Asia Pacific Market Open Talking Points
- GBP/USD sits above a potential turning point after a dovish BoE
- US Dollar gained as 2020 Fed outlook improved and yields rose
- Japanese Yen may reverse losses on fading US-China deal hopes
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British Pound and Japanese Yen Sink on BoE and Trade Hopes Respectively
The British Pound was one of the worst-performing major currencies on Thursday. Its decline could be traced to unexpectedly dovish developments from the Bank of England monetary policy announcement. It was revealed that two voters dissented against a rate hold at 0.75 percent. Governor Mark Carney also highlighted that risks to local growth are skewed to the downside.
At this point, Brexit news arguably remains the key fundamental driver for Pound price action as the UK awaits an upcoming general election. The BoE noted that should Brexit and global risks worsen, policy easing could be needed. For the time being, the latter seems to be tilting towards a favorable position given further developments over the past 24 hours.
Reports that an interim US-China trade deal signing could translate into gradual tariff unwinding fueled stocks at the expense of the anti-risk Japanese Yen. The S&P 500 hit a new record high as the sentiment-linked Australian Dollar rose. Fading dovish Fed policy bets boosted the US Dollar as local front-end government bond yields rallied.
Friday’s Asia Pacific Trading Session
S&P 500 futures are pointing higher heading into Friday’s Asia Pacific trading session. Arguably some of the upside potential that may come has been reduced. This is because a report from Reuters revealed that plans from the White House to rollback Chinese tariffs could be faced with internal opposition. A deterioration in risk trends could thus bode ill for the Australian Dollar as the Yen rises.
The former will be eyeing unscheduled Chinese trade data for October. China is Australia’s largest trading partner. Data is still tending to underperform relative to economists’ expectations out of the world’s second-largest economy. More of the same may add fuel to near-term RBA easing expectations. The central bank will also be releasing their statement on monetary policy at 00:30 GMT, outlining assessments of local conditions.
British Pound Technical Analysis
GBP/USD now sits at a potential turning point, hovering above the key psychological barrier between 1.2773 – 1.2798. The fall to support was preceded by a combination of a Bearish Harami candlestick formation alongside negative RSI divergence. The latter is a signal of fading upside momentum. A daily close under support could pave the way for a test of a potential rising trend line from September – red line below.
Chart of the Day – GBP/USD
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— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter