Market refocuses to US CPI rates

The USD edged higher against its counterparts on Friday as some degree of uncertainty about the US CPI rates for January, which are to be released tomorrow, seems to remain and puzzles market participants. It should be noted that the preliminary University of Michigan consumer sentiment indicator for February was on the rise, which may have provided also some slight support for the greenback as it would imply a greater degree of optimism on behalf of the average US consumer. North of the US border, the CAD rallied against the USD as January’s employment data were surprisingly better than expected, allowing for the market to expect that BoC’s hawkishness is to be maintained. Across the Atlantic, the release of the UK GDP rates for Q4 and especially for December on a month-on-month basis may be worrying pound traders given the wide contraction of the UK economy for the last month of the past year. Pound traders are expected to be quite busy this week as a number of high-impact financial data are due out and could shake the pound. Across the continents, the Yen weakened against the USD on Friday and during today’s Asian session, as the expected new BoJ Governor Ueda is not expected to proceed with a radical overhaul of the bank’s ultra-loose monetary policy. Overall, today in the European and American session, a more easy-going mood is anticipated and we expect fundamentals to take over, given the low number of high-impact financial releases stemming from Europe and North America, keeping market volatility relatively contained.

USD/JPY edged higher since Friday, breaking the 131.40 (S1) resistance line, now turned to support. We tend see the case for the pair to rise further in which case we may see USD/JPY approaching if not breaching the 134.80 (R1) resistance line. Should the bears take over we may see the pair breaking the 131.40 (S1) support line and aim for the 128.60 (S2) support level.

AUD/USD edged lower approaching the 0.6900 (S1) support line. We see the case for the pair to drop lower, breaking the 0.6900 (S1) support line and aim for the 0.6800 (S2) support level, given also that the RSI indicator has dropped below the reading of 50, yet we have to note that the are some stabilisation signs which could keep the pair afloat. Should the bulls take over we note as the next possible target the 0.7010 (R1) resistance line.   

Other highlights for the day:

In an easy-going Monday, we note in the European session Switzerland’s CPI rates for January and in the American session on the monetary front, Dallas Fed President Logan, Philadelphia Fed President Harker and NY Fed President Williams are scheduled to speak. During Tuesday’s Asian session, we note from Australia the release of the consumer sentiment for February as well as the Business conditions and Business optimism indicators for January, while the highlight is expected to be Japan’s GDP rate for Q4.

As for the rest of the week

On Tuesday, we get UK’s employment data for December, Norway’s and Eurozone’s GDP rates for Q4, while the highlight of the day is expected to be the US CPI rates for January, which could set the tone for broader market expectations. On Wednesday we get UK’s CPI rates for January, Eurozone’s industrial production for December and the US retail sales growth rate for January. On Thursday we note from Japan the release of the trade data for January and the machinery orders growth rate for December, while from Australia we get January’s employment data and in the American session from the US we note the release of the Philly Fed Business index for February, the weekly initial jobless claims figure and January’s PPI rates. Finally, on an easy-going Friday, we note the release of the UK retail sales growth rate for January.

USD/JPY H4 Chart

Support: 131.40 (S1), 128.60 (S2), 126.40 (S3)

Resistance: 134.80 (R1), 138.15 (R2), 140.60 (R3)

AUD/USD H4 Chart

Support: 0.6900 (S1), 0.6800 (S2), 0.6720

Resistance: 0.7010 (R1), 0.7125 (R2), 0.7265 (R3)

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