USD/JPY Fundamental Daily Forecast – Traders Shrug Off BOJ, Focus Remains on Treasury Yields, Risk Sentiment

The Dollar/Yen is edging lower on Thursday amid positive risk sentiment as Asian stocks followed U.S. equities in rising to new record after Joe Biden, who has laid out plans for a $1.9 trillion pandemic relief package, was sworn in as president. The Japanese Yen traded 103.335 per dollar, stronger than levels above 104.086 against the greenback seen earlier in the trading week.

In other news, the Bank of Japan kept monetary policy unchanged on Thursday while revising up its economic forecast for next fiscal year.

At 09:40 GMT, the USD/JPY is trading 103.430, down 0.117 or -0.11%.

Bank of Japan Leaves Interest Rates Unchanged Amid Gloomy Outlook

The Bank of Japan (BOJ) left its main policy unchanged after forecasting the economy will regain more lost growth than previously thought once it starts to recover from the current state of emergency.

The BOJ held its interest rate and asset buying setting intact, according to a statement from the central bank on Thursday. All economists surveyed by Bloomberg predicted no change in the bank’s main policy levers ahead of a policy review in March.

While the bank took a gloomier view of the current state of the economy as record cases of COVID-19 keep a state of emergency in place, the BOJ concluded that weaker growth at the end of the current fiscal year and a government stimulus package announced last month will result in a stronger rebound in the year starting April.

“The growth outlook, especially for fiscal 2021, has been lifted somewhat considering the impact of the government’s economic policy,” BOJ Governor Haruhiko Kuroda said at a briefing after the board met. “There is a high degree of uncertainty, though, because the outlook can change with the trajectory of the pandemic.”

Ahead of the meeting, economists had taken the view that the bank would likely hold off on any action until it completes a review of policy at its next gathering in March. By then the economic landscape and the trajectory for the pandemic should be much clearer.

Daily Forecast

Japanese Yen traders showed little reaction to the largely in-line outcome of the meeting. There primary focus is on risk demand and Treasury yields.

In this current turned around trading environment, increased demand for riskier assets tends to drive investors into the Japanese Yen and away from the safe-haven U.S. Dollar.

However, another spike higher in U.S. Treasury yields would help boost the USD/JPY.

For a look at all of today’s economic events, check out our economic calendar.

Asia-Pacific Shares Track Wall Street Higher on Hopes of Massive New US Stimulus

The major Asia-Pacific stock indexes were mixed but mostly higher on Thursday with Hong Kong giving back a portion of this week’s stellar gains. Shares in the region rose after stocks on Wall Street soared to record highs as U.S. President Joe Biden was sworn into office.

Investors are hopeful the incoming Biden administration will be able to secure passage of a massive new stimulus package to cushion the economic damage of the COVID-19 pandemic.

Republicans in the U.S. Congress have indicated they are willing to work with President Joe Biden on his administration’s top priority, a $1.9 trillion U.S. fiscal stimulus plan, but some are opposed to the price tag. Democrats took control of the U.S. Senate on Wednesday, though they will still need Republican support to pass the program.

But after record high closes on Wall Street Wednesday, markets in Asia reflected relief over an orderly transition of power and strong expectations that U.S. stimulus will provide continued support for global assets.

Cash Market Performances

In the cash market on Thursday, Japan’s Nikkei 225 Index settled at 28756.86, up 233.60 or +0.82%. Hong Kong’s Hang Seng Index finished at 29927.76, down 34.71 or -0.12% and South Korean’s KOSPI Index closed at 3160.84, up 46.29 or +1.49%.

China’s Shanghai Index settled at 3621.26, up 38.17 or +1.07% and Australia’s S&P/ASX 200 Index finished at 6823.70, up 53.30 or +0.79%.

Hong Kong Stocks Snap 5-Day Winning Streak on Profit-Taking

Hong Kong stocks ended lower on Thursday, snapping a five-day winning streak, as investors locked in profits following sharp gains helped by strong demand from mainland investors.

Bank of Japan Leaves Interest Rates Unchanged Amid Gloomy Outlook

The Bank of Japan (BOJ) left its main policy unchanged after forecasting the economy will regain more lost growth than previously thought once it starts to recover from the current state of emergency.

The BOJ held its interest rate and asset buying setting intact, according to a statement from the central bank on Thursday. All 44 economists surveyed by Bloomberg predicted no change in the bank’s main policy levers ahead of a policy review in March.

Market participants showed scant reaction to the largely in-line outcome of the meeting, with stocks and the Japanese Yen little changed from levels before the decision.

Australia’s Unemployment Rate Drops to 6.6 Percent as 30,000 More People Find Work

Australia’s unemployment rate has dropped to 6.6 percent as 30,000 more Australians found work in the wake of the COVID-19 pandemic.

New data from the Australian Bureau of Statistics (ABS) showed that for December 2020, the number of employed people in the country was a figure 784,000 higher than it was in May.

Despite the dramatic recovery, the total number of employed people was still down year-on-year because of mass COVID-19 layoffs.

For a look at all of today’s economic events, check out our economic calendar.

The U.S Dollar Hits Reverse Ahead of the ECB Monetary Policy Decision and Press Conference

Earlier in the Day:

It’s was a relatively busy start to the day on the economic calendar this morning. The Aussie Dollar and the Japanese Yen were in action early this morning.

Later this morning, the Bank of Japan delivers its first monetary policy decision of the year. While the markets expect the BoJ to continue to leave policy unchanged, the latest wave of the pandemic will be a concern.

Vaccination rates will need to materially pick up globally, not just in Japan, to support a sustained economic recovery.

Away from the economic calendar, sentiment towards the U.S economic outlook provided direction early on. Hopes of significant fiscal support drove demand for riskier assets early on.

For the Japanese Yen

The trade surplus widened from ¥366.1bn to ¥751.0bn in December 2020. Economists had forecast a widening to ¥942.8bn.

According to the Ministry of Finance,

  • Exports rose by 2.0% in the month of December, while imports slid by 11.6%.
  • For the calendar year, 2020, exports slid by 11.1%, with imports tumbling by 13.8% to leave the trade surplus at ¥674.73bn.

By geography,

  • Exports to Asia fell by 5.1%, in spite a 2.7% increase of exports to China. Imports from Asia saw a more marked 7.5% decline in the calendar year 2020.
  • To the U.S, exports tumbled by 17.3%, with imports from the U.S sliding by 14.0%.
  • Exports to Europe slid by 15.1%, driven by sizeable declines to Germany (-14.9%) and the UK (-24.3%). Imports fell by 13.7 from Europe in the calendar year.

The Japanese Yen moved from ¥103.547 to ¥103.572upon release of the figures. At the time of writing, the Japanese Yen was down by 0.01% to ¥103.55 against the U.S Dollar.

For the Aussie Dollar

Employment figures were in focus this morning.

According to the ABS,

  • Employment rose by 50k in December, following a 90.0k increase in November, which was in line with forecasts.
  • Full employment increased by 37.5k, following an 84.2k jump in November.
  • As a result, the unemployment rate slipped from 6.8% to 6.7%, while the participation rate rose from 66.1% to 66.2%.
  • Employment finished the year 0.7% below the March level, having fallen 6.7% between March and May.
  • The recovery in employment was largely as a result of a more marked recovery in part-time employment, however.

The Aussie Dollar moved from $0.77551 to $0.77516 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.27% to $0.7768.

Elsewhere

At the time of writing, the Kiwi Dollar was up by 0.31% to $0.7194.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. There are no material stats due out of the Eurozone to provide the EUR with direction.

While there are no stats, the ECB is scheduled to deliver its first monetary policy decision of the year.

With the markets expecting the ECB to stand pat on policy, the ECB press conference will likely be the key driver.

Last week, ECB President Lagarde stood by the ECB’s growth forecasts for this year, in spite of extended lockdown measures.

We can expect plenty of discussion on price stability and the outlook during the presentation and the Q&A.

Away from the economic calendar, COVID-19 vaccine news along with the latest COVID-19 figures will provide direction.

At the time of writing, the EUR was up by 0.16% to $1.2125.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. CBI Industrial Trend Orders are due out later today.

With little else for the markets to consider, expect the stats to influence.

Ultimately, however, COVID-19 news updates will likely remain the key driver near-term.

At the time of writing, the Pound was up by 0.15% to $1.3674.

Across the Pond

It’s a busy day ahead on the economic calendar. Key stats include the weekly jobless claims figures and December’s Philly FED Manufacturing PMI.

Housing sector data for December, including building permits and housing starts are also due out. These will likely have a muted impact on risk sentiment, however.

Away from the economic calendar, President Biden’s first moves as U.S President together with COVID-19 news will also influence.

At the time of writing, the Dollar Spot Index was down by 0.15% to 90.340.

For the Loonie

It’s a quiet day on the economic data front. Economic data is limited to house price figures that will likely have a muted impact on the Loonie.

Chatter from Capitol Hill and COVID-19 news will be the key drivers on the day, with little else for the markets to consider.

At the time of writing, the Loonie was up by 0.13% to C$1.2620 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Price Forecast – US Dollar Pulls Back from 104 JPY Level.

The US dollar has pulled back a bit against the ¥104 level, an area that has been important more than once. In the short term, it looks as if the market is simply going back and forth and trying to figure out what it wants to do next. We have been in a longer term downtrend, so I think at this point in time the market probably continues to go to the downside. Short-term rally should continue to offer selling opportunities right around that ¥104 level, and I think that the resistance probably extends all the way to the ¥105 level.

Near the ¥103.50 level, I think there is a certain amount of support in that general vicinity that is worth paying attention to, especially if we can break down below there. If we do break down below there, then it is likely that we go down towards the ¥102.50 level, perhaps even lower than that. We have been in a very extended downtrend for a while, and I simply just do not see that changing in the short term.

Furthermore, if we are going to massive amounts of stimulus, one would have to think that eventually the US dollar needs to continue going lower. What makes this trade a little bit more confusing at times is the fact that it also is highly sensitive to risk appetite, so it is a little bit of a “push/pull” type of situation in the short term, and that explains a lot of the choppiness that is seen on the chart.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Technical Analysis – Rangebound as US Treasury Yields Flatten After Recent Volatility

The Dollar/Yen is trading lower on Wednesday, reversing yesterday’s rally as the choppy trade continues for a fifth straight session. The price action suggests traders are trying to decide if the risk is on or risk is off.

The five-day counter-trend rally in March 10-year U.S. Treasury notes could also be confusing traders after the recent steep rise in interest rates. Traders seem to wait for yields to make their next move before committing to a direction in the Dollar/Yen. Higher yields will widen the spread between U.S. Treasuries and Japanese Government bonds, making the U.S. Dollar a more attractive investment.

At 07:32 GMT, the USD/JPY is trading 103.745, down 0.160 or -0.15%.

In other news, on Tuesday, U.S. Treasury Secretary nominee Janet Yellen, appearing before the Senate Finance Committee, urged lawmakers to “act big” on the next coronavirus relief package, adding that the benefits outweigh the costs of a higher debt burden. This news gave risk appetite better support, helping to boost the U.S. Dollar.

Daily Swing Chart Technical Analysis

Daily USDJPY

The main trend is up according to the daily swing chart. A trade through 104.398 will signal a resumption of the uptrend. The main trend changes to down on a trade through 102.593.

The minor trend is also up. A trade through 104.198 will indicate the buying is getting stronger. The minor trend will change to down on a move through 103.524.

On the upside, resistance is a series of retracement levels at 104.135, 104.499 and 104.821.

The minor range is 102.593 to 104.398. Its 50% level at 103.496 is potential support and a trigger point for an acceleration to the downside.

Daily Swing Chart Technical Forecast

The price action the last seven sessions suggests the direction of the USD/JPY will be determined by trader reaction to a pair of 50% levels at 103.496 and 104.135.

Bearish Scenario

A sustained move under 103.496 will indicate the presence of sellers. If this move generates enough downside momentum then look for a potential acceleration with 102.593 the next major downside target.

Bullish Scenario

A sustained move over 104.135 will signal the presence of buyers. This could lead to a labored rally with initial targets coming in at 104.198, 104.398 and 104.499.

For a look at all of today’s economic events, check out our economic calendar.

Inauguration Day and the Bank of Canada Put the Greenback and the Loonie in Focus

Earlier in the Day:

It’s was a relatively busy start to the day on the economic calendar this morning. The Aussie Dollar and the PBoC were in action early this morning.

For the Aussie Dollar

The Westpac Consumer Confidence Index fell by 4.5% to 107.0 in January. In December, the Index had stood at 112.0.

According to the January report,

  • Domestic border closures and COVID-19 clusters together with a sharp rise in new COVID-19 cases overseas weighed on sentiment.
  • In spite of the fall, the index is up by 14.6% from a year ago and stood 41.5% higher than the pandemic low last April.

Looking at the key components:

  • Economic conditions next 12-months slid by 8.3%, with family finances vs a year ago falling by 7.0%.
  • In spite of the decline both were up compared with a year ago.
  • Family finances next 12-months saw a more modest 0.3% decline, with economic conditions next 5-years down by 4.5%.
  • Compared with this time last year, economic conditions next 5-years was up by 31.6%, with economic conditions next 12-months up by 21.1%.
  • Time to buy a major household item was down by 2.8%, while up by 4.8% compared with this time last year.
  • Time to buy a dwelling bucked the trend, however, rising by 0.2%. This was supported by sentiment towards house prices.
  • The House Price Expectations Index increased by 1.1%.
  • Sentiment towards unemployment was disappointing, however. The Unemployment Expectations Index was up by 11.9%, while down by 11.2% compared with a year ago.

The Aussie Dollar moved from $0.77100 to $0.77102 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.21% to $0.7711.

From China

This morning, the PBoC left loan prime rates unchanged in the central bank’s first monetary policy decision of the year.

In line with market expectations, the 1-year LPR remained unchanged at 3.85%, with the 5-year unchanged at 4.65%.

The Aussie Dollar moved from $0.77026 to $0.77072 upon announcement of the decision.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.13% to ¥103.77 against the U.S Dollar, with the Kiwi Dollar up by 0.04% to $0.7125.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. German wholesale inflation figures for December and finalized December inflation figures for the Eurozone are due out later today.

Barring marked revision from prelim Eurozone inflation figures, we don’t expect the stats to have too much influence, however.

Away from the economic calendar, COVID-19 vaccine news along with the latest COVID-19 figures and Italian politics will provide direction.

At the time of writing, the EUR was up by 0.10% to $1.2141.

For the Pound

It’s a relatively busy day ahead on the economic calendar. December inflation and wholesale inflation figures are due out of the UK later today.

A pickup in inflationary pressures should deliver support for the Pound. Wholesale inflationary pressures will also need to see a pickup, however.

While the stats will influence, the market focus will remain on the UK Government’s progress towards ending the COVID-19 pandemic.

At the time of writing, the Pound was up by 0.12% to $1.3647.

Across the Pond

It’s yet another particularly quiet day ahead on the economic calendar. There are no material stats to provide the Greenback and the broader markets with direction.

The lack of stats will leave the Greenback in the hands of chatter from Capitol Hill and COVID-19 news.

It’s Inauguration Day, so expect market focus to be on Capitol Hill. Upon entering the Oval Office, Biden is expected to begin repealing Trump policy.

At the time of writing, the Dollar Spot Index was down by 0.12% to 90.388.

For the Loonie

It’s a busy day on the economic data front. December inflation figures are due out ahead of the Bank of Canada’s first monetary policy decision of the year.

With the markets likely to hold out for the BoC rate statement and press conference, inflation figures will likely have a relatively muted impact on the Loonie.

Rising crude oil prices and optimism towards the economic outlook is likely to leave the BoC in a holding pattern. It remains to be seen, however, whether there’s any hawkish chatter.

At the time of writing, the Loonie was up by 0.11% to C$1.2721 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Price Forecast – USD Continues to Dance Around Same Figure

The US dollar has rallied initially during the trading session on Monday to reach towards the ¥104 level, which of course is an area where we have seen quite a bit of action at recently. The market certainly looks as if it is trying to build up enough momentum to continue going higher, but I think there is a significant amount of resistance that extends all the way towards the ¥105 level. It is not until we break above there that I would be bullish though, because quite frankly we are still very much in a major downtrend. With that being the case, I still prefer to sell short-term rallies, mainly due to the fact that there is so much stimulus coming out the United States.

USD/JPY Video 20.01.21

Traders will course be paying attention to whether or not we are going to see massive amounts of stimulus coming from the United States, and of course we have to decide whether or not that stimulus is going to be big enough to really weigh upon the US dollar longer term. The one problem with this trade of course is that we are extraordinarily low at this point in time, and as a result it is most certainly worth paying attention to the fact that we may get the occasional bounce. In fact, I believe that is essentially what we are looking at currently, and I do think that eventually people will start to focus on the trend yet again. With this, I think that eventually we could go as low as ¥102, but it is going to be very noisy and choppy trading.

For a look at all of today’s economic events, check out our economic calendar.

Even When She Speaks Softly, She’s Yellen

After posting the first back-to-back decline this year, the MSCI Asia Pacific Index bounced back today, led by a 2.7% gain in Hong Kong (20-month high) and a 2.6% rise in South Korea’s Kospi. The Nikkei and Taiwan’s Stock Exchange rose by more than 1%. Europe’s Dow Jones Stoxx 600 eked out a small gain yesterday and is a little higher today. The S&P 500 fell in the last two sessions for a loss of a little more than 1% and is trading about 0.6% better now.

The US 10-year is firm at 1.11%, while European bonds are little changed, and the periphery is doing better than the core. Of note, France’s 50-year bond sale was greeted with a record reception. The dollar is lower against all the major currencies, but the yen. Most emerging market currencies are firmer as well. We see the dollar’s pullback as part of the larger correction that began almost two weeks ago.. Gold recovered smartly from yesterday’s test on $1800 to return to the 200-day moving average (~$1845). February WTI reversed lower ahead of the long holiday weekend and made a marginal new low today (~$51.75) before recovering nearly a dollar.

Asia Pacific

According to the recent government data, China’s rare earth exports fell by more than a quarter to what Reuters estimates are the lowest in five years. China attributed it to weaker global demand, but there is something else going on. Yesterday, China indicated that a new mechanism will be created to decide, coordinate, and regulate the rare earth supply chain (including mining, processes, and exporting).

Rather than exporting rare earths, China’s industrial policy aims to export products containing rare earths. Move up the value-added chain. The big push now apparently is for batteries for electric vehicles. The PRC has become a net importer of rare earths that it processes. Its imports often come from mines it owns outright or has an important stake. For example, the Democratic Republic of Congo is responsible for 60% of the world’s cobalt.

There are 12 mines, and reports suggest China has a stake in each, and more than 85% of the cobalt exports are headed to China. In 2018, China provided around 80% of US rare earths, and at least one mine in the US sends the material to China to be processed.

For the past several sessions, the dollar has forged a base in the JPY103.50-JPY103.60 area and is probing the JPY104.00 level. The high from January 14 was about JPY104.20, and there is an option for roughly $360 mln at JPY104.35 that expires later today, just shy of last week’s high near JPY104.40. The Australian dollar closed below its 20-day moving average yesterday (~$0.7100) for the first time in a little more than two months.

It rebounded earlier today to $0.7725. The session high may not be in place, and we suspect there is potential toward $0.7740. The dollar’s reference rate was set at CNY6.4883, practically spot-on median expectations in the Bloomberg survey of bank models. The dollar’s four-day advance was snapped today. It has risen from almost CNY6.45 and stalled in front of CNY6.50. Faced with an increase in interbank borrowing costs for the ninth consecutive session, the PBOC injected CNY75 bln in seven-day cash via repo agreements.

It is the first injection after draining for the past six sessions, and it was the largest supply of funds this month. Some liquidity appears to be going into equities, and Chinese traders reportedly bought a record $3.4 bln of HK shares today.

Europe

Despite Germany’s social restrictions, which may be tightened and extended, business sentiment held in better than feared. The ZEW survey assessment of current conditions did not deteriorate as economists expected, though it did not really improve, either. The -66.4 reading compares with -66.5 in December. However, the expectations component rose to 61.8 from 55.0. This is the highest since September and more than anticipated.

The UK Prime Minister, who holds the rotating G7 presidency, has invited South Korea, India, and Australia to the summit in June. Moreover, reports suggest Johnson intends on getting them involved right away, which seems aggressive. It appears to be causing some consternation among other members. Germany, Japan, France, and Italy are opposed.

Italy’s Prime Minister Conte survived the vote of confidence in the Chamber of Deputies yesterday, and today’s challenge is in the Senate. The government support is thinner. However, the ability to secure a majority is somewhat easier given that Renzi’s party will abstain, though it will still be close. A defeat could see Italian bonds sell-off, but Conte will seek to broaden the coalition in the existing parliament before elections are required. This could include independents or members of center-right parties.

Two central bank intervention announcements last week caught our attention. First, Sweden’s Riksbank announced a three-year plan to purchase SEK5 bln a month. The purpose is to fund reserve purchases in SEK and pay down the SEK178 bln fx loans from the National Debt Office, which is thought to be about 70% in US dollars.

The krona was trending lower this year against both the dollar and euro, which follows the krona’s appreciation in the last few months of 2020. The impact is minor in terms of average daily turnover, estimated to be around SEK300-SEK320 bln almost equally divided between euros and dollars.

Second, the Israeli shekel soared in recent months and reached levels not seen since Q1 1996. The Bank of Israel intervened and bought $21 bln in all of 2020, with almost $4.5 bln in December alone, and still the shekel appreciated by 7.5% and nearly 3%, respectively. Businesses and investors were crying for relief. The central bank announced it would buy $30 bln this year, which triggered a powerful short-covering rally that carried the dollar from nearly ILS3.11 to almost ILS3.29 by the end of last week.

Dollar sellers emerged yesterday. It is steadier today, but in wider ranges than typically seen before. Its preannounced intervention war chest may ultimately prove insufficient to prevent shekel appreciation. The $30 bln is roughly twice its current account surplus, but foreign direct investment inflows are nearly the same size as the current account surplus. And yet, net portfolio inflows should be expected, but most importantly, how Israeli offshore investment is managed can be impactful.

Profit-taking on foreign investments or hedging the currency risk, even on a small fraction of the roughly $470 bln of foreign stocks and bonds owned by Israelis, can be a significant force rivaling the current account and direct investment-related flows.

The euro was sold a little below $1.2060 yesterday, its lowest level since December 1st. It reached $1.2130 in the European morning, and the $1.2140 area is the halfway point of last week’s decline. The bounce has left the euro’s intraday momentum indicator stretched.

We expect North American dealers will take advantage of the upticks for a better selling opportunity. Also, note there are around 4.1 bln euros of $1.2190-$1.2200 options that roll-off today. Sterling recovered a little more than a cent from yesterday’s lows (~$1.3520) to today’s high. It faces resistance near $1.3635. Tomorrow the UK reports December CPI figures, and a small uptick is expected.

America

The Senate holds the confirmation hearing for Yellen. She was the first woman to head the Federal Reserve, and she will be the first woman to lead the US Treasury, and the first person to have held both posts. It is a reflection of our age. Like the current Federal Reserve, the former Chair can be expected to recognize the need for fiscal support, while at the same time acknowledging that deficits will decline on the other side of the emergency.

The stock of debt is elevated, but it not extreme in relative or absolute terms. Despite higher debt in 2020, the servicing costs appear to have fallen. Moreover, as the economy grows faster than the level of interest rates, debt will decline as a percentage of GDP. Her remarks on the dollar will be scrutinized. To demonstrate the Biden Administration’s multilateral thrust, at this juncture, it is sufficient for Yellen to acknowledge the G7/G20 position that exchange rates are best set by the market.

At the end of last year, the US Treasury cited Switzerland and Vietnam as currency manipulators. She may be asked about those, and of course, the yuan. The new US Treasury model had the yuan a few percentage points undervalued. However, it is interesting to note that when adjusted for GDP per capita, The Economist Big Mac index of purchasing power parity has the yuan slightly (~2.5%) overvalued.

The economic calendars for North America are light today. The Treasury’s International Capital (TIC) for November will be reported today at the end of equity trading. Capital flows were volatile at the onset of the pandemic, but long-term inflows averaged $23.56 bln in the first ten months of 2020 compared with an average of $27.21 bln in the same period in 2019 and $54.32 bln in the Jan-Oct period in 2018.

The week’s highlight includes the January Philadelphia Fed survey Thursday and weekly jobless claims, as well as Friday’s preliminary PMI. Canada reports the December CPI tomorrow, shortly before the outcome of the Bank of Canada meeting is announced. Although the consensus is for a standpat outcome, a “mini-cut” cannot be ruled out given the official rhetoric. The current overnight target rate is 25 bp. The main feature for Mexico is the December unemployment figures on Thursday. Brazil’s central bank meets tomorrow, and the is little chance of a change in the 2% Selic rate.

Last Thursday, the US dollar recorded its lowest level against the Canadian dollar since April 2018 (~CAD1.2625). Between the modest greenback strength seen yesterday and expectations that Biden cancels the XL pipeline, the US dollar tested CAD1.28. It has come back offered today and is testing the CAD1.2720 area in the European morning.

It can fall a bit further in the North American session, but we look for support in the CAD1.2690 area to hold. That said, a break could signal a move toward CAD1.2640. The greenback held below MXN20.00 yesterday and reversed lower, closing a little under MXN19.69. It has taken out yesterday’s low (~MXN19.66) but struggles to maintain the downside momentum. A move above MXN19.75 would suggest a return to MXN20.00 is likely.

The dollar fell from BRL5.5160 last week, its highest level since mid-Movember, to BRL5.20. The low from earlier this month was around BRL5.12, and there is scope for a re-test.

This article was written by Marc Chandler, MarctoMarket.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Fundamental Weekly Forecast – Higher-Yields, Strong Risk Sentiment Supportive for Dollar/Yen

The Dollar/Yen posted a two-sided trade last week, but after a promising start for the bulls, the early surge fizzled and the Forex pair closed lower. Driving the price action was choppy movement in U.S. Treasury yields which started out with a surge to a 10-month high on Monday, but ended the week with a slight drift lower.

Last week, the USD/JPY settled at 103.872, down 0.094 or -0.09%.

Stabilizing U.S. Treasury yields helped lift the U.S. Dollar to its highest level since December 10 against the Japanese Yen last Monday, though investors remained bearish on the greenback’s near-term prospects.

Treasury yields had jumped about 20 basis points in the previous week on expectations that new fiscal stimulus will boost economic growth and increase Treasury supply after Democrats won control of the Senate.

The catalyst for the jump in rates were the two elections in Georgia the first week in January, which sparked the return of a relation trade. The Georgia Senate run-off opened the door to the possibility of very significant additional stimulus.

After getting an initial boost from the Treasury surge, rates peaked along with the USD/JPY and drifted lower the rest of the week. The catalyst behind the weakness was the shedding of demand for riskier assets which drove investors out of risky currencies and equities and into the safe-haven Japanese Yen.

Weak U.S. economic data and concerns over President-elect’s new stimulus package also drove investors out of riskier assets and into the Japanese Yen.

President-elect Joe Biden outlined a $1.9 trillion stimulus package proposal last Thursday, saying bold investment was needed to jump-start the economy and accelerate the distribution of vaccines to bring the coronavirus under control.

Weekly Forecast

U.S. Treasury yields fell on Friday after retail sales data came in below economists’ expectations and following President-elect Joe Biden’s proposed $1.9 trillion stimulus program. Yields had jumped ahead of Biden’s announcement late on Thursday that he hopes to jump-start the weakened U.S. economy and accelerate the distribution of vaccines to bring the coronavirus under control with new funds.

But yields came back down following the announcement and dropped further after data on Friday showed worse-than-expected retail sales for December.

This week is going to see some of the same price action until investors decide on the direction of Treasury yields.

A risk-off scenario will drive yields lower as well as the USD/JPY. If investors decide that risk is back on then look for yields to rise, taking the U.S. Dollar higher against the Japanese Yen.

For a look at all of today’s economic events, check out our economic calendar.

Economic Data Puts the EUR and the Loonie in Focus as Inauguration Day Nears

Earlier in the Day:

It’s was a relatively quiet start to the day on the economic calendar this morning. The Kiwi Dollar was in action early this morning.

For the Kiwi Dollar

Business confidence picked up in the 4th quarter of 2020.

According to the NZIER Quarterly Report,

  • A net 16% of businesses expect a deterioration in general economic conditions over the coming months. This was lower than the 38% in the previous quarter and well below the 68% in March 2020.
  • The building sector delivered strong optimism, while other sectors saw some improvement.
  • Away from the construction sector, businesses were reportedly still cautious about general economic conditions ahead.
  • While demand has improved, firms are still finding it difficult to pass on rising costs by raising prices.
  • Despite resulting weak profitability, increased certainty about the outlook supported hiring and investment.
  • A net 15% of firms are planning to hire in the next quarter, with a net 10% planning to invest in plant and machinery.

The Kiwi Dollar moved from $0.71122 to $0.71118 upon release of the figures that preceded retail sales figures.

