US-Sino phase 1 deal agreed, yet market yawns

The US and China announced that they have reached a last-minute phase 1 trade deal on Friday afternoon. The deal provides for a partial roll back of US tariffs on imports from China and at the same time the Chinese are to make additional imports form the US. It should be noted that the agreement practically avoided the implementation of additional new US tariffs, which were to be imposed on the 15th of December. The deal is to be signed in the US during the first week of January by the principal negotiators of the two sides in Washington. The market had a rather muted reaction and the USD remained low against safe havens. USD/JPY weakened at the announcement on Friday somewhat, distancing itself from the 109.70 (R1) resistance line. The pair maintained a tight rangebound motion during today’s Asian session and we could see it being maintained should there be no further headlines. Also, it should be noted that the US financial releases could provide for some volatility for the pair. Should the pair’s long positions be favoured by the market we could see it breaking he 109.70 (R1) resistance line and aim for higher grounds. On the flip side, should the pair come under the selling interest of the market we could see it breaking the 109.00 (S1) support line and move further south.

…while the Aussie weakens as well…

The Aussie retreated against the USD, on Friday as the new US-Sino trade deal could have disappointed the market. Analysts also point out that traders took out profits, following sharp rallies in the past two weeks, which also caused the Aussie to weaken. A key highlight during today’s Asian session, was the Government’s mid-year budget review, in which the growth forecast was cut to 2.25%. It was characteristic that the surprisingly positive Chinese data released today, were unable to excite the markets and provided only a temporary support for the Aussie. There was also a steep downgrade to the wages outlook by the Australian government and the combined news could weaken the Aussie further in the next day. AUD/USD tumbled on Friday, breaking the upward trendline incepted since the 11th of December, the 0.6905 (R2) support line as well as the 0.6875 (R1) support level, both now turned to resistance. The pair seems to stabilize somewhat during today’s Asian session, yet we suspect that the bears maybe just around the corner. Should the bears pick up control over the pair’s direction once again, we could see it breaking the 0.6850 (S1) support line and aim for the 0.6820 (S2) support line. Should the bulls take over, we could see the pair breaking the 0.6875 (R1) resistance line and aiming if not breaking the 0.6905 (R2) resistance level.

Other economic highlights today and early tomorrow

Today, its PMI day as during the European session we get Germany’s, France’s, Eurozone’s and UK’s preliminary PMIs for December. In the American session, we get from the US the NY Fed Mfg Index for December and the preliminary US Markit Mfg PMI. In tomorrow’s Asian session we get Australia’s housing finance growth rate for October. As for speakers please note that ECB’s De Guindos and are scheduled to speak. Also, please bear in mind that UK’s BoE will be releasing its financial stability report and Australia’s RBA will be releasing the minutes of its last policy meeting.

As for the week ahead

On Tuesday, from Australia RBA’s meeting minutes are due out and we also get UK’s employment data for October, and the US industrial production. On Wednesday, from Germany we get the Ifo Business climate indicator for December, UK’s inflation rates, from the Czech Republic the CNB repo rate, Canada’s inflation rates for November and New Zealand’s GDP rate for Q3. On Thursday, we get Australia’s employment data for November, BoJ’s interest rate decision, Sweden’s Riksbank interest rate decision, Norway’s Norgesbank’s interest rate decision, UK’s retail sales growth rate for November and BoE’s interest rate decision.

USD/JPY 4 Hour