FX Market Analysis – 20 February 2018 (Video)

Senior Market Analyst Craig Erlam discusses this week’s key event risks, with the most notable being the UK jobs report and BoE inflation report hearing.

Craig also gives his live analysis on EURUSD (11:04), GBPUSD (15:13), EURGBP (17:04), AUDUSD (18:36), USDCAD (20:02), GBPCAD (22:01), NZDUSD (24:47), USDJPY (25:44), GBPJPY (26:47) and EURJPY (28:24).

USD/JPY – Dollar Punches Above 107 Yen, Fed Minutes Ahead

Higher Yields Pushing Dollar Up

Intermezzo

USD/JPY – Yen Edges Lower in Thin Holiday Trade

The Japanese yen has posted slight losses in the Monday session. In North American trade, USD/JPY is trading at 106.54, up 0.23% on the day. On the release front, there are no US events, with US markets closed for Presidents’ Day. In Japan, the current account surplus jumped to JPY 0.37 trillion in January, up from JPY 0.09 trillion a month earlier. This easily  beat the estimate of JPY 0.14 trillion. On Tuesday, Japan releases Manufacturing PMI and All Industries Activity.

The US posted sharp housing and consumer confidence reports on Friday, but the dollar failed to make headway against the surging Japanese yen. Building Permits jumped to 1.40 million in January, up from 1.30 million in December. This easily beat the estimate of 1.29 million. Housing Starts followed suit and improved to 1.33 million in January, up from 1.19 million a month earlier. This was well above the forecast of 1.28 million. There was more positive news from consumer confidence, as UoM Consumer Confidence climbed to 99.9, well above the estimate of 95.4 points.

The yen enjoyed a banner week, as the currency climbed 2.5% this week. This marked the strongest weekly gain since July. Nervous investors continued to snap up the safe-haven yen, as stock markets across the globe continued to show volatility, draining risk appetite. On Friday, the dollar dropped below 106 yen for the first time since November. If the markets continue to fluctuate during the week, the yen rally could continue.

Bank of Japan Governor Harohiko Kuroda has been reappointed to another 5-year term, the first time a BoJ governor has received a second term in 60 years. The move is a clear message from the Bank that it is no rush to make any change to the massive stimulus program, a key component of Abenomics. Kuroda has made it a priority to raise inflation, but this has proven a daunting task, as inflation is still below of the BoJ’s inflation target of 2%. In this period of strong volatility in the currency markets, Kuroda’s re-election may have a calming effect on the markets. What’s next for the BoJ? With the yen continuing to rise, policymakers may contemplate further easing in order to curb the yen’s value and protect the export sector, which has improved due to stronger global demand.

 

USD/JPY Fundamentals

Sunday (February 18)

  • 18:50 Japanese Trade Balance. Estimate 0.14T. Actual 0.37T

Monday (February 19)

  • There are no Japanese or US events

Tuesday (February 20)

  • 19:30 Japanese Flash Manufacturing PMI. Estimate 55.2
  • 23:30 Japanese All Industries Activity. Estimate 0.5%

*All release times are EST

*Key events are in bold

USD/JPY for Monday, February 19, 2018

USD/JPY February 19 at 11:20 EST

Open: 106.30 High: 106.73 Low: 106.10 Close: 106.54

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
103.16 104.32 105.53 106.64 107.29 108.00

USD/JPY ticked higher in the Asian session. The pair was flat in European trade. In North American trade, the pair posted small gains but has retracted.

  • 105.53 is providing support
  • 106.64 was tested earlier in resistance and remains a weak line

Current range: 105.53 to 106.64

Further levels in both directions:

  • Below: 105.53, 104.32 and 103.16
  • Above: 106.64, 107.29, 108.00 and 109.11

OANDA’s Open Positions Ratios

In the Monday session, USD/JPY ratio is showing long positions with a majority (75%). This is indicative of trader bias towards USD/JPY continuing to move higher.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

US Dollar Rout Continues With Inflation Data in the Horizon

Safe haven flows after the stock market collapse favour JPY and CHF

The US dollar is once again on the back foot on Tuesday. The currency is softer against major pairs ahead of key US inflation data for January. The U.S. Federal Reserve along with traders will be looking at the consumer price figures for signs of higher inflation and further validations of their plans to keep raising US interest rates in 2018. The U.S. non farm payrolls (NFP) report earlier in the month boosted the USD with a positive wage growth signal at 0.3 percent monthly gain. The market will be watching the core CPI released on Wednesday, February 14 at 8:30 am EST looking for confirmation.

