• GBP/USD bounces off 10-day SMA, stays inside the six-week-old symmetrical triangle.
  • An upside break of the triangle needs validation from 1.3000 psychological magnet.
  • Sellers can aim for 38.2% Fibonacci retracement during the pair’s drop beneath the technical pattern.

While holding tightly above the 10-day Simple Moving Average (SMA), GBP/USD takes the rounds to 1.2940 during Tuesday's Asian session. Even so, the pair remains inside a multi-week-old triangle formation.

That said, the pattern’s resistance line around 1.2975 acts as an immediate upside barrier holding the key to the pair’s run-up towards 1.3000 round-figure.

However, a sustained rise beyond the same might not refrain from challenging the May month tops surrounding 1.3180.

Alternatively, pair’s downside below 10-day SMA level of 1.2906 could trigger fresh pullback towards the triangle’s support line, near 1.2840.

In a case where prices defy the triangle formation with a break beneath 1.2840, 38.2% Fibonacci retracement level of October month upside close to 1.2700 will be on the Bears’ radar.

GBP/USD daily chart

Trend: Sideways

  • USD/JPY recovers from five days’ low.
  • The US-led challenges to global trade system stay, US President Donald Trump attacks the Fed.
  • Trade/political headlines will be in focus.

USD/JPY pulls back from the five days’ low while taking rounds to 109.00 amid the initial Asian trading session on Tuesday.

The quote registered the highest losses in a month’s time on Monday after headlines from the United States (US) flashed challenges to the global trading system. Also contributing to the pair’s declines were downbeat data from the US.

Be it the US-China phase-one stalemate or steel tariffs on South American economies, not to forget likely trade negative measures against the European Union (EU), the US ran the show of trade protectionism on Monday. Further, the US ISM manufacturing numbers stayed in the contraction territory for the fourth consecutive month and raised doubts on the strength of the world’s largest economy.

With this, the market’s risk aversion hit Wall Street on the first trading day of the month whereas the US 10-year Treasury yields recovered four basis points to 1.82%. However, the latest quotes seem to change with the S&P 500 Futures be mildly on the positive side with the US government bonds waiting for fresh directions.

Fed under attack…

The US President Donald Trump maintains his dislike for the US Federal Reserve’s (Fed) monetary policy as he recently said “the Fed should lower rates (there is almost no inflation) and loosen, making us competitive with other nations, and manufacturing will SOAR! The dollar is very strong relative to others.” While the Fed policymakers are on the blackout session, downbeat data from the US keep diming odds of any monetary policy stabilization amid contrasting comments from the US President Trump.

Additionally, a rehash of the November news that the Japan government is considering 25 Trillion Japanese yen (JPY) economic stimulus package, as per the NHK, recently crossed the wires while helping the pair.

Moving on, a lack of major data will keep the market’s attention on the trade/political headlines.

Technical Analysis

The quote stays shy of visiting 110.00 and can drop back to mid-November lows near 108.20 on the break of 21-day Simple Moving Average (SMA) level of 108.95.

Further to the news back in November that Prime Minister Shinzo Abe had given orders for Japan’s first economic stimulus package since 2016 as his government frets about a global slowdown, the impact of higher consumption tax and the risk of a hangover from next year’s Tokyo Olympics, there are fresh headlines hitting the twitter feeds on the matter.

  • Japan government considering 25 trillion yen economic stimulus package – NHK

As reported last month, and considering the concerns about the health of the global economy, the Japanese government officials had vowed to produce an “agile” and “comprehensive” stimulus that will take advantage of ultra-low interest rates and borrow in order to finance public investment.

Japan’s chief cabinet secretary, Yoshihide Suga, said at the time that, "to speed up our recovery [from natural disasters], deal with risks from abroad and accelerate productivity growth, we are formulating an economic plan along the lines of a 15-month budget."

FX implications

The package would hope to boost spending plans that would lift the economy all the way into 2021. The scale the stimulus is significant and 13 trillion yen would be included for fresh fiscal spending. USD/JPY is unchanged on the news and traders will want to see something formal in an official announcement and a commitment to maintaining higher yields on the longest duration bonds.

The final decision will be made in consultation with the ruling party sometime soon – however, considering how much of the stimulus is already priced in and given the yen's safe-haven status, a bigger focus will likely stay with trade-deal noise, global equities, safe-haven and end-of-year flows.

Adding to his previous attacks on the US Federal Reserve’s (Fed) monetary policies, the United States (US) President Donald Trump pushed further for lower interest rates as he anticipates the US dollar (USD) is very strong.

