Asian equities markets and commodity currencies are off to a bullish start for the week. The Hang Seng index is up over 1.60%, around 445.5 points at 27,040.0 while the Nikkei 225 is up by 0.78% or 179.9 points at 23,292.8.
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Meanwhile, the New Zealand dollar exchange rate is up around 0.27% as NZDUSD trades around 0.6423. AUDUSD is in the green by almost 0.20% at 0.6795. AUDJPY, which compares the risk currency Aussie to the safe haven Japanese yen, is up around 20 pips at 73.95.
Optimism that the US and China will be able to set aside their differences and pass phase one of their trade deal by 2019 has been renewed. U.S. national security adviser Robert O’Brien has said so over the weekend. More importantly, China announced that it is willing to impose stricter penalties on intellectual property (IP) violations. IP has been one of the issues in which the two countries had difficulty seeing eye-to-eye on. Therefore, this move by China was widely welcomed by market participants as it is a step towards finalizing a phase one deal.
Now the big question is, will the US welcome this announcement from China?
If we hear more positive developments on negotiations, we will likely see support on the rising trend line (connecting the lows of August 26, October 10, and November 21) of AUDJPY hold. The area around 73.70 also coincides perfectly with the 50% Fib level when drawing the Fibonacci retracement tool from the low of October 2 to the high of November 7. A bullish candlestick that closes above the 74.00 handle could mean that AUDJPY is on its way to test resistance at its monthly highs at 75.63.
On the other hand, a bearish close below low of November 14 at 73.35 could mean that AUDJPY may be on its way to support at 71.71 where it made lows on October 4. Risk aversion as well as dovish remarks from RBA Deputy Governor Guy Debelle could trigger this. So keep tabs on our site as we make updates on his speech which is scheduled at 11:50 pm GMT.Download our latest quarterly market outlookfor our longer-term trade ideas.
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