In December, electronic card retail sales rose by 3.5% compared with December 2019. In November, sales had increased by 1.4%, year-on-year.

According to NZ Stats,

  • Spending on groceries, furniture, and electronics drove sales, while accommodation and fuel spending dragged.
  • Retail spending rose in 4 of the 6 industries in December 2020 compared with December 2019.
  • Consumables had the largest retail sector increase, rising by 7.5%, followed by spending on durables, which increased by 6.7%.
  • Spending on eating out increased by a relatively modest 1.8%. In spite of containment measures, domestic tourism delivered support.
  • By contrast, spending on hotels, motels, and other accommodation was down by 32% due to a lack of international tourists.

The Kiwi Dollar moved from $0.71120 to $0.71051 upon release of the figures. At the time of writing, the Kiwi Dollar up by 0.25% to $0.7128.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.02% to ¥103.71 against the U.S Dollar, while the Aussie Dollar was up by 0.22% to $0.7698.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. Finalized December inflation figures from Germany and ZEW economic sentiment figures for Germany and the Eurozone are due out.

Expect Germany’s ZEW Economic Sentiment figure for January to be the key driver.

Away from the economic calendar, COVID-19 vaccine news along with the latest COVID-19 figures will also influence.

On the political front, the Italian government faces a Senate vote later today that will decide Conte’s fate. On Monday, the Chamber of Deputies voted in favor of Conte’s government following the coalition breakdown.

A political crisis on top of the COVID-19 pandemic would pressure the EUR.

At the time of writing, the EUR was up by 0.09% to $1.2088.

For the Pound

It’s another quiet day ahead on the economic calendar, with no material stats due out to provide the Pound with direction.

The lack of stats will continue to leave COVID-19 news to provide direction.

At the time of writing, the Pound was up by 0.06% to $1.3595.

Across the Pond

It’s another particularly quiet day ahead on the economic calendar after Monday’s market close.

The lack of stats will leave the Greenback in the hands of chatter from Capitol Hill and COVID-19 news.

At the time of writing, the Dollar Spot Index was down by 0.06% to 90.713.

For the Loonie

It’s a relatively busy day on the economic data front. Manufacturing sales and wholesales figures for November are due out later today.

The numbers are unlikely to have a material impact on the Loonie, however.

COVID-19 news updates from China and the U.S will likely remain the key drivers on the day.

At the time of writing, the Loonie was up by 0.17% to C$1.2735 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Price Forecast – US Dollar Continues to Grind Sideways

The US dollar did very little during the trading session on Monday, as we are sitting just below the ¥104 level. This is a large, round, psychologically significant figure that has of course attract a lot of attention. Because of the fact that the market has shown itself to be so resilient, I do believe that eventually we will continue the overall downtrend. Having said that, the US dollar is oversold against almost everything, so I am also allowing for the possibility of a move towards the ¥105 level. It is not until we break above there that I believe the downtrend is over with.

USD/JPY Video 19.01.21

You can clearly see that last week there was a certain amount of support right around the ¥103.50 level, as quite frankly the interest rate differential between the two bond markets are starting to favor the United States but the difference is ever so slight at best. With that being the case, bond yields are not quite enough to drive this pair higher. Keep in mind that this pair is also highly sensitive to employment and risk appetite in general, which is a bit all over the place at this point in time.

If we were to break down below the ¥103.50 level, I think at that juncture we would go looking towards the ¥102.75 level initially, which was the most recent low. Breaking down below their opens up the possibility of a move towards the ¥101 level. In the meantime, I would expect a lot of choppy trading, which is essentially how this market has been trading for a good year or more. I still favor the downside, but I recognize that this trend has a momentum problem.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Forex Technical Analysis – Retracement Zone at 104.135 – 104.499 Capping Gains

The Dollar/Yen is inching lower early Monday on below average volume. The trade is light because of a U.S. bank holiday. The Forex pair could remain in a tight range all session with U.S. Treasury markets closed. The recent recovery in the Dollar/Yen has been fueled by a surge in Treasury yields.

At 03:58 GMT, the USD/JPY is trading 103.754, down 0.118 or -0.11%.

After surging to its highest level since December 10 last week, the USD/JPY has moved sideways to lower as Treasury yields fell from their highest level since March 2020. Risk sentiment and Treasury yields are expected to continue to exert the most influence on the Forex pair over the short-run. Investors particularly interested in the interest rate differential between U.S. Government bonds and Japanese Government bonds.

Daily USD/JPY

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 104.398 will signal a resumption of the uptrend after five sessions of sideways price action. The main trend changes to down on a move through 102.593.

The minor trend is also up. A trade though 103.524 will change the minor trend to down. This will also shift momentum to the downside.

The minor range is 102.593 to 104.938. Its 50% level at 103.496 is potential support.

The short-term range is 105.677 to 102.593. Its retracement zone at 104.135 to 104.499 is resistance. This zone stopped the rally at 104.398 on January 11.

The main range is 107.049 to 102.593. Its retracement zone at 104.821 to 105.347 is controlling the near-term direction of the USD/JPY.

Daily Swing Chart Technical Forecast

The low volume and the U.S. bank holiday could hold prices in a range on Monday with a pair of 50% levels at 103.496 and 104.135 providing support and resistance respectively. The range could also extend to the minor bottom at 103.524 and the minor top at 104.198.

Bullish Scenario

Taking out 104.135 will indicate the presence of buyers, but the rally is likely to be labored because of a series of potential resistance levels at 104.398, 104.499, 104.751, 104.761 and 104.821. The buying is likely to expand on a move over 104.821.

Bearish Scenario

Taking out 103.496 will signal the presence of sellers. This could trigger an acceleration to the downside since the nearest support is 102.593.

For a look at all of today’s economic events, check out our economic calendar.

Economic Data from China to Set the Tone for the Day

Earlier in the Day:

It’s was a quiet start to the day on the economic calendar this morning. There were no material stats to provide the markets with direction in the early hours. Later this morning, however, economic data from China will set the tone.

Key stats due out of China later this morning include 4th quarter GDP figures along with industrial production and retail sales numbers.

Unemployment and fixed asset investment figures for December are also due out but will likely have a muted impact on risk sentiment.

For the Majors

At the time of writing, the Aussie Dollar was down by 0.13% to $0.7693, with the Kiwi Dollar down by 0.11% to $0.7125.

The Japanese Yen was up by 0.06% to ¥103.79 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a quiet day ahead on the economic calendar. Finalized December inflation figures from Italy are due out.

The numbers are unlikely to influence, however.

Expect COVID-19 news and updates from Rome to influence. Political uncertainty, amidst the COVID-19 pandemic, will test EUR support. Conte will now need to avoid going back to the polls…

At the time of writing, the EUR was down by 0.06% to $1.2075.

For the Pound

It’s a quiet day ahead on the economic calendar. There are no material stats due out to provide the Pound with direction.

The lack of stats will leave COVID-19 news to provide direction. A pickup in vaccination rates should provide support, though the markets will need to see new cases begin to fall.

At the time of writing, the Pound was down by 0.07% to $1.3580.

Across the Pond

It’s a particularly quiet day ahead on the economic calendar, with the U.S markets closed today.

The lack of stats will leave the Greenback in the hands of market risk sentiment and COVID-19 news.

At the time of writing, the Dollar Spot Index was up by 0.03% to 90.800.

For the Loonie

It’s another quiet day on the economic data front. Housing start figures for December are due out later today.

