USD’s steadies but will it last?

The USD steadied against most of its counterparts yesterday, as rather weak inflation data for January kept buyers disappointed. On a month on month basis the headline CPI rate ticked down, while the core rate decelerated to stagnation levels, both implying a retreat of inflationary pressures in the US economy for the past month. Trading was rather light given, especially during today’s Asian session given the New Year celebration holidays for China and Japan. On the monetary front we note that Fed Chairman Powell’s speech yesterday, reiterated the Fed’s promise for a loose monetary policy. The Fed Chairman’s dovish tone was evident as he stressed that the US economy is still very far from a strong jobs market and that the bank is strongly committed to doing what it can to promote employment. On the other hand, it should be noted that US stockmarkets reached new record highs before retreating somewhat yesterday. Given the Fed’s worries for the US employment market, we would not be surprised to see traders turning their attention to today’s employment data. Other than that fundamentals could take the lead.
USD/JPY maintained a sideways motion yesterday just below the 104.75 (R1), albeit it tried to break it at some point yesterday, unsuccessfully though. We maintain a bias for a sideways movement for the pair, yet the RSI indicator below our 4-hour chart is below the reading of 50 implying that the bears may have a slight advantage. Should the pair come under the selling interest of the market, we may see USD/JPY aiming for the 103.55 (S1) which provided considerable support for the pair on the 26th of January. On the flip side, should buyers have the initiative over the pair’s direction, we may see the pair breaking the 104.75 (R1) resistance line and aim for the 105.75 (R2) resistance level which marked an almost three month high on the 5th of the month reversing the pair’s upward movement.

AUD remains steady after Biden-Xi call

The Aussie tended to remain rather steady against the USD yesterday, yet got some support during today’s Asian session after a call being made between US President Biden and China’s President Xi. The call was made on the occasion of the Chinese New Lunar Year and during which Biden expressed his concerns for China’s trading practices. Headlines and analysts tend to note that the US for the time being is going to continue to maintain its current trade policy towards China, yet changes are to come. On the other hand, Chinese President Xi warned that a confrontation between the two countries could be a disaster for both nations. US President Biden on the other hand, tweeted that he would work with China when it benefits the American people. Overall, there seems to be willingness to work out their differences on both sides and that could lift hopes for an intensification of global trade and hence a quicker rebound of the global economy. Should there be a positive sentiment in the markets we may see the AUD getting some support, given its nature as a commodity currency and a close proxy for the Chinese Yuan.
AUD/USD maintained a sideways motion yesterday around the 0.7725 (S1) line, managing to float above it during today’s Asian session. We maintain a bias for a sideways moment currently for the pair, yet the RSI indicator below our 4-hour chart remains above the reading of 50, implying that the bulls may have slightly the upper hand. Also the positive divergence of the 50 moving average (green) in comparison to the 200 moving average (orange) tends to support such a notion. Should the bulls actually take command over the pair’s direction, we may see it breaking the 0.7785 (R1) resistance line, aiming for higher grounds. Should the bears be in charge, we may see the pair breaking the AUD/USD breaking the 0.7725 (S1) support line and aim for the 0.7680 (S2) support level.

Other economic highlights

Today we have a light calendar with the weekly US initial jobless claims figure standing out in the American session, while ECB’s De Guindos is scheduled to speak in the European session.

USD/JPY 4時間チャート