USD/JPY Eyes 200-MA, S&P 500 Descending Triangle in Play

Covid-19, Hong Kong Safety Regulation, US-China Commerce Warfare, S&P500, USD/JPY – Speaking Factors:

• Upbeat Chinese language PMI information fuelled sentiment early in Asia-Pacific commerce.
• S&P 500consolidating at key resistance as Hong Kong’s safety regulation escalates tensions between the US and China
• USD/JPY eyeing the 200-day transferring common because it seems to be to increase its 5-day rally

Asia-Pacific Recap

A broad risk-on tilt was seen early in Asia-Pacific commerce as upbeat Chinese language PMI information nudged the trade-sensitive Australian Greenback larger towards its US counterpart. S&P 500 futures remained comparatively unchanged regardless of better-than-expected pending dwelling gross sales figures in a single day.

The haven-associated US Greenback and Japanese Yen drifted decrease earlier than pegging again misplaced floor, because the closing bell sounded for the Australian session. Gold held regular at $1,770 while yields on US 5-year Treasuries fell to a document low of 0.271% because the Federal Reserve considers replicating the Reserve Financial institution of Australia’s tackle Yield Curve Management (YCC).

Trying ahead, focus will stay fixated on Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell’s testimony in entrance of the Home Monetary Providers Committee, with any inkling of additional stimulus measures being launched probably stoking market urge for food for threat.

Supply – TradingView

Coronavirus Headlines Proceed to Dictate Sentiment

Warning photographs fired by the top of the World Well being Group (WHO) that the “worst is but to return” could proceed to empty the positivity from monetary markets as world circumstances of coronavirus blast previous 10 million, leading to over 500,000 deaths.

The deteriorating state of affairs in the US continues to weigh on threat urge for food as Houston, the second-most populous metropolis in Texas, reported ICU beds have been 5% shy of capability while Arizona re-instated restrictions on bars, gyms and theatres.

The notion that Covid-19 could also be seasonal in nature appears all however debunked as circumstances proceed to climb in the course of the summer season months, suggesting {that a} full lifting of restrictions could not happen till the introduction of an efficient vaccine.

To that finish, world asset costs could come underneath stress as traders start to query whether or not the restoration has prolonged past the basics.

Supply – Worldometer

Hong Kong Safety Regulation Stokes US-China Tensions

The Nationwide Folks’s Congress Standing Committee (NPCSC) could have escalated tensions between the world’s two largest economies after voting unanimously to approve the controversial Nationwide Safety Regulation someday earlier than the anniversary of Hong Kong’s return to Chinese language rule.

Adoption of this regulation basically permits Beijing to override the native judicial system in Hong Kong, eroding the autonomy of the particular administrative area’s (SAR) ‘one nation, two system’ precept of governance that has granted it particular commerce standing with the US.

Given the Trump administration’s pre-emptive motion to limit US exports of defence gear and high-tech merchandise on Monday, additional measures are nearly assured with the President hinting on the cessation of the extradition treaty with Hong Kong together with the cancellation of visas for Chinese language college students and researchers with ties to the navy.

Moreover, Hong Kong Chief Government Carrie Lam’s defiance that “sanctions is not going to scare us” and that “China will take countermeasures when wanted” all however assures a interval of sustained tit-for-tat exchanges, probably fueling a surge of threat aversion and discounting of risk-associated property.

S&P 500 Every day Chart – Descending Triangle Forming at Key Resistance

Supply – TradingView

Finish of month flows together with a shortened buying and selling week has seen the S&P500 consolidate right into a doable Descending Triangle formation after worth collapsed by the uptrend from the yearly low (2,179) on June 11.

The sudden 9% fall from the June excessive (3,233) pushed the benchmark index again to key supportive confluence on the 61.8% Fibonacci (2,933), 50-day transferring common (2,916) and 2009 uptrend.

This sharp correction offered the chance to maybe ‘purchase the dip’, permitting worth to tentatively recuperate again above the psychological 3,000-level.

The outlook stays constructive as worth maintain above 3,000, which can proceed to encourage patrons because the overlap between the 50- and 200-MA offers a supportive security internet for the US benchmark index.

Nonetheless, additional beneficial properties appear to be restricted by substantial resistance on the 78.6% Fibonacci (3,137) and the waning momentum seen on each technical indicators.

To that finish, promoting stress could intensify if worth can clear help on the 61.8% Fibonacci (2,932) and carve a path again to the Could low (2,766) and 38.2% Fibonacci (2,645).

USD/JPY Every day Chart – Charge Eyeing 200-Day Shifting Common

Supply – TradingView

USD/JPY continues to recoup misplaced floor after collapsing 3% from the June excessive (109.85) earlier than reacting to the psychologically imposing 106-handle.

Preliminary improvement within the RSI late final week instructed worth would proceed to breakdown, however the steep reversal previous to oversold readings might see USD/JPY work its approach again to the 200-day transferring common (108.21).

Having stated that, the momentum indicator has diverged from worth and its fellow technical oscillator, hinting at an underlying diploma of bearishness in USD/JPY, which might see the change price reverse on the February downtrend as its executed on two earlier events.

Response across the 200-MA (108.21) might present a key inform for future route, with the shortcoming to clear the sentiment-driving transferring common probably signalling a reversal of the 5-day rally.

— Written by Daniel Moss

Observe me on Twitter @DanielGMoss