Market News & Analysis


Top Story

Risk assets wobble - USDJPY

Last night, I sat down to update a webinar I am presenting this evening for City Index Australia on “How to hedge an equity portfolio using CFDs” along with five reasons to do so.

The last time I presented this webinar was in September 2019, a few weeks before the U.S. and China first signalled an intent to sign a trade deal. Four months later and with markets firmly in the grip of the reflation trade, there appeared to be a lack of immediate reasons to hedge.

The most likely candidates, a re-emergence of U.S. - China trade tensions, signs of excess in equity markets, anaemic global growth and geopolitical tensions ranging from Russia – NATO conflict, North Korean sabre-rattling, to Gulf tensions resulting in oil supply disruptions.

This morning two potential catalysts have sprung to light and caught traders' attention in the Asian time zone.

The first was an overnight downgrade to global growth by the IMF. Due mainly to weakness in India, the global economy is expected to grow at 3.3% in 2020, 0.1% lower than previously forecast. The growth forecast for 2021 was trimmed to 3.4%, 0.2% lower than previously forecast. Thereby bringing into question the upswing to global growth that was expected after the U.S.- China trade truce.

The second catalyst, the confirmation that a fourth person has died in China from the Coronavirus. The World Health Organization has confirmed the virus can spread from person to person and not just from animals to humans as originally hoped for. The China health commission has given the Coronavirus the same rating as the SARs virus from 17 years ago that killed 800 people and rattled markets.

With the Bank of Japan expected to maintain the status quo at their meeting this afternoon the setup in USDJPY offers traders a potentially attractive risk-reward setup should equities continue to wobble.

After breaking above recent highs 109.70 area, USDJPY has stalled ahead of the trendline resistance at 110.30 which comes from the 2015, 125.85 high. Providing USDJPY remains below resistance at 110.30 and was then to break below 109.70 (formerly resistance now support) the risks are for a decline towards the recent 107.65 low. Conversely, should USDJPY break and close above 110.30 it would allow USDJPY to extend its recovery towards 111.50.

Source Tradingview. The figures stated areas of the 21st of January 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.