GLOBAL MARKET SELL-OFF INTENSIFIES ON TRADE WORRIES
The yen gained against the USD in early trading hours despite negative economic data from Japan. Data from the government showed that the economy contracted by minus 2.5%, which was lower than the consensus estimate of minus 1.9% and the slowest growth in more than four years. On a QoQ basis, the economy contracted by minus 0.6%. Bank lending in November increased by 2.1%, which was lower than the estimated 2.2%.
Asian markets declined sharply today as traders renewed their worries about trade. Over the weekend, China threatened the US with ‘severe consequences’ over the arrest of Huawei’s CFO. She was arrested last weekend in Canada and was accused of working against US sanctions in Iran. European and American futures pointed to a lower open.
Sterling was relatively unmoved ahead of a key vote on Brexit scheduled tomorrow. Parliament is widely expected to vote against the bill proposed by Theresa May. This could have major results for the United Kingdom. Over the weekend, Labor leader Jeremy Corbyn asked Theresa May to resign if she loses the vote in parliament. Other analysts have raised the chances that May could resign or ask for another referendum on Brexit. Later today, traders will receive key data from the UK including the GDP numbers, industrial production, manufacturing data, and trade data.
The EUR/USD pair extended the gains started on Friday after disappointing NFP numbers. It reached an intraday high of 1.1442, which was higher than last week’s low of 1.1267. On the hourly chart, the pair’s price is above the 50-day and 25-day EMA. The RSI has moved closer to the overbought level of 70 while the momentum indicator is above the 100 level. This week, the pair will likely continue moving higher as traders wait for direction of monetary policy from the Fed.
The USD/JPY pair declined today to an intraday low of 112.22. This was an important support and on the hourly chart appears to be a double bottom position. The current price is below all the major moving averages while the RSI is at 35. The price is also slightly above the lower line of the Bollinger Bands. The declines could continue if the pair crosses the important support level of 112.22.
The GBP/USD pair was little moved in the Asian session as traders wait for tomorrow’s vote and important data today. It is now trading at 1.2742. On the four-hour chart, the pair’s price is below the 50-day and 25-day EMA. The MACD is along the neutral level while the RSI is at 50. The pair will likely continue moving in this sideways direction before starting a new trend tomorrow.