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MARKETS SHRUGGING OFF GEOPOLITICAL STRAINS, DOLLAR SUFFERING

Surprisingly, despite an increase in US-China political tensions over Hong Kong and cross-Pacific trade frictions, markets appear to have shrugged off these concerns as the Stock market indices continue their rallies and show no sign of slowing down. This proves to us the markets are not at all currently corelated to the Coronanvirus Pandemic and particularly not correlated to medical metrics and the implied fiscal and monetary policies.

EARNINGS DATA MAY PUSH USD HIGHER

The US Dollar will be closely monitoring the release of a large number of large market-cap companies. These include American Express, IBM, Verizon, Tesla, Coca-Cola, AT&T, Capital One and more. Last week, JPMorgan reported record-breaking trading revenue, even though many investment banks are reportedly increasing their capital stock in anticipation of higher rate of defaults across a collection of loans.

Conversely, lower-than-expected earnings fall from these firms could be a tailwind for the US Dollar and help it recover losses it might have incurred throughout the week against currencies such is the EUR and the GBP. Financial instability could also increase USD gains as highly-leveraged companies continue to face downturns despite recent signs of economic stabilization.

The US Dollar may also fall in the week ahead against currencies such as EUR and the GBP and AUD on fizzling demand for haven-linked assets despite a rising number of Covid-19 cases worldwide. However, against the JPY, the USD is expected to rise dramatically as the JPY is also seen as a safe haven asset that will not have much demand in the days to come.

TECHNICAL OUTLOOK

We have been closely monitoring the USDJPY pair on the H1 and H4 time frames and there hasn’t been much activity as the pair has been largely stuck in a sideway range for a little while now.

Interestingly however, a head and shoulder’s pattern has emerged perfectly on the H1 chart and we are now close to breaking above the Neckline level of 107.420.

As soon as we have broken above 107.420, we should then expect to see a quick and an aggressive move up all the way toward 108.952.

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