Macroeconomic overview

Japan’s economy grew at an annualised rate of 1.0% in October-December, posting a fourth straight quarter of expansion, led by solid exports and firmer capital expenditure. The preliminary reading for fourth-quarter GDP compared with the median estimate of 1.1% growth. It followed a revised 1.4% expansion in the prior quarter, the Cabinet Office data showed. On a quarter-on-quarter basis, GDP rose 0.2%, versus 0.3% growth expected by the market.

U.S. President Donald Trump did not discuss the currency or its strength at weekend talks with Japanese premier Shinzo Abe did likewise.

All eyes are fixed on testimony by Federal Reserve chief Janet Yellen this week after signs that other policymakers at the U.S. central bank are leaning towards more hikes in interest rates than the two currently priced in by markets. She is likely to reiterate the outlook for a few gradual hikes this year as the economy is close to the Fed’s goals. But the timing still depends on the data out in the next few months. We do not think that Yellen’s comments will support the USD.

Technical analysis

The USD/JPY corrective move extended through the cloud overnight to 114.16. We think that the USD/JPY move will be stopped in the area between two key resistance levels: 114.24 (38.2% fibo of December-February fall) and 114.52 (23.6% fibo of November-December rise).

Trading strategy

We have placed a sell order at 114.50, below an important resistance at 114.52. If our order is filled the target will be at 112.00, above February lows. Long-term outlook remains unchanged.

USD/CAD dropped on strong Canadian jobs report

Macroeconomic overview

Canada added 48.3k jobs last month, exceeding market expectations for employment growth to be unchanged.

Full-time positions increased by 15.8k. Although that was outpaced by a 32.4k increase in part-time work, investors were encouraged by the decline in the unemployment rate to 6.8%, even as the participation rate edged up.

The service sector added 42.6k jobs in January, with a 20.5k increase in the finance, insurance and real estate industry. Hiring in the transportation and warehousing, and business and support services sectors also rose.

The goods sector created just 5.6k jobs last month, with a 5.2k increase in construction. The natural resources sector added 2.5k positions.

Average hourly wages rose 1% from last January, but average weekly hours for permanent employees declined 0.6% as part-time workers saw fewer hours.

The CAD strengthened against the USD on Friday on rising oil prices and better-than-expected jobs data. Gains for the Canadian dollar came even as the greenback strengthened against a basket of major currencies.

Technical analysis

The overall structure remains bearish. The USD/CAD is still below the descending trendline. The rate is also back below 14-day exponential moving average after a short-lived corrective move in recent days.

Trading strategy

We stay near-term and long-term bearish. The target of our positions is 1.2820.

TRADING STRATEGIES SUMMARY:

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