The numbers are unlikely to have a material impact on the Loonie ahead of Wednesday’s monetary policy decision.

Economic data from China and COVID-19 news updates will likely be the key drivers on the day.

At the time of writing, the Loonie was down by 0.26% to C$1.2765 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – U.S Politics, Monetary Policy, Economic Data, and COVID-19 in Focus

On the Macro

It’s a busy week ahead on the economic calendar, with 73 stats in focus in the week ending 22nd January. In the week prior, 46 stats had been in focus.

For the Dollar:

It’s a quiet week ahead on the economic data front.

In a shortened week, there are no material stats to consider in the 1st half of the week.

Through Thursday, Philly FED Manufacturing PMI and weekly jobless claims figures are in focus.

With market attention to labor market conditions, expect the jobless claims to have the biggest impact. Another jump in jobless claims would likely weigh on riskier assets.

At the end of the week, prelim private sector PMI figures for January wrap things up.

Housing sector data also due out in the week will likely have a muted impact on the Dollar and risk sentiment.

The Dollar Spot Index ended the week up by 0.75% to 90.772.

For the EUR:

It’s a busy week ahead on the economic data front.

On Tuesday, January ZEW Economic Sentiment figures for Germany and the Eurozone kick things off.

Germany’s ZEW Economic Sentiment indicator will likely be the key driver.

The focus will then shift to January prelim private sector PMI numbers on Friday. France, Germany, and the Eurozone’s private sectors will be in the spotlight on.

Expect Germany’s manufacturing and the Eurozone’s composite to be the key drivers.

Finalized December inflation figures for member states and the Eurozone, also due out in the week, will likely have a muted impact on the EUR.

On the monetary policy front, the ECB is in action on Thursday. No moves are expected, leaving the press conference as the key driver. Questions on the economic outlook are likely as EU member states extend lockdown periods.

The EUR ended the week down by 1.11% to $1.2082.

For the Pound:

It’s a relatively busy week ahead on the economic calendar. Key stats include December inflation and retail sales figures, CBI industrial trend orders, and prelim January private sector PMIs.

Expect the retail sales figures and services PMI, due out on Friday, to have the greatest influence.

Away from the economic calendar, COVID-19 news will also influence. Following the vaccine approvals, the markets will be looking for new COVID-19 cases to begin abating.

On the monetary policy front, BoE Governor is scheduled to speak on Wednesday.

The Pound ended the week up by 0.16% to $1.3590.

For the Loonie:

It’s a busy week ahead on the economic calendar.

Key stats include December inflation and November retail sales figures due out on Wednesday and Friday.

Other stats include housing stats, manufacturing and wholesale sales figures. We would expect these stats to have a muted impact on the Loonie, however.

On the monetary policy front, the BoC is in action on Wednesday. With the markets expecting the BoC to hold rates steady, the rate statement and press conference will be the key drivers.

From elsewhere, economic data from China and private sector PMIs from the Eurozone and the U.S will also influence.

Expect COVID-19 news updates and chatter from Capitol Hill to also provide direction.

The Loonie ended the week down by 0.24% to C$1.2732 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a busier week on the economic data front.

Consumer sentiment figures for January are due out on Wednesday.

With consumer confidence key to fueling a pickup in consumer spending and an economic recovery, expect Aussie Dollar sensitivity to the numbers.

On Thursday, December employment figures will also provide direction ahead of retail sales figures on Friday.

Economic data from China and private sector PMI numbers from the U.S and the Eurozone will also influence.

COVID-19 news updates will remain a key driver in the week. however.

The Aussie Dollar ended the week down by 0.70% to $0.7703.

For the Kiwi Dollar:

It’s a quiet week ahead on the economic calendar.

In the 1st half of the week, 4th quarter business confidence and electronic card retail sales figures are in focus on Tuesday.

At the end of the week, Business PMI and 4th quarter inflation figures wrap things up.

Expect business confidence, retail sales, and 4th quarter inflation figures to be the key drivers.

The Kiwi Dollar ended the week down by 1.51% to $0.7133.

For the Japanese Yen:

It is a busy week ahead.

Finalized November industrial production figures get things going on Monday.

On Thursday, December trade figures will draw plenty of attention. With the COVID-19 pandemic continuing to wreak havoc, weak numbers could test market risk appetite.

At the end of the week, December inflation figures and prelim private sector PMIs for January wrap things up. The PMI numbers should have greater influence at the end of the week.

On the monetary policy front, the BoJ is in action on Thursday.

The Japanese Yen ended the week up by 0.09% to ¥103.85 against the U.S Dollar.

Out of China

It’s also a busy week ahead.

December industrial production and 4th quarter GDP numbers are due out on Monday. These will be the key stats of the week.

Other stats include fixed asset investment, retail sales, and unemployment figures. Barring dire numbers, however, these stats should have limited impact on market risk sentiment.

On Wednesday, the PBoC is also in action. However, the markets are not expecting any moves.

The Chinese Yuan ended the week down by 0.10% to CNY6.4809 against the U.S Dollar.

Geo-Politics

U.S Politics

It’s a busy week on Capitol Hill.

Inauguration Day and Trump’s impeachment will draw interest.

COVID-19

Vaccination rates and availability of vaccines will be key areas of interest.

An upward trend in vaccination rates and a downward trend on infection rates would support optimism towards an economic recovery.

Corporate Earnings

A number of big names deliver results in the week ahead.

From the U.S

These include:

Bank of America (Tues)

Goldman Sachs Group (Tues),

Netflix (Tues)

United Airlines (Wed)

Morgan Stanley (Wed)

Intel Corp. (Thurs).

The Weekly Wrap – COVID-19, Economic Data, and U.S Stimulus Weigh on Riskier Assets

The Stats

It was a relatively busy week on the economic calendar, in the week ending 15th January.

A total of 46 stats were monitored, following 61 stats from the week prior.

Of the 46 stats, 21 came in ahead forecasts, with 17 economic indicators coming up short of forecasts. There were 8 stats that were in line with forecasts in the week.

Looking at the numbers, 17 of the stats reflected an upward trend from previous figures. Of the remaining 29 stats, 23 reflected a deterioration from previous.

For the Greenback, it was a 2nd consecutive weekly gain, with the Dollar Spot Index rising by 0.75% to $90.772. In the previous week, the Dollar had risen 0.18% to 90.098.

Out of the U.S

It was a relatively busy week on the economic data front.

It was a quiet 1st half of the week, however, with stats limited to JOLTs job openings and inflation figures.

While job openings fell in November, inflation held steady, with the annual rate of core inflation holding at 1.6%.

Consumer prices rose by 0.4%, month-on-month, while core consumer prices increased by a modest 0.1%.

In a busy 2nd half of the week, key stats included the weekly jobless claims, retail sales, and consumer sentiment figures.

Jobless claims figure disappointed on Thursday, with initial jobless claims jumping from 784k to 965k.

In December, core retail sales slid by 1.4%, with retail sales falling by 0.7%, both following on from declines in November.

Consumer sentiment figures also disappointed.

According to prelim figures, the Michigan Consumer Sentiment Index fell from 80.7 to 79.2.

The downside was limited, however, supported by COVID-19 vaccines and hopes of a bipartisan shift.

The survey noted that the fall was minor when considering the sharp rise in COVID-19 related deaths, insurrection, and Trump’s impeachment.

Other stats included industrial production, NY Empire State Manufacturing, and business inventory figures. These stats had limited impact on the markets, however.

