Dollar Recovers on Profit Taking, Stays the Weakest for the Week

After initial selloff, dollar regains some growth in early US session. Nonetheless, that’s more about pre-weekend profit taking. The greenback is still trading as the weakest one for the week, followed by the Loonie. Yen continues to trade as the strongest one and is picking up some momentum against Europeans. Released from US, housing starts rose to 1.33m annualized rate in January, building permits rose to 1.40m. Import price index rose 1.0% mom in January. Canada manufacturing sales dropped -0.3% mom in December. International securities transactions dropped CAD -1.97b in December. Released earlier, UK retail sales dropped -0.3% mom in December.

ECB Coeure: Market volatility contained to stocks only

ECB Governing Council member Benoit Coeure commented on recent market volatility. It said "so far what we see is that the adjustment has been orderly in markets and the spillover to the euro zone, the impact on the euro zone, has been largely contained to the equity market." Regarding forward guidance, Coeure reiterated the stance that our communication on monetary policy will change and we said it will be discussed in early 2018." He added "so far we have not discussed it." Meanwhile, the central bank will not raise interest rate before ending the asset purchase program.

Kuroda nomination finally confirmed

In Japan, it’s finally confirmed that Haruhiko Kuroda is nominated by the government to server a rare second term as BoJ Governor. BoJ executive director Masayoshi Amamiya and Waseda University professor Masazumi Wakatabe are nominated as the to deputies. Hiroshi Nakaso and Kikuo Iwata will be replaced as deputies when their terms expire in mid-March. With the ruling coalition holding a majority, the nominations will be easily approved by both houses.

RBA Lowe: No strong case for near term hike

RBA Governor Philip Lowe told the parliament today that the timing of any change in interest rate will "depend upon the extent and pace of progress that we make in reducing the unemployment rate and having inflation return to target." And, "as things currently stand, we expect that progress to be steady, but to be only gradual." Therefore, "the reserve bank board does not see a strong case for a near-term adjustment of monetary policy."

NZ manufacturing expands at faster pace

Business NZ manufacturing PMI rose to 55.6 in January, up from 51.2, indicating faster expansion. BNZ Senior Economist Craig Ebert noted that "while the NZ PMI has led the world for the last five years, the global PMI has now pretty much caught up. This suggests the international investment cycle is clicking into place and promises to self-sustain the global economic expansion. This should be good for manufacturing industries, New Zealand included."

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 105.78; (P) 106.39; (R1) 106.74; More…

USD/JPY recovers mildly after dipping to 105.54. Still intraday bias remains on the downside for deeper fall. Current fall is part of the pattern from 118.65 and should target 118.65 to 100% projection of 118.65 to 108.12 from 114.73 at 104.20 next. On the upside, break of 107.89 minor resistance is needed to be the first sign of short term bottoming. Otherwise, outlook will stay bearish.

In the bigger picture, current development argues that the corrective pattern from 118.65 is extending. The solid break of 61.8% retracement of 98.97 to 118.65 at 106.48. now suggests that the pattern from 125.85 high is possibly extending. Deeper fall could be seen through 98.97 key support (2016 low). This bearish case will now be favored as long as 110.47 resistance holds.

Economic Indicators Update