MNI China Daily Summary: Friday, April 26

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FX Markets Stabilise as Middle-East Tensions Simmer

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  • Despite the heightened level of uncertainty overnight, and the subsequent significant volatility spike, currency markets have stabilised as the weekend close approaches. The USD index has recouped the majority of its overnight losses and emerging market currencies have also recovered.
  • With the missile strike appearing limited in nature and closer to a warning shot rather than a declaration of protracted hostilities, markets bottomed out to put USD/JPY a big figure above the overnight low and hovering just shy of the multi-decade highs registered earlier in the week.
  • Recent USDJPY gains have confirmed a resumption of the primary uptrend and this maintains the bullish price sequence of higher highs and higher lows. The trend is overbought, however, this is clearly not a concern for bulls at this stage.
  • GBP is a relative underperformer on Friday as any bullish sentiment following the week’s firmer inflation and labour market data appears to have faded. The trend condition in GBPUSD remains bearish and the pair has traded to a fresh cycle low today.
  • The recent breach of 1.2519, the Feb 5 low, strengthens a downtrend and highlights a stronger reversal with scope seen for an extension towards 1.2364, a Fibonacci retracement.
  • Data heats up next week with Eurozone flash PMI’s Tuesday and US GDP figures on Thursday. The Bank of Japan will also meet where no policy adjustment is anticipated at the upcoming two-day meeting ending Friday.
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  • Despite the heightened level of uncertainty overnight, and the subsequent significant volatility spike, currency markets have stabilised as the weekend close approaches. The USD index has recouped the majority of its overnight losses and emerging market currencies have also recovered.
  • With the missile strike appearing limited in nature and closer to a warning shot rather than a declaration of protracted hostilities, markets bottomed out to put USD/JPY a big figure above the overnight low and hovering just shy of the multi-decade highs registered earlier in the week.
  • Recent USDJPY gains have confirmed a resumption of the primary uptrend and this maintains the bullish price sequence of higher highs and higher lows. The trend is overbought, however, this is clearly not a concern for bulls at this stage.
  • GBP is a relative underperformer on Friday as any bullish sentiment following the week’s firmer inflation and labour market data appears to have faded. The trend condition in GBPUSD remains bearish and the pair has traded to a fresh cycle low today.
  • The recent breach of 1.2519, the Feb 5 low, strengthens a downtrend and highlights a stronger reversal with scope seen for an extension towards 1.2364, a Fibonacci retracement.
  • Data heats up next week with Eurozone flash PMI’s Tuesday and US GDP figures on Thursday. The Bank of Japan will also meet where no policy adjustment is anticipated at the upcoming two-day meeting ending Friday.