A potential trade opportunity in a more optimistic risk environment
Risk sentiment is boosted by the news that Boris Johnson's Conservative party has won the UK election. In addition, market players are hoping for the announcement of a phase 1 trade deal between the United States and China after Donald Trump hinted on such a possibility in his tweet on Thursday.
CNY/JPY is a good proxy for traders' optimism. The technical setup for it is also quite interesting. The uptrend is in place since the end of August. Recently the pair formed a bullish flag, while Thursday's close above the 200-day MA (15.65) solidified the position of buyers.
On Friday, the pair opened with a gap up above the 50-week MA (15.76) and then corrected down. The return above this level will open the way up to 15.915 (61.8% Fibonacci of the April-August decline). A fundamental shift in sentiment may boost the rate to even higher, to 16.20 (the resistance line of the longer-term downtrend). If, however, it happens that the cheerfulness was premature, the fall below 15.65 will bring the pair down to 15.55.
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