, the daily high, while the first support stands at $204.92, the low from yesterday’s trading session. Ripple is 0.28% lower at 0.1997. Litecoin (LTCUSD) is 0.04% higher at 44.74.

 In the Lookout: The Japan Industrial Production came in at -9.1%, below the expectations of -5.1% in April, the yearly reading for the Industrial Production came in at -14.4%, below the forecasts of -7.9%. 

Consumer Confidence Index in Japan registered in at 24 topping the forecasts of 12.8 in May. The Japan Housing Starts came in at -12.9% below the expectations of -12.1% in April. The Annualized Housing Starts came down to 0.797M in April from the previous 0.905M, while the Japan Construction Orders came in at -14.2% in April from the previous -14.3%. 

Trading Perspective: In the forex markets, EURUSD managed to break above the 1.11 mark. USDCHF is 0.13% lower at 0.9628. GBPUSD is 0.23% higher at 1.2347; the AUDUSD is 0.35% higher at 0.6657. The U.S. dollar is also weaker against the Yen; the USDJPY is 0.43% lower at 107.13. 

USDCHF Under Pressure

USDCHF trades lower for the second consecutive trading session amid broad greenback weakness. USD is under selling pressure after yesterday the U.S. Initial Jobless Claims registered in at 2123K above the expectations of 2100K in May. The four-week moving average was 2,608,000, a decrease of 436,000 from the previous week’s average. The U.S. Gross Domestic Product Annualized came in at -5%, below the forecasts of -4.8% in the first quarter, the fourth quarter of 2019 was at 2.1%. The Durable Goods Orders dropped to -17.2% but beat the forecasts of -19% in April.

In Switzerland, the May KOF leading indicator index came down to 53.2 well below the expectations of 70.0. 

The technical outlook for USDCHF is bearish for the pair as now is trading below the major daily moving averages. On the downside, the first support for USDCHF stands at 0.9621, the daily low. The next level to watch for USDCHF on the downside is the low from May 1 at 0.9585. A break below will provide a bearish signal. The next support area is at 0.9499, the low from March 10.  

On the other hand, the first support for the USDCHF pair will be met at 0.9645, the daily high. A break above 0.9645 might open the way for a test of the critical resistance at the 100-day moving average (0.9684). If the USDCHF breaks that resistance, then bulls will be in control, targeting 0.9696 the 50-day moving average. 

EURJPY At Two Week Highs, Capped By 200-Day SMA Resistance 

EURJPY retreat today after four consecutive days of gains as the common currency attracts bids on the E.U. Commission proposal on the common recovery fund. The Commission proposal includes 250 billion in loans and 500 billion in grants to the worst affected European countries by the coronavirus crisis.

On the economic data today, the Japan Housing Starts came in at -12.9% below the forecasts of -12.1% in April. The Annualized Housing Starts came down to 0.797M in April from 0.905M in March, while the Japan Construction Orders came in at -14.2% in April from the previous -14.3%. The Japan Industrial Production came in at -9.1%, below the expectations of -5.1% in April, the yearly reading for the Industrial Production came in at -14.4%, below the forecasts of -7.9%. 

Consumer Confidence Index in Japan registered in at 24 topping the forecasts of 12.8 in May. 

From Europe, France’s first quarter-final GDP came in at -5.3% better than expectations of -5.8%. The France consumer spending came down to -20.2% in April; the March reading was at -14.7%. 

EURJPY Technical Analysis

On the technical side, the pair managed to break above the 50-day moving average on Monday, and that attract more bulls. The mini-rally also breached above the 100-day moving average and stalled yesterday and today at the 200-day moving average. 

On the upside, strong resistance will be met at 119.25 – 119.32 area (200-day moving average and daily high). A move above might test the next resistance at 119.69 the high from March 31. 

On the other side, initial support for the pair stands at 118.85, the daily low. A break below might test the critical 100-day moving average at 118.71. If EURJPY breaks below, then the next support is at 117.71 the low from May 27. 

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