Believe it or not but it’s true, S&P has made new highs and risky assets continue to move higher as the market awaits the phase one deal signing ceremony. The Treasury has removed China as a currency manipulator, this appears to be more symbolic than anything else USDCNH is trading around 6.8870, which shows quite a lot of strengthening in the Yuan ahead of the signing. Chinese trade data overnight was positive. It just needs to be seen what happens after the deal is signed and whether any stipulations or amendments arise. As such USDJPY has continued to enjoy a move higher hitting a high of 110.20 overnight, it needs to be seen now whether it can continue higher once the trade deal euphoria subsides, bollinger band resistance comes in at 110.26 on the daily chart which we believe will be difficult to overcome initially with support now at 109.00. The FED Williams speaks today and we are pretty sure that he’ll say he’s pretty happy for now where monetary policy is. In terms of US data today we have CPI which is expected at 0.2% compared to 0.3% previous.
EURUSD traded a high of 1.1145 overnight but has since come off a little as there’s a report from Moody’s which reveals its outlook for sovereign creditworthiness in the euro area for 2020 has changed to negative from stable. On the political front there is a chance that Italy might go to a snap election before a pending constitutional referendum if League wins a general vote on Jan 26. For now the mammoth expiry at 1.1100 is keeping the single currency supported with 1.1160 being the main hurdle to overcome. We still believe that rallies offer good opportunities to sell as still see EURUSD testing lower, support lies at 1.1080.
GBPUSD weaker than expected data yesterday in the way of industrial production and GDP weighed on Sterling. The market now seems to be convinced that a rate cut is coming in May(90%) or a 50/50 chance that it could come as soon as January. Should it come that soon then we believe there is a good chance that cable can trade as low as 1.2700. Later this week have CPI and retail which will dictate the next direction flow. On a lighter note Boris Johnson is “ very, very confident” that the EU trade deal will be done by the end of year. For today we believe 1.3000 will be good resistance and are looking a move initially to 1.2950 and possibly 1.2900. GBPEUR is 1.1665.