After being pressured for most of the week, Dollar is trying to stabilize after US President Donald Trump said he wants a strong Dollar. But so far, there is little sign of sustainable rebound yet. The greenback is still vulnerable to another selloff. The key to whether Dollar could reverse recent fortune might lie in Q4 GDP. Sterling remains one of the strongest one this week and will also look into UK GDP for more strengthen. Euro jumped overnight after ECB President Mario Draghi’s comment but there was no follow through buying.
Trump said he "wants" a strong Dollar
Trump said in a CNBC interview in Davos, Switzerland, that he wants to "see a strong dollar". He said that Treasury Secretary Steven Mnuchin’s comments earlier this week were "taken out of context". Trump added that "no. 1 I don’t like talking about it because frankly nobody should be talking about it. It should be what it is, it should also be based on the strength of the country – we are doing so well. Our country is becoming so economically strong again and strong in other ways too, by the way that the dollar is going to get stronger and stronger and ultimately I want to see a strong dollar." Dollar gained some footing after Trump but there is no sign of a reversal yet.
SNB Jordan: Forex usually focuses on fundamentals
SNB Chairman Thomas Jordan said in Davos that he didn’t believe trade war is imminent. He noted that "every time monetary policy changes somewhere, the spillovers are bigger than in the past, because the interest rate instrument is not available as it used to be." And, therefore, "maybe we should not focus on daily volatility". He added that "usually the foreign exchange market will refocus on fundamentals again and also correct again." Regarding the Swiss Franc, he said that "what we don’t look at is specific exchange rates" Ad, "we look at all the exchanges together and see what is the impact on the Swiss economy and then, if necessary, decide whether to intervene or not."
ECB maintained policy and forward guidance unchanged
Yesterday, ECB left the policy rates unchanged, with the main refinancing rate, the marginal lending rate and the deposit rate staying at 0%, 0.25% and -0.40% respectively. The pace of asset purchases also stayed unchanged at 30B euro per month until September, or beyond, if necessary. President Mario Draghi attempted to downplay speculations that the central bank would soon adjust the forward guidance, as interpreted by many following the December meeting minutes. Meanwhile, he stressed that any rate hike would be ‘well past’ the end of asset purchases. Draghi also warned of the impacts of the strong euro on growth and complained about the US for talking down the greenback at the World Economic Forum. More in Euro Rallied Further Despite Draught’s Attempt To Downplay Forward Guidance Adjustment
On the data front
Japan national CPI core was unchanged at 0.9% yoy in December. Tokyo CPI core slowed to 0.7% yoy in January. Corporate services price rose 0.8% yoy in December. Eurozone M3 will be released in European session. But main focus will be on UK Q4 GDP. Later in the day, Canada will release CPI. US will release Q4 GDP and durable orders.
USD/JPY Daily Outlook
Daily Pivots: (S1) 108.70; (P) 109.19; (R1) 109.90; More…
USD/JPY recovers after forming a temporary low at 108.49 and intraday bias is turned neutral first. At this point, deeper fall is still expected as long as 110.18 support turned resistance holds. Below 108.49 will target next fibonacci support at 106.48. Nonetheless, break of 110.18 will be the first sign of near term reversal and will turn bias back to the upside for 111.47 resistance.
In the bigger picture, current development argues that the corrective pattern from 118.65 is extending. There is risk of dropping further to 61.8% retracement of 98.97 to 118.65 at 106.48. But this level should provide strong support to contain downside and bring resumption of rise from 98.97. However, sustained break of 106.48 will now likely send USD?JPY through 98.97 to resume the corrective fall from 125.85 (2015 high).
Economic Indicators Update
| GMT | Ccy | Events | Actual | Forecast | Previous | Revised |
|---|---|---|---|---|---|---|
| 23:30 | JPY | National CPI Core Y/Y Dec | 0.90% | 0.90% | 0.90% | |
| 23:30 | JPY | Tokyo CPI Core Y/Y Jan | 0.70% | 0.80% | 0.80% | |
| 23:50 | JPY | Corporate Service Price Y/Y Dec | 0.80% | 0.80% | 0.80% | |
| 23:50 | JPY | BOJ Minutes | ||||
| 09:00 | EUR | Eurozone M3 Money Supply Y/Y Dec | 4.90% | 4.90% | ||
| 09:30 | GBP | Index of Services 3M/3M Nov | 0.40% | 0.30% | ||
| 09:30 | GBP | GDP Q/Q Q4 A | 0.40% | 0.40% | ||
| 13:30 | CAD | CPI Y/Y Dec | 1.90% | 2.10% | ||
| 13:30 | CAD | CPI Core – Trimmed Y/Y Dec | 1.80% | |||
| 13:30 | CAD | CPI Core – Common Y/Y Dec | 1.50% | |||
| 13:30 | CAD | CPI Core – Median Y/Y Dec | 1.90% | |||
| 13:30 | USD | GDP Annualized Q/Q Q4 A | 3.00% | 3.20% | ||
| 13:30 | USD | GDP Price Index Q4 A | 2.30% | 2.10% | ||
| 13:30 | USD | Durable Goods Orders Dec P | 0.90% | 1.30% | ||
| 13:30 | USD | Durables Ex Transportation Dec P | 0.60% | -0.10% |
