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CAD/JPY probably in upside acceleration, targeting 85 projection level

    By
    ActionForex.com
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    CAD/JPY continued it’s uptrend, on the back on strong oil price and risk-on sentiments. 81.91 key medium term resistance is finally considered firmly taken out, while rise from 72.80 resumed. The solid support from rising 55 day EMA is clearly bullish. At the same time, daily MACD also suggests that the cross is building up side momentum for some acceleration.

    Next short to medium term target is 100% projection of 74.76 to 91.91 from 77.91 at 85.06. Also, note that the down trend from 91.62 (2017 high) should have completed at 73.80. Sustained break of 84.74 structural resistance could open up long term rise towards 91.62.

    WTI continues up trend on supply cut and recovery hope, on track to 58.26

      By
      ActionForex.com
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      WTI crude oil’s up trend continues and hits as high as 57.37 so far. Oil is now back at pre-pandemic level, partly supported by Saudi Arabia’s move on extra supply cuts in February and March. Traders are also betting on a strong recovery ahead with mass vaccine rolls out.

      WTI is on track to 100% projection of 47.24 to 53.92 from 51.58 at 58.26. Reaction to this projection level will indicate the underlying momentum for further upside acceleration. Sustained break would likely bring even quicker rally to 161.8% projection at 62.38.

      Break of 56.38 minor support will bring some consolidations. But wouldn’t be any change in the up trend as long as 53.92 resistance turned support holds.

      Fitch affirmed Japan’s rating at A with negative outlook

        By
        ActionForex.com
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        Fitch affirmed Japan’s sovereign credit rating at “A”, with a “negative outlook”. The rating agency said that “balance the strengths of an advanced and wealthy economy, with correspondingly robust governance standards and public institutions, against weak medium-term growth prospects and very high public debt.”

        On the one hand, “strong external finances are underpinned by a persistent current account surplus, a large net external creditor position, and the yen’s reserve currency status.” But the negative outlook was retained, “given continued downside risks to the macroeconomic and fiscal outlook from the coronavirus shock.”

        Also, Fitch expected BoJ to maintain the currency monetary policy stance over the coming year. “The BOJ’s policies entail longer-term risks to the central bank’s balance sheet, particularly the purchase of ETFs and fluctuations in underlying equity prices,” it added.

        US Yellen: A long way to dig out the deep hole in job market

          By
          ActionForex.com
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          US Treasury Secretary Janet Yellen told said over the weekend the job market is “stalling”. “We’re in a deep hole with respect to the job market and a long way to dig out,” she added. It could take until 2025 for the US market to recovery without adequate support. But the administration’s USD 1.9T stimulus “will generate will create demand for workers.”

          “As Treasury secretary, I have to worry about all of the risks to the economy,” Yellen added. “And the most important risk is that we leave workers and communities scarred by the pandemic and the economic toll that it’s taken, that we don’t do enough to address the pandemic and the public health issues, that we don’t get our kids back to school.”

          Canada employment dropped -213k in Jan, unemployment rate surged to 9.4%

            By
            ActionForex.com
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            Canada employment dropped -213k, or -2.12% in January, much worse than expectation of -43.5k. “Losses were entirely in part-time work and were concentrated in the Quebec and Ontario retail trade sectors.”

            Unemployment rate surged to 9.4%, well above expectation of 8.9%. That’s also the higest level since August 2020.

            Full release here.

            US non-farm payroll rose only 49k in Jan, but unemployment rate dropped to 6.3%

              By
              ActionForex.com
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              US non-farm payroll employment rose only 49k in January, well below expectation of 85k. “Notable job gains in professional and business services and in both public and private education were offset by losses in leisure and hospitality, in retail trade, in health care, and in transportation and warehousing.”

              However, unemployment rate dropped to 6.3%, down from 6.7%, much better than expectation of 6.7%. Number of unemployed persons dropped to 10.1 million. Participation rate was about unchanged at 61.4%. Average hourly earnings rose 0.2% mom, below expectation of 0.3% mom.

              Full release here.

              BoE Broadbent: Recovery will be linked to vaccine rollout and people’s cautiousness

                By
                ActionForex.com
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                BoE Deputy Governor Ben Broadbent said the strong economic growth this year will be a “function of lower starting point last year”. Recovery will be linked to vaccine rollout and how cautious people are going forward. Nevertheless, unemployment rate will very like go out when furlough scheme ends. Also, tight international borders would be negative for both the supply and demand side of the economy.

                He also noted that it’s not unusual for banks to need time to prepare for negative interest rates. ECB had similar preparation time for negative rates, even though the UK is in a difference place to ECB in 2014 regarding inflation.

                Dollar index eyes 91.74 resistance as NFP awaited

                  By
                  ActionForex.com
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                  Dollar is currently trading as the strongest one for the week and stays firm, as focus turns to non-farm payrolls report from the US. Markets are expecting 85k job growth in January, while unemployment rate would stay at 6.7%.

