The Aussie continues strong

The Aussie continued to rise yesterday and during today’s Asian session as the currency hit a five month high against the USD and recovered the position it had at the beginning of the year. The positive investor mood for the Australian currency, continues to be fuelled by hopes relating to the improvement of the US-Sino relationships and the signing of a phase 1 deal. It would be indicative that US White house adviser Peter Navarro stated that the phase 1 deal would likely be signed in the next week, but confirmation will be provided by US President Trump. Also, financial data from China showed yesterday that the Chinese manufacturing sector remains still in a positive area, as the NBS Mfg PMI was able to outperform expectations. Should the positive sentiment continue to dominate the market and a more risk on sentiment continue to drive investors, we could see the Aussie gaining further as a commodity currency. AUD/USD continued to rise yesterday, aiming for the 0.7010 (R1) resistance line. We maintain a bullish outlook for the pair, as it seems to be guided by the upward trendline incepted since the 18th of December. It must be noted though that the pair’s RSI indicator in the four hour chart seems to remain above the reading of 70, confirming the bull’s dominance yet at the same time could imply that the pair’s long position seems to be rather overcrowded. Should the pair find fresh buying orders along its path, we could see it breaking the 0.7010 (R1) resistance line and aim for the 0.7040 (R2) resistance level. Should the it come under the selling interest of the market, we could see AUD/USD breaking the 0.6985 (S1) support line and aim for the 0.6955 (S2) support level.

…while the USD remains under a bearish spell…

The USD seemed to ease further against other currencies yesterday, weakening even against safe haven JPY, despite the positive, risk on market mood mentioned above. Analysts tend to note that the dipping of the USD, in the past few days may also related to renewed optimism about global growth, driving the markets towards riskier assets. As for other currencies, analysts mention that the more risk-on orientation of investors may have also helped the EUR recover, while on the flip side worries seem to resurface about UK’s Brexit and seem curb the pound’s optimism. It should be noted that according to the USD Index, the USD seems to be returning, very near to the position it was at the beginning of 2019, providing little return for investor this year. Should markets remain oriented towards riskier assets, we could see the USD weakening further. USD/JPY continued to drop yesterday, breaking the 109.00 (R1) support line, now turned to resistance. We maintain a bearish outlook for the pair, as the pair seems to remain under the guidance of the bearish trendline incepted since the 27th of December. Also it should be noted that the RSI indicator in the pair’s 4 hour chart, remains under the reading of 30, possibly indicating an excessive number of short positions for the pair. Should the bears maintain control over the pair’s direction, we could see it breaking the 108.35 (S1) support line and aim for the 107.75 (S2) support level. Should the bulls take over, we could see the pair’s prices breaking the 109.00 (R1) support line, heading towards the 109.70, which the pair tested last Thursday, before the downward movement began.

Other economic highlights today and early tomorrow

In today’s American session we get the US consumer confidence for December and just before the Asian session starts the API weekly crude oil inventories figure is due out. Please bear in mind that due to the thin trading of the period, we could see abnormal market reactions in the next few days. It is characteristic that on the 4th of January 2019, the Aussie experienced a mini crash, under similar market circumstances. Given the opportunity, we would like to extent also our best wishes for a healthy and prosperous 2020.

USD/JPY 4 Hour