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FOREX: USD Index Ending on Front Foot Amid Trump/Xi Headline Induced Volatility

FOREX
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  • Volatility in FX markets on Friday was stoked by headlines surrounding a meeting between President-Elect Trump and China President Xi. Descriptions of a positive tone for China/US relations provided a boost for the Chinese Yuan. USDCNH fell from around 7.3580 to 7.3330 very quickly, before then stabilising ~7.3450 ahead of the close.
  • EURJPY had the most impressive move following the news and the more optimistic risk sentiment. After oscillating around the psychological pivot of 160.00, the pair rose a little over 100 pips to a 161.01 high, which coincided with EURUSD having a sharp move higher from 1.0265 to 1.0330 in short order.
  • Since then, the US dollar has traded on the front foot, and the USD index is tracking close to session highs around 109.30, and only down a moderate 30 pips on the week. The bullish trend for the greenback remains broadly intact as President-Elect Trump’s inauguration swiftly approaches.
  • This dynamic led USDJPY back above 156.00 into the close, up 0.65% on the day. The 50-day EMA had been touted as an important technical level for the pair, and this average managed to support USDJPY well overnight. The pair briefly tested the post US data highs from Thursday at 156.35, having recovered ~135 pips from the Friday APAC lows.
  • GBPUSD underperformance stands out on Friday, registering a daily low of 1.2161 on the back of weaker-than-expected UK retail sales. These followed yesterday's disappointing activity data and should, on the margin, underpin ongoing UK growth / fiscal concerns. 
  • On Monday, US President-elect Donald Trump will be sworn in as the 47th President of the United States. The market could experience significant turbulence if Trump follows through with plans to sign up to 100 executive orders on Day 1. Focus will also be on next week’s BOJ meeting.
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  • Volatility in FX markets on Friday was stoked by headlines surrounding a meeting between President-Elect Trump and China President Xi. Descriptions of a positive tone for China/US relations provided a boost for the Chinese Yuan. USDCNH fell from around 7.3580 to 7.3330 very quickly, before then stabilising ~7.3450 ahead of the close.
  • EURJPY had the most impressive move following the news and the more optimistic risk sentiment. After oscillating around the psychological pivot of 160.00, the pair rose a little over 100 pips to a 161.01 high, which coincided with EURUSD having a sharp move higher from 1.0265 to 1.0330 in short order.
  • Since then, the US dollar has traded on the front foot, and the USD index is tracking close to session highs around 109.30, and only down a moderate 30 pips on the week. The bullish trend for the greenback remains broadly intact as President-Elect Trump’s inauguration swiftly approaches.
  • This dynamic led USDJPY back above 156.00 into the close, up 0.65% on the day. The 50-day EMA had been touted as an important technical level for the pair, and this average managed to support USDJPY well overnight. The pair briefly tested the post US data highs from Thursday at 156.35, having recovered ~135 pips from the Friday APAC lows.
  • GBPUSD underperformance stands out on Friday, registering a daily low of 1.2161 on the back of weaker-than-expected UK retail sales. These followed yesterday's disappointing activity data and should, on the margin, underpin ongoing UK growth / fiscal concerns. 
  • On Monday, US President-elect Donald Trump will be sworn in as the 47th President of the United States. The market could experience significant turbulence if Trump follows through with plans to sign up to 100 executive orders on Day 1. Focus will also be on next week’s BOJ meeting.