US stocks rose sharply after Donald Trump sent a tweet about a potential trade deal. In the tweet, Trump said that the US was getting very close to a big deal with China. The tweet came at a time when the market was worried that the US would add tariffs on Chinese goods worth more than $160 billion. The market believes that the two sides could announce a deal today or on Saturday. Alternatively, the US could postpone the implementation of these tariffs. The S&P500 rose by 0.9% while the Nasdaq gained by 0.7%. The Dow Jones Industrial Average rose by 0.8%.
Sterling jumped by more than 2% as results of the snap election started to stream in. Exit polls showed that Boris Johnson’s party would have a landslide victory. The poll predicted that the party would win 368 seats, which is 50 seats more than what Theresa May got in 2017. This will be the biggest win for the Tories in more than 30 years. Johnson’s win brings hope that the country will now have a clean Brexit. It will end the stalemate that has been in Parliament since the 2017 general election.
The Japanese yen declined sharply against the USD after the country released important data. The Tankan Large non-manufacturing index declined from 21 to 20. The large manufacturing index stagnated in the fourth quarter. This was lower than last quarter’s 5. The Tankan all small industry CAPEX declined by 2.2% while the Tankan small manufacturing diffusion index declined to -12. The pair also rose in reaction to Donald Trump’s tweet on trade. These numbers came more than a week after Shinzo Abe’s government announced a new $120 billion stimulus package.
The GBP/USD pair rose to a high of 1.3465, which is the highest level since May 2018. The pair has been on an upward trend since September 9, when it was trading at 1.1957. The pair is trading above the 14-day and 28-day moving averages. The RSI has reached an overbought level of 81 while the signal line of the MACD has continued to rise. While the pair may continue to soar, there’s a possibility of a pullback.
The EUR/USD pair rose as the market reacted to Brexit news. The pair reached a high of 1.1200, which is the highest level since August this year. The price is above the 14-day and 28-day moving averages while the RSI has moved to the overbought level. The Parabolic SAR indicator remained below the price, which is a sign that the pair will continue moving upwards. As with the GBP/USD pair, a pullback is also possible.
The USD/JPY pair rose to a high of 109.62, which was the highest level since December 2. The pair had just formed a strong triple bottom pattern as shown below. The price is above the 14-day and 28-day moving averages while the RSI has moved above the overbought level of 70. The pair may continue to rise, with the next target being the resistance level of 109.722.