Key quotes

“The Fed should lower rates (there is almost no inflation) and loosen, making us competitive with other nations, and manufacturing will SOAR! Dollar is very strong relative to others.”

FX implications

While the said comment fails to provide any immediate market direction, US President Trump’s strong push for further rate cuts amid recently downbeat data can have negative impact on the USD. The news could also be considered as a risk-negative catalyst.

  • AUD/JPY drops from three weeks’ high.
  • An eight-day-old rising trend channel keeps buyers hopeful.
  • 50% Fibonacci retracement, channel’s upper line adds to the resistance beyond 200-bar SMA.

AUD/JPY takes a U-turn from immediate rising channel and declines below 200-bar Simple Moving Average (SMA) as the quote flashes 74.30 mark during the early Asian session on Tuesday.

Prices are likely extending the pullback towards the eight-day-old channel’s support, at 74.00, a break of which could please sellers with November 21 low near 73.50 and mid-November bottom close to 73.35.

Meanwhile, pair’s run-up beyond 200-bar SMA, at 74.37 now, will confront 50% Fibonacci retracement level of November month fall, at 74.52, followed by the channel’s resistance line, at 74.55.

Given the bull’s dominance beyond 74.55, highs marked during November 10 and 12 around 74.95/75.00 will be in focus.

AUD/JPY 4-hour chart

Trend: Pullback expected

  • The yellow metal is starting December trapped in familiar ranges.
  • The key resistance to watch is the 1465 level.

Gold daily chart

Gold is starting the last month of 2019, questioning the 1465 resistance level while trading below the 50/100-day simple moving averages (SMAs). However, the market would likely become strongly bearish below 1445 swing low on a daily closing basis as it could entail a dive to the 1400 figure near the 200-day SMA.

Gold four-hour chart

The metal is putting the 50 and 100 SMAs under pressure as the market is trying to break above the 1465 resistance. If the buyers are successful, it can lead to the market to the 1480 level in the medium term.

Additional key levels

  • AUD/USD fails to extend run-up beyond the nine-day high.
  • The US takes tough stands against Argentina and Brazil, keeps pressure on the EU while also standing ready for tariffs on China.
  • RBA is likely to hold the monetary policy intact, signals for rate cuts in 2020 will be in focus.

AUD/USD steps back from multi-day high to 0.6820 during early Tuesday morning in Asia. The Aussie pair previously benefited from the US dollar (USD) weakness and upbeat data from China but is recently under pressure amid rising risk aversion and profit-booking ahead of the key event.

Despite witnessing mixed readings at home, Aussie traders initially cheered welcome Purchasing Managers’ Index (PMI) numbers from Australia while also benefiting from the downbeat US dollar (USD) performance. The greenback had to bear the burden of ISM Manufacturing PMI as well as the renewal of doubts over the phase-one deal between the United States (US) and China.

Not only the US-China story but the recent show of trade protectionism by the US seems to negatively affect the market sentiment. The US reinstated steel tariffs on Argentina and Brazil whereas it stood ready to announce further tariffs on the European Union after gaining support from the World Trade Organization’s (WTO) verdict on Airbus. Further, the US Trade Secretary Wilbur Ross signaled that the scheduled tariffs on Chinese products, for December 15, will go into effect if the deal isn’t reached between now and then. On the other hand, Chinese have shut Hong Kong’s gate for the US military and announced sanctions on the US non-government organizations.

Against the odds were comments from the White House advisor, Kellyanne Conway, mentioning that China trade-deal is being written-up. Elsewhere, US President Donald Trump keeps his criticism of the Federal Reserve’s easy money policy.

While portraying the moves, the US 10-year Treasury yields recovered back beyond 1.80% but Wall Street marked heavy losses on the first trading day of December.

Investors will now focus on the monetary policy meeting by the Reserve Bank of Australia (RBA) while a third quarter (Q3) Current Account Balance from Australia, expected 6.3B versus 5.9B prior, can offer intermediate moves. The RBA is widely anticipated to hold its present monetary policies unchanged. However, latest comments from the RBA policymakers and a mixed set of data at home, not to forget US-China trade deal noise, keep pushing traders to look for clues to 2020 rate cuts.

Technical Analysis

As far as prices stay above 100-day Simple Moving Average (SMA) level of 0.6815, expectations of witnessing early-November lows close to 0.6860 back to the chart stay on the cards. Alternatively, 50-day SMA level surrounding 0.6800 and November month low near 0.6755 may become sellers’ choices.