  • US January inflation expected to underperform
  • US Oil producers putting downward pressure on prices
  • US inflation trend to continue on Thursday with the release of the PPI



The EUR/USD gained 0.52 percent on Tuesday. The single currency is trading at 1.2355 ahead of the release of monthly inflation and retail sales data in the US. The U.S. Federal Reserve is expected to lift rates 3 or more times this year, but to do so it would need inflation in the US to pick up, as this was the biggest debate within the central bank last year. Doves within the Federal Open Market Committee (FOMC) are pushing for more patience, until inflation rises, while the hawks who lost Chair Yellen as their biggest supporter would rather raise rates sooner rather than later. The core consumer price index, the Fed pays more attention to this data point that excludes food and energy, is expected to come in at 0.2 percent. Retail sales are forecasted to have gained 0.2 percent in January, but the core reading to have advanced by 0.5 percent by removing auto sales.

The tumble in stocks prices has had a negative effect on the confidence in the US economy. The employment report released on February 2 posted higher than forecasted number of jobs and more importantly hourly wages rose by 0.3 percent. Several dollar rallies that started with a strong employment report have been cut short by disappointing inflation and retail sales data. This time around the USD has not been able to find solid footing in 2018. With a stock market correction and bond yields at four year highs inflation takes a more important role as it could solidify the case of Fed hawks and make way for a 4 rate hike scenario. The USD has been impacted by improving growth around the globe and other central banks have hiked or signalled and end to low rates cutting the lead of the U.S. Federal Reserve and reducing the attractiveness of the dollar. A higher than expected inflation figure could trigger a US currency recovery alongside a drop in the stock market as higher rates would be forthcoming. Vice versa a lower than expected consumer price gain could sink the dollar even lower as the market is already pricing in 3 rate hikes and could start reevaluating that position with weak inflationary pressures.

European politics have reached some stability with the German coalition now in place but with the upcoming Italian elections in March the boat is sure to rock. Economic fundamentals have been strong in the eurozone with Germany leading the way as usual. The gap between the U.S. Federal Reserve and the European Central Bank (ECB) is closing with regarding monetary policy. The ECB is expected to end its QE program and could even lift interest rates later this year. The week will bring minor indicator releases in Europe with the German central bank chief Jens Weidmann speaking in Frankfurt on Wednesday, February 14 at 3:00 am EST. Earlier that day the GDP figures for Germany will be released with a 0.6 percent growth expected.



The USD/JPY lost 0.84 percent in the last 24 hours. The currency pair is trading at 107.73 as the JPY has benefited from risk aversion and risk appetite moves. Usually the USD is the main beneficiary of a risk aversion move, but given some of the global uncertainty is happening in Washington and Wall Street the greenback is not the sturdiest safe haven for investors. The USD is soft ahead of inflation and retail sales data with both having to overcome concerns.

The Japanese Prime Minister Shinzo Abe is expected to reappoint Haruhiko Kuroda as the head of the Bank of Japan (BOJ) for his second term and that in itself could be a sign the central bank is ready to start dealing back some of its massive stimulus program.

Market events to watch this week:

Wednesday, February 14
8:30am USD CPI m/m
8:30am USD Core CPI m/m
8:30am USD Core Retail Sales m/m
8:30am USD Retail Sales m/m
10:30am USD Crude Oil Inventories
7:30pm AUD Employment Change
Thursday, February 15
8:30am USD PPI m/m
Friday, February 16
4:30am GBP Retail Sales m/m
8:30am USD Building Permits

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

Weekly FX Market Update – 6 February 2018 (Video)

It’s been an extremely turbulent 24 hours in the financial market with the Dow recording its largest ever daily points drop as panic set in and traders tried to work out what was triggering such a strong sell-off. Markets have stabilized a little on Tuesday but there remains some concern among traders which continues to weigh.

Senior Market Analyst Craig Erlam talks about what he thinks has triggered such a move and goes through this week’s other key events in the markets.

He also gives his live analysis on EURUSD (18:08), GBPUSD (20:02), EURGBP (22:12), AUDUSD (23:32), USDCAD (25:10), GBPCAD (27:16), NZDUSD (28:54), USDJPY (30:58), GBPJPY (32:53) and EURJPY (34:12).

DAX Recovers After Falling to 5-Month Low

Beware: FX Space is Calm, But Appearances Can Be Deceiving

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