The 2020 version of the annual meetings of the Chinese Parliament has kicked off. Traditionally held every March, this year’s sessions are starting two months later than normal as the country battled the coronavirus outbreak. The Chinese Parliament is made up of handpicked representatives that form the National People’s Congress (NPC), and the largely-ceremonial Chinese People’s Political Consultative Conference (CPPCC). The meetings discuss political and economic policy direction for China.
A significant event that takes place at this meeting is the announcement of China’s GDP forecast. This declaration tends to be a market mover for currencies with direct exposure to China’s economic and political arena. There are also likely to be several major economic policy pronouncements as the Chinese government seeks to get the economy back on track.
However, this year’s meeting also takes place against the backdrop of the threat of renewed economic sanctions on China by the US over the former’s handling of the coronavirus outbreak. The US has accused China of an elaborate cover-up and has called for investigations and possible compensation from China, threatening new sanctions also.
But a fiery response has come from the Speaker of the Chinese Parliament, Zhang Yesui. Comments credited to the Global Times on Thursday quote Yesui as saying:
“China never starts trouble and never flinches when trouble comes its way… China will firmly defend its interests if the US does things that undermine China’s core interests.”
These comments look set to have set the stage for a week of possible risk-on/risk-off sentiment plays that may affect compliant currencies.
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Outlook for USDJPY
USDJPY may be susceptible to risk sentiment plays on pronouncements from the NPC/CPPCC meetings. Presently, the pair trades within a rising wedge pattern, but upside on today’s candle is limited by the resistance at 107.82. This resistance must be breached for the pair to continue its journey towards the opposing wedge border.
Beyond 107.82, 108.26 or 108.42 seem to be the price targets at which the upper wedge border could serve as a resistance to further price advancement. A breakout above these points invalidates the wedge pattern, allowing the pair to aim for 109.30 and possibly 109.70.
On the flip side, a breakdown of the wedge pattern could be on the cards if price fails to breach 107.82 to the upside. This move opens the door for the pair to aim for downside targets at 107.03, 106.65 and possibly 105.75. However, price targets found at 105.75 and below are only attainable if the lower border of the larger symmetrical triangle (purple lines, better visualized on the monthly chart) is breached.
Watch for the headlines from the NPC/CPPCC meetings to see how the pair reacts. One-on-one coaching to understand how risk sentiment in the market works is available here.