On the monetary policy front, FED Chair Powell assured the markets that rates were not going up any time soon. The FED Chair also stated that there would be no tapering of bond purchases near-term.

In the equity markets, the NASDAQ and the S&P500 slid by 1.54% and by 1.48% respectively. The Dow fell by a more modest 0.91%.

Out of the UK

It was a relatively busy week on the economic data front.

Monday through Thursday economic data was limited to BRC retail sales and RICS house price figures.

Retail sales rose by a further 4.8% in December, following a 7.7% rise in November according to the BRC.

House prices were also on an upward trend, with the RICS house price balance coming in at 65%. While down marginally from October’s 66%, upward pressure on house prices is expected to remain.

At the end of the week, industrial and manufacturing production and GDP figures were in focus.

In November, industrial production fell by 0.1%, following a 1.1% rise in October. Manufacturing production rose by 0.7%, following a 1.6% increase in October. Both fell short of forecasts.

GDP figures were not much better. In November, the economy contracted by 2.6% reversing 0.4% growth from October. On a 3-month rolling basis, the economy grew by 4.1%, slowing from a 10.2% to October.

Trade data released on Friday had a muted impact on the Pound, however. In November, the trade deficit widened from £13.29bn to £16.01bn, with the non-EU deficit widening from £5.82bn to £8.01bn.

Away from the economic calendar, a pickup in vaccination rates in the UK offset the negative sentiment towards lockdown measures.

In the week, the Pound rose by 0.16% to $1.3590. In the week prior, the Pound had fallen by 0.76% to $1.3568. A 0.72% slide on Friday pared some of the gains from earlier in the week.

The FTSE100 ended the week down by 2.00%, partially reversing a 6.39% gain from the previous week.

Out of the Eurozone

It was a relatively quiet week on the economic data front.

Industrial production and trade figures for the Eurozone, together with full year GDP numbers for Germany were in focus.

It was a mixed set of numbers for the EUR and the European majors.

For the Eurozone, industrial production jumped by 2.5% in November, following a 2.3% increase in October.

Trade data disappointed, however, with the trade surplus narrowing from €30.0bn to €25.8bn in November. Weak numbers were expected, however, following Germany’s trade data from last week.

While economic data from Germany has been impressive of late, GDP figures disappointed.

For the full year 2020, the economy contracted by 5.0%, following 0.6% growth in 2019. Economists had forecasted a 5.1% fall, however, which limited the damage.

ECB President Lagarde had spoken the day before the release of the GDP numbers. Lagarde continued to stand by the ECB’s economic forecasts, in spite of the extended lockdown measures in the EU. Lagarde pointed out that the forecasts had factored in lockdowns through the 1st quarter.

At the end of the week, finalized inflation figures for France and Spain had a muted impact on the EUR.

On the monetary policy front, the ECB’s monetary policy meeting minutes also failed to move the dial in the week.

For the week, the EUR slid by 1.11% to $1.2082. In the week prior, the EUR had risen by 0.02% to $1.2218.

For the European major indexes, it was a bearish week. The EuroStoxx600 fell by 0.81%, with the CAC40 and DAX30 sliding by 1.67% and 1.86% respectively.

A continued spike in new COVID-19 cases weighed. Across the EU, member states were reporting particularly low vaccination rates that added to the negative mood.

For the Loonie

It was a particularly quiet week on the economic data front. There were no material stats to provide the Loonie with direction.

At the start of the week, the BoC’s Business Outlook Survey failed to move the dial.

Market optimism, fueled by expectations of a sizeable U.S stimulus package, had supported crude oil prices and the Loonie.

A Friday sell-off, however, left the Loonie in the red. Concerns over the COVID-19 pandemic and market reaction to the Biden stimulus package weighed on riskier assets.

In the week ending 15th January, the Loonie fell by 0.24% to C$1.2732. In the week prior, the Loonie had risen by 0.2% to C$1.2702.

Elsewhere

It was a bearish week for the Aussie Dollar and the Kiwi Dollar, following solid gains from the previous week.

In the week ending 15th January the Aussie Dollar fell by 0.70% to $0.7703, with the Kiwi Dollar ended the week down by 1.51% to $0.7133.

For the Aussie Dollar

It was a quiet week on the economic calendar.

November retail sales, building permit, and new home loan figures were in focus in the week.

Retail sales impressed in November, supported by an easing of containment measures in Victoria. Sales jumped by 7.1%, following a 1.4% rise in October.

Building permits rose by 2.6%, following a 3.3% increase in October, with new home loans surging by 5.5%.

Home loans hit a record high mid-way through the 4th quarter.

From elsewhere, trade data from China also provided support, with imports and exports on the rise in December.

For the Kiwi Dollar

It was also a particularly quiet week on the economic calendar.

There were no material stats from New Zealand to provide the Kiwi Dollar with direction.

For the Japanese Yen

It was a relatively quiet week on the economic calendar. Core machinery orders were in focus in the week.

Month-on-month, orders rose by 1.5% in November, following October’s 17.1% surge. Economists had forecast a 6.2% slide. Year-on-year, orders were down by 11.3%, after having risen by 2.8% in October. Economists had forecast a more severe 15.4% slump.

The stats ultimately had a muted impact on the Japanese Yen, however. COVID-19 news and chatter from Capitol Hill remained key drivers in the week.

The Japanese Yen rose by 0.09% to ¥103.85 against the U.S Dollar. In the week prior, the Yen had fallen by 0.72% to ¥103.94.

Out of China

Inflation and trade data for December were in focus.

The stats were skewed to the positive, supporting riskier assets in the week.

Inflationary pressures returned at the end of the year, with consumer prices rising by 0.7%, month-on-month. In November, consumer prices had fallen by 0.6%. As a result, consumer prices were up by 0.2% year-on-year, partially reversing a 0.5% decline from November.

Wholesale deflationary pressures also eased at the end of the year.

Trade data was more impressive, however, with exports surging by 19.1% following a 21.1% jump in November. Imports increased by 6.5%, leading to a widening in the USD trade surplus from $75.4bn to $78.16bn.

While the stats were positive, a spike in new COVID-19 cases in China was a concern in the week.

In the week ending 15th January, the Chinese Yuan fell by 0.10% to CNY6.4809. In the week prior, the Yuan had risen by 0.81% to CNY6.4746.

The CSI300 slipped by 0.68%, while the Hang Seng ended the week up by 2.50%.

USD/JPY Weekly Price Forecast – US Dollar Struggling at 104 JPY

The US dollar initially rallied during the course of the week to break above the ¥104 level, only to turn around and form a bit of a shooting star. Ultimately, this is a market that I think continues to struggle going higher, mainly due to the fact that there is a massive amount of stimulus out there that will continue to cause issues. After all, if there is going to be a flood of stimulus in the United States than people will start to step away from the in fact, one of the main reasons we did see a bit of a rally during the week was the fact that we started to see interest rates rise as people demanded more yield for US bonds. However, that becomes a short-term play, and it now looks as if those yields are starting to calm down a bit.