                  Looking at some employment related data, ADP private job growth surprised well to the upside with 174k. ISM manufacturing employment rose modestly from 51.7 to 52.6. ISM services employment, however, staged an impressive turn around, rose form 48.7 to 55.2. Four-week moving average of initial jobless claims, on the other hand rose 11k to 848k. All in all, there is prospect of some upside surprise in today’s NFP report.

                  Dollar index’s rally this week confirmed short term bottoming at 89.20. Immediate focus is now on 91.74 support turned resistance. Decisive break there will indicate that rise from 89.20 is at least a correction to the down trend form 102.99. In this case, we’d likely see some more upside acceleration in DXY towards 38.2% retracement of 102.99 to 89.20 at 94.46 next.

                  Australia AiG services rose to 54.2, strongest since Nov 2019

                    By
                    ActionForex.com
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                    Australia AiG Performance of Services rose to 54.2 in February, up from 52.9, highest since November 2019. Ai Group Chief Executive, Innes Willox, said: “With a considerable way to go before a full recovery can be claimed, the more convincing lift in new orders is an encouraging pointer to continuing recovery over coming months. Sales also grew strongly – in part reflecting a release of pent-up demand and higher levels of confidence and employment as the sector continued to recover.”

                    Full release here.

                    RBA Lowe: Interest rates to be low for quite a while yet

                      By
                      ActionForex.com
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                      RBA Governor Philip Lowe told a parliamentary committee that the central bank was committed to do “everything it reasonably can” to to push the unemployment rate lower and drive wages growth higher. However, even in the most optimistic scenario, inflation won’t be back to its target band before 2023.

                      “The cash rate will be maintained at 10 basis points for as long as is necessary,” Lowe added. “Interest rates are going to be low for quite a while yet.”

                      Fed George and Bostic talked down tapering QE this year

                        By
                        ActionForex.com
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                        Kansas Fed President Esther George said yesterday that the central bank was still “far away” from meeting its objectives. It’s “too soon to try to speculate about” scaling back the asset purchase program. “Until we see the path to getting past this virus, it will be difficult to make any prognosis about when that time might come.” she added.

                        Separately, Atlanta Fed President Raphael Bostic said, based on his modal economic forecasts, “that’s not my expectation” for Fed to start tapering the asset purchases at the end of this year. “But I will be open to any possibility,” he added. “And that can go in either direction. I think that’s the most important message to come out of this.”

                        US initial jobless claims dropped to 779k, continuing claims dropped to 4.6m

                          By
                          ActionForex.com
                          -

                          US initial jobless claims dropped -33k to 779k in the week ending January 30, better than expectation of 850k. Four-week moving average of initial claims dropped -1.25k to 848.3k.

                          Continuing claims dropped -193k to 4592k in the week ending January 23. Four-week moving average of continuing claims dropped -120k to 4882k.

                          Full release here.

                          GBP/CHF resumes rally as BoE didn’t want to signal setting negative rate

                            By
                            ActionForex.com
                            -

                            Sterling jumps as in the BoE minutes noted, ” the Committee was clear that it did not wish to send any signal that it intended to set a negative Bank Rate at some point in the future”.

                            Though, on balance, “it would be appropriate to start the preparations to provide the capability to do so if necessary in the future,””

                            “The MPC therefore agreed to request that the PRA should engage with PRA-regulated firms to ensure they commence preparations in order to be ready to implement a negative Bank Rate at any point after six months,” the minutes added.

                            GBP/CHF resumes recent rise after BoE and hits as high as 1.2318 so far. Further rally is expected as long as 1.2232 minor support holds. Current rise is seen as resuming whole medium term rebound from 1.1102, as consolidation from 1.2259 has completed at 1.1583. Next target is 61.8% projection of 1.1102 to 1.2259 from 1.1683 at 1.2398. Firm break there would bring upside acceleration to 100% projection at 1.2840.

                            BoE downgrades 2021 GDP forecasts, upgrades 2022

                              By
                              ActionForex.com
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                              In BoE’s economic projections, based on assumption of constant interest rate at 0.1%, GDP is seen as growing 5% in 2021 (revised down from November forecast of 7.25%), 7.25% in 2022 (revised up from 6.25%), and 1.25% in 2023 (revised down from 1.75%.

                              Unemployment rate was forecast to be at 6.5% in 2021 (revised down from 6.34%), 5% in 2022 (unchanged) and 4.50% in 2023 (revised up from 4.25%).

                              CPI inflation was projected to be 2 2% in 2021 (unchanged), 2.25% in 2022 (revised up from 2%), and 2% in 2023 (unchanged).

                              BoE’s Monetary Policy Report.

                              BoE stands pat, expects GDP to recover rapidly towards pre-Covid levels over 2021

                                By
                                ActionForex.com
                                -

                                BoE kept monetary policy unchanged as widely expected. Bate Rate is held at 0.10%. Total target stock of asset purchases also stayed at GBP 895B. Both decisions were made with unanimous votes.

