19 April 2017
Trump said the dollar is too strong and he likes interest rate to be low. USD/JPY broke below 109 and display signs of heading towards 107.
After months of labelling other nations of weakening their currencies against the dollar and gaining advantage over exports, it seems like Trump could be the most skilful currency manipulator by talking down the dollar. In order to facilitate discussions with China, Trump has confirmed the Treasury will not label China as a currency manipulator in their report. USD/JPY hit 22-week low and below are the 3 reasons:
Geopolitical risk heightened early last week as reports mentioned China was deploying troops to the border with North Korea in preparation for possible US strikes and Russia may have cut its communication with US. These fuelled demand for safe-haven yen.
In his mid-week speech, Trump said the greenback is too strong and he prefers low interest rate policies. He may even nominate more dovish members to Fed.
Lacklustre data – US inflation and retail sales underperformed against market expectations. Core CPI came in -0.1% versus 0.2%, while core retail sales came in at 0% versus 0.2%.
The above 3 reasons overshadowed the optimism from Fed chair Janet Yellen and her plan for gradual tightening. With the lack of significant US data this week, USD/JPY may continue to trickle towards the next key support around 107.
The highly contested French presidential election will be held in the upcoming weekend. Should there be no candidate gaining a majority vote, the second round of election will be held on the 7 May between the top 2 candidates. According to the recent poll, it is a tough fight among the top 4 candidates (in no particular order), Francois Fillon (Les Republicains), Marine Le Pen (Front National), Emmanual Macron (Independent) and Jean-Luc Mélenchon (Unbowed France). We expect euro to remain weak and a possibility of significant gapping after the weekend depending on the result.
USD/JPY – Slightly bearish. Consider going short if price retraces higher towards 109.
EUR/JPY – Bearish. This pair is on a strong downtrend. Consider going short around 115.20.
OIL/USD (WTI) – Reversal. A reversal pattern Head & Shoulder is forming. Consider going short after price broke the support around 53.00.
Top News This Week (GMT+8 time zone)
New Zealand: CPI q/q. Thursday 20th April, 6.45am.
We expect figures to come in at 0.7% (previous figure was 0.4%).
UK: Retail Sales m/m. Friday 21st April, 4.30pm.
We expect figures to come in at 0.1% (previous figure was 1.4%).
Canada: CPI m/m. Friday 21st April, 8.30pm.
We expect figures to come in at 0.4% (previous figure was 0.2%).
by Fullerton Markets Research Team
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