USD/JPY Video 18.01.20

Nonetheless, the shooting star of course is a negative sign and I think there is a significant amount of resistance to be found all the way to the ¥105 level. If we were to break above there, then obviously things would change quite drastically. Until then, I think that people will be looking to fade short-term rallies, and that is part of the problem with trading the weekly chart here. Quite frankly, a huge portion of the trade has already happened, so you probably need to drill down to at least the daily timeframe if not lower. Longer-term trading will be difficult for this market even though I think that it eventually goes looking towards the ¥101 level.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Price Forecast – US Dollar Continues to Grind Sideways

The US dollar initially fell against the Japanese yen on Friday but then turned around to show signs of resiliency again. Quite frankly, this is a pair that does not seem like it has anywhere to be in the short term, and therefore I think you probably will do better off looking at other markets for trading opportunities. However, we are pressing the ¥104 level, an area that has been a bit difficult for the market to break above significantly for a while now, and of course we are sitting at roughly the 50 day EMA, which also has attracted a certain amount of attention. That being said, I think that if you can see signs of exhaustion on a short-term chart, you may have an argument for taking a trade to the downside.

USD/JPY Video 18.01.21

As far as buying the dollar against the yen is concerned, I do not really have any interest in doing so in the short term, but I do recognize that if we broke above the ¥105 level, and perhaps even the 200 day EMA which is just above there, then you might have an argument for a complete turnaround in the trend. We are at extreme lows, and quite frankly we have been lower before. In other words, I think the market is trying to figure out what to do next but with the massive amount of stimulus coming out the United States it could very well continue to weigh upon the greenback overall, and therefore continue the longer-term downtrend. As things stand now, if we do break down, we could go looking towards the ¥102.50 level.

For a look at all of today’s economic events, check out our economic calendar.

Economic Data Puts the Pound and the Dollar in the Spotlight, with COVID-19 News also in Focus

Earlier in the Day:

It’s was a quiet start to the day on the economic calendar this morning. The Aussie Dollar was in action in the early hours.

For the Aussie Dollar

Homes loans jumped by 5.5% in November, following a 0.8% rise in October. Economists had forecast a 0.5% increase.

According to the ABS,

  • The total value of new loan commitments for housing and the value of owner occupier home loan commitments hit record highs in November 2020.
  • Year-on-year, the value of new owner home loan commitments was 31.4% higher.

The Aussie Dollar moved from $0.77855 to $0.77792 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.04% to $0.7775.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.06% to ¥103.74 against the U.S Dollar, with the Kiwi Dollar up by 0.07% to $0.7216.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. November trade data for the Eurozone is due out later today.

Finalized December inflation figures for France and Spain are also due out but should have a muted impact on the EUR.

Away from the economic calendar, expect COVID-19 news to continue to influence sentiment towards the economic outlook.

At the time of writing, the EUR was down by 0.02% to $1.2153.

For the Pound

It’s a busy day ahead on the economic calendar. Key stats include industrial and manufacturing production and GDP figures for November.

Trade data is also due out but will likely have a muted impact on the Pound.

Away from the economic calendar, any COVID-19 vaccination news will also provide direction.

At the time of writing, the Pound was down by 0.01% to $1.3688.

Across the Pond

It’s a particularly busy day ahead on the economic calendar. Key stats include December retail sales and industrial production figures and prelim January consumer sentiment numbers.

Expect consumer sentiment and retail sales figures to have the greatest impact on market risk sentiment.

NY Empire State Manufacturing, wholesale inflation, and business inventory figures are also due out. We would expect these to have a muted impact on the Dollar and market risk sentiment, however.

Away from the economic calendar, expect chatter from Capitol Hill to remain a key driver.

At the time of writing, the Dollar Spot Index was up by 0.02% to 90.256.

For the Loonie

It’s another quiet day on the economic data front, with no material stats due out to provide the markets with direction.

The lack of stats will leave the Loonie in the hands of market risk sentiment on the day.

At the time of writing, the Loonie was down by 0.03% to C$1.2644 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Price Forecast – US Dollar Grinding Higher

The US dollar rallied a bit during the trading session on Thursday as we continue to see a lot of noise when it comes to the way the markets have behaved. The biggest problem with this pair right now is the fact that interest rates continue to rise in the United States, meaning that it actually drives up demand for the US dollar, despite the fact that stimulus is going to be so ridiculous. Nonetheless, there is a major downtrend in this pair still so I would not be quick to jump in and start buying.

USD/JPY Video 15.01.21

We currently trade right around the 50 day EMA, and that of course is something worth paying attention to. It is a technical indicator that a lot of people will use as dynamic support and resistance, so most likely we will see a bit of a reaction given enough time. The area between the 50 day EMA and the 200 day EMA has been a huge wall of resistance over the last year or so, so if we were to break above the 200 day EMA it would make me stand up and take notice. Until then, I would look at rallies as potential selling events, but I also need to see signs of exhaustion before getting involved. Currently, this is a market that I am essentially on the sidelines for, but I do think that we are building up momentum to break in one direction or the other, so it is most certainly worth paying attention to for a few days.

For a look at all of today’s economic events, check out our economic calendar.

Trading Currencies: With a New Year Comes a Review

Happy New Year – A time of renewal, a time of new thinking and a time of excitement for change as we look to the future (even in the time of COVID).

We like to use the New Year to ‘review’ and see if we need to ‘renew’ or ‘rethink’ our FX strategy, which is what we shall do for this week’ piece.

Differences in the Global Trading Environment between 2020 & 2021

What’s changed from 2020 to 2021?

  • New administration in Washington
  • Brexit is finally complete
  • US rates have shifted

What hasn’t?

  • COVID-19
  • Unconventional policy the world over
  • Geo-political tensions – particularly in the Pacific

2021 Forex Trend Forecast

We will be watching for reactions to these points from both the fiscal and monetary sides of policy this year but what this means for FX based on the current setting is:

USD: New administration will mean increased US fiscal stimulus, and President-elect Joe Biden has already announced that he is assembling a multitrillion-dollar relief plan that would boost stimulus payments for Americans to $2,000. The discussions of the stimulus had triggered bearishness in the currency for most of 2020, but what will happen as it becomes a real event in 2021? It probably risks creating a US ‘exception’ narrative and may lead to a rise in market discussions of the Fed tapering. Either way the USD is near ‘rock-bottom’ pricing and in the short term a snap back may be seen.

EUR: Real yields and equity sentiment remain the key drivers of the EUR, ECB remains sidelined and fiscal support is piecemeal and country specific. Over 2021 it’s likely to rise naturally. Economists at Nordea expect EUR/USD to peak to the 1.25-1.27 level during the first 6 months of 2021.

GBP: Brexit is over and the oversold GBP had snapped back with gusto to end 2020. However, post-Brexit reality is COVID, as the country is now under its third lockdown, which could cause a probable double-dip recession and a likely BoE rate cut in Feb. Bearish here.

JPY: It remains a solid defensive play. USD/JPY had weakened due to the USD’s slide, however if as expected the USD finds support, the pair will struggle to fall further, much to the relief of the BoJ, which is extended until September 2021.

AUD: RBA is out of ammo in the medium term and Asia’s thrust for copper and iron ore is driving the AUD hard. However, AUD/USD is vulnerable to a short-term pullback on a pausing USD and profit taking – medium-term outlook is bullish and short-term outlook is bearish.

Key Events to Watch in the Coming Week

  • President-elect Biden’s speech – January 15, 2021
  • Fed’s Chair Powell’s speech – January 15, 2021
  • Inauguration of Joe Biden – January 20, 2021

This article is prepared by Lucia Han from Mitrade and is for reference only. We do not represent that the material provided here is accurate, current or complete. The article content neither takes into account your personal investment objects nor your financial situation, and therefore it should not be relied upon as such. You should seek for your own advice.