Dollar remains steady in early US session despite disappointing NY state manufacturing report. The Empire State Manufacturing Survey showed significantly weaker growth in January, with a reading of 9.1 comparing to prior month's 22.2 and expectation of 20. The 13.1 point fall was the largest month-to-month drop since May 05. The details of the report were weak as well, with new orders and shipments both fell this month, down from 10.3 to 22.5 and 27.6 to 16.1 respectively. Employment index also weakened from 18.6 to 6.9. However, price paid index rose from 28.1 to 35.1, suggesting price pressures are still a concern in the New York state.
Earlier today, both Sterling and Euro were boosted mildly after solid data. CPI inflation continues to accelerate in UK in Dec, with headline CPI rising 0.6% mom, 3.0% yoy, still much higher than BoE's target rate of 2.0% and being highest since 1997. Retail price index was also strong, posting 0.8% mom, 4.4% yoy gain. With inflation at the edge of BoE's limit (2% plus a percent point tolerance band), market will continue to price in further rate hike from BoE this year.
The ZEW Index of Economic Sentiment for Germany improved markedly in Jan, hitting a reading of -3.6 following a reading of -19.0 in Dec. The current conditions component also continues to improve, hitting 70.6 in Jan from a revised reading of 63.5 in Dec.
Bank of Canada keep rates unchanged at 4.25% as widely expected.
USD/JPY
Daily Pivots: (S1) 120.13; (P) 120.35; (R1) 120.65;
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USD/JPY edges marginally higher to 120.75 but upside momentum is unconvincing with 4 hours MACD stays below signal line. Nevertheless, intraday bias will still be on the upside as long as USD/JPY stays above 120.04 minor support and further rise should be seen towards next upside target of 121.38 resistance (05 high). Below 120.04 again will indicate USD/JPY is still bounded in consolidative trading and risk further pull back to 4 hours 55 EMA (now at 119.69). But downside should be contained above 119.02 cluster support (61.8% retracement of 117.96 to 120.71 at 119.01) and bring another rally.
On the downside, break of 119.02 cluster support will indicate the rise from 114.41 has possibly completed. Focus will then be on 117.96 support and break will encourage deeper correction.
In the bigger picture, sustained break of 119.86 resistance confirmed that whole rally from 108.99 has resumed for 121.38 resistance As discussed before, fall from 121.38 to 108.99, with its three wave nature, should either represent the correction to whole year long up trend from 101.65 to 121.38, or part of such correction. That is, the medium term rally from 108.99 is either resumption of the whole up trend from 101.65 or a rising leg of consolidation pattern that started at 121.38. Favor is still in the former case as long as USD/JPY stays above 114.41 support or before sign of reversal.
Also, note that the current rally has pushed USD/JPY above multi-year falling trend line (147.68 to 135.20, now at 117.65) again. Sustained break of 121.38 resistance will confirm that whole up trend from 101.65 has resumed.
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY) here.
Shing-Ip Tsui is the founder and CEO of
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