                                The central bank pledged that, “if the outlook for inflation weakens, the Committee stands ready to take whatever additional action is necessary to achieve its remit.”

                                Also, “the Committee does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably.”

                                BoE expected GDP to “recover rapidly towards pre-Covid levels over 2021”. As for inflation, CPI is projected “to be close to 2% over the second and third years of the forecast period”.

                                Outlook for the economy remains “unusually uncertain”, depending on the “evolution of the pandemic, measures taken to protect public health, and how households, businesses and financial markets respond to these developments.”

                                Full statement here.

                                Eurozone retail sales rose 2% mom in Dec, EU up 1.4% mom

                                  By
                                  ActionForex.com
                                  -

                                  Eurozone retail sales rose 2.0% mom in December, above expectation of 1.3% mom. The volume of retail trade increased by 5.1% mom for automotive fuels, by 1.9% mom for food, drinks and tobacco and by 1.5% mom for non-food products (within this category textile, clothing and footwear increased by 12.4% mom).

                                  EU retail sales rose 1.4% mom. Among Member States for which data are available, the highest increases in the total retail trade volume were observed in France (22.3% mom), Belgium (15.9% mom) and Ireland (11.4% mom). The largest decreases were registered in the Netherlands (-10.9% mom), Germany (-9.6% mom) and Denmark (-8.0% mom).

                                  Full release here.

                                  UK PMI construction dropped to 49.2, renewed slide in commercial work

                                    By
                                    ActionForex.com
                                    -

                                    UK PMI Construction dropped sharply to 49.2 in January, down from 54.6, missed expectation of 52.8. Markit noted the renewed down turn in commercial activity. House building recovery lost momentum. But purchase price inflation was highest since June 2018.

                                    Tim Moore, Economics Director at IHS Markit: “The latest survey highlighted that construction companies have become more cautious about the business outlook. Output rebounded quickly after stoppages on site at the start of the pandemic, but hesitancy among clients in January and worries about near-term economic conditions resulted in a dip in growth expectations for the first time in six months.”

                                    Full release here.

                                    Gold to break 1810 to resume near term decline

                                      By
                                      ActionForex.com
                                      -

                                      Current decline in gold suggests that corrective recovery from 1810.07 has completed at 1875.59 already. Focus is back on 1810.07 support. Break will resume the decline form 1959.16 for 1764.31 low and below. Though above 1844.72 minor resistance will delay the bearish case and bring more consolidations first.

                                      Overall, Gold is still extending the correction from 2075.18 high. Break of 1764.31 should be seen. But we’d expect strong support from 38.2% retracement of 1160.17 to 2075.18 at 1725.64 to contain downside to bring rebound.

                                      BoE to stand pat and discuss negative rates, some previews

                                        By
                                        ActionForex.com
                                        -

                                        BoE is widely expected to keep monetary policy unchanged today, with Bank rate held at 0.1% and asset purchase target at GBP 895B. New economic projections will also be released. But the major focus will be on rhetorics regarding negative interest rates.

                                        Governor Andrew Bailey has recently noted that it might be premature to implement negative rates. For instance he suggested that there are “lots of issues” with negative rates and policymakers have “not actually discussed” the issue yet. Chief Economist Andy Haldane expected the economy to recover at “a rate of knots” from Q2. Brexit risks were also cleared. The hurdle for the divided committee to reach a consensus on using negative rates seem too high.

                                        Here are some BoE previews:

                                        Sterling’s rally has been losing much momentum ahead of BoE rate decision, even against the weak Euro. We’ll see if more sell-on-news movement would happen after BoE affirms its stance on negative rates. In particular, break of 0.8917 minor resistance in EUR/GBP confirm short term bottoming and bring stronger rebound, probably dragging Sterling down elsewhere too.

                                        Australia NAB Business Confidence rose to 14 in Q4, strong rebound in conditions

                                          By
                                          ActionForex.com
                                          -

                                          Australia NAB Business Confidence rose to 14 in Q4, up from -8. Current Business Conditions rose to 9, up from -5. Next 3 months Business Conditions rose to 19, up from -3. Next 12 months Business Conditions rose from 0 to 24. Capex plans rose from 13 to 31. Looking at some more details, trading condition rose from 1 to 16. Profitability condition rose form -1 to 14. Employment condition rose from -14. to -1.

                                          According to Alan Oster, NAB Group Chief Economist “like many other indicators the survey shows that the economy continued to rebound strongly late in Q4. Optimism in the business sector continued to strengthen as the impacts of severe lockdowns faded”.

                                          “What is even more encouraging is the fact that businesses have seen a strong rebound in actual conditions – particularly in trading conditions and profitability. This likely reflects the huge support provided to the economy by policy makers” said Oster.

                                          Full release here.

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