- EUR/JPY headed for a strong close on Wall Street on market euphoria.
- EUR/JPY’s remains above the 121.47/34 200-day moving average and seeks upside channel resistance.
The US stocks on Wall Street are headed to their highest all-time closes on the euphoria that a trade deal between the US and China will be signed next month; Such a move will be opening the way to a phase-two deal. For that reason, the yen is on the back foot and EUR/JPY is trading +0.45% into the close.
EUR/JPY is currently trading at 122.11, having travelled from a low of 121.56 to a high of 122.23, holding above the 200-day moving average and on track for the top of the rising channel.
Key notes of trade-deal to date
- President Donald Trump vowed not to pursue a new round of tariffs set for Sunday.
- China agreed to billions of dollars in agricultural purchases from the US.
- The US and China had agreed on phase-one of a trade deal last week, although markets are of the mind it is a one-and-deal scenario – (not so bullish).
- Markets are in anticipation of the details of the phase one-deal between the US and China.
- The world’s two largest economies plan to sign the partial accord in the first week of January.
- China have only stated that they will proceed for legal review and translation without touching on a timeline.
- Details of the new trade deal only appear to be a slight improvement on the details that the earlier ‘phase one’ deal had already agreed.
- Key difference is that this deal is “fully-enforceable”.
- The US has agreed to halve the tariffs on US$120bn of Chinese goods (from 15% to 7.5%) but will retain a 25% on US$250bn of Chinese imports.
- China confirmed prior agreement to purchase an additional US$16bn in goods from the US over the next two years.
- US Trade Representative, Robert Lighthizer, said on Sunday to CBS that the phase-one China deal was “totally done.”
- Lighthizer said the deal goes beyond agriculture to address intellectual property issues, noting that it has strong enforcement provisions and addresses financial services and currency devaluation issues – the deal is expected to be signed in January.
- Wall Street rallies to record highs.
However, analysts at ABN Amro argued that while a ‘Phase-One’ deal reduces tail risks, but it won’t supercharge growth, and on imports, the analysts express that it would arguably be at the US’s discretion whether China will have done enough (importing of US goods) to fulfil its side of the bargain when the time comes.
EUR/JPY levels
Bulls are on track for the 124 handle and making their way towards the top of the ascending channel. “EUR/JPY’s remains above the 121.47/34 200-day moving average and October highs but is to today stay below the 61.8% Fibonacci retracement and last week’s high at 122.63/65,” analysts at Commerzbank noted.
“Into year end the June and July highs at 123.18/34 could be reached, however. Further up sit the March low and the May 21 high at 123.65/75. Support below the 200 day moving average at 121.34 comes in at the 121.01 early December high.”
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