Economic Indicators & Central Banks:
- Markets are closed for the holiday in mainland China, Taiwan, South Korea, Indonesia, the Philippines and Vietnam.
- Treasuries declined for a 2nd straight session & Wall Street closed with small gains, as the market continues to shed expectations on Fed rate cuts ahead. The catalyst for selloff was the declines in initial and continuing jobless claims, reversing some of the recent increases and indicating the job market remain solid.
- Nikkei (JPN225) saw an uptick at Friday’s close, pulling back from a 34-year peak as investors are in a profit taking mode in this 3rd week of gains. It edged up by 0.09% to 36,897.42 after surging as high as 1.15% to 37,282.26, marking its highest level since February 1990.
- German HICP inflation was confirmed at 3.1% y/y in the final reading for January. Inflation is still far above the ECB’s target, but on a clear downtrend, and for the doves at the ECB that is enough to start weighing rate cuts.
Market Trends:
- European futures declined cautiously ahead of US inflation data, while Asia geared down for the Lunar New Year holiday.
- Australian equities remained relatively stable, while Japanese stocks displayed mixed performance, partially supported by a weaker yen.
- The Nikkei rallied 2.1%, mainland China bourses and the Hang Seng corrected again.
- SoftBank Group surged by 8.72%, extending its upward trajectory for a 2nd day following the tech investment firm’s return to profitability after 5 quarters. The rally in SoftBank Group Corp. shares was propelled by a more-than-55% surge in Arm Holdings (Arm chip design unit), in which SoftBank holds a 90% stake, after the British tech company forecasted quarterly sales and profit surpassing Wall Street expectations.
- Nissan plummeted by 12% after the company failed to meet profit estimates.
Financial Markets Performance:
- The USDIndex remained steady ahead of the annual revisions to monthly US inflation data, following last year’s revisions that raised doubts about the Federal Reserve’s progress in managing consumer prices.
- The Yen stabilized after a 0.8% decline against the USD on Thursday, triggered by comments from a BoJ deputy governor hinting at the central bank’s continued accommodative policy stance. The USDJPY broke 149 and extended to 149.49.
- NZDUSD climbed to 0.6133 along with New Zealand yields following ANZ Bank New Zealand Ltd.’s forecast of 2 more interest rate hikes by the RBNZ this year.
- USOIL broke $76, eyes on $80 resistance level.
- Bitcoin spiked to 1-month high above $46,000, with historical data indicating positive returns post-Lunar New Year holidays, averaging over 10% in 10-day returns since 2014.
- Ether, Solana and Cardano also pushed upward.
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Andria Pichidi
Market Analyst
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Breaking the Resistance: Yen, Oil, and Bitcoin Face Off in Anticipation of US Inflation Week
As the global economy continues to recover from the effects of the COVID-19 pandemic, all eyes are on the United States this week as it releases its latest inflation data. This data, which measures the rate of increase in consumer prices, has the potential to greatly impact the financial markets, and three major players are gearing up for the challenge of breaking through resistance in preparation for these numbers: the Japanese Yen, Oil, and Bitcoin.
With the US Federal Reserve recently signaling a potential shift in its policies towards inflation, the upcoming release of this data could have significant implications for the global financial landscape. In this article, we will explore how the Japanese Yen, Oil, and Bitcoin are preparing for this inflation showdown and what it could mean for traders and investors.
The Japanese Yen: A Safe Haven Against Inflation
When it comes to trading in times of uncertainty, the Japanese Yen has long been considered a safe haven currency. This is due to Japan’s relatively stable economy, strong manufacturing sector, and low levels of inflation. In fact, the country has been struggling with deflation for years, which has driven investors towards the Yen as a safe store of value.
However, with the US economy showing signs of strong recovery and possible inflationary pressures, the Yen is facing a tough challenge in maintaining its strength. In anticipation of the US inflation data, the Yen has been trading near a nine-month low against the US dollar, as investors brace for the potential impact these numbers could have on the global economy.
In addition to the US data, the Yen is also closely watching the situation in its neighboring country, China. With China’s economy starting to show signs of slowing down, this could also have a knock-on effect on the Yen’s strength and its ability to resist inflation. Traders and investors in the Yen will need to closely monitor both the US and China’s inflation data in order to make informed decisions in the coming weeks.
Oil: Riding the Wave of Economic Recovery
As vaccination rates rise and lockdown restrictions ease, the global economy is showing signs of bouncing back from the pandemic-induced downturn. This has translated into a surge in demand for oil, with prices hitting multi-year highs in recent months.
However, with the US Federal Reserve potentially raising interest rates in response to rising inflation, this could put a halt to the oil market’s upward momentum. Higher interest rates typically lead to a stronger US dollar, which could make oil, which is priced in USD, more expensive for international buyers.
In addition, concerns over a possible increase in oil production by major oil-producing countries could also put downward pressure on prices. With the OPEC+ group currently in talks to potentially increase output, the market is closely watching how this could impact supply and demand dynamics.
All in all, oil is facing resistance from both internal and external factors as it prepares for the US inflation data release. Traders and investors will need to closely monitor the OPEC+ meetings and any potential shift in the US interest rate landscape in order to make informed decisions about their positions in this market.
Bitcoin: The Ultimate Hedge Against Inflation?
In recent years, Bitcoin has emerged as a major player in the financial world, drawing the attention of both mainstream investors and retail traders. With its decentralized nature and limited supply, many see Bitcoin as a hedge against inflation and a potential safe haven asset.
As the US prepares to release its latest inflation data, Bitcoin is also facing a key resistance point in its price chart. After reaching an all-time high of nearly $65,000 in April, Bitcoin has since faced a steep decline, with prices hovering around $30-40,000 for the past few weeks. The upcoming inflation data could be a catalyst for a breakout in either direction, making it a critical time for traders to closely monitor this market.
One factor in particular that could influence Bitcoin’s reaction to the US inflation data is the recent increase in institutional adoption. As more companies and institutions begin to invest in Bitcoin, it could be seen as a sign of confidence in the cryptocurrency’s ability to withstand inflationary pressures. This could help to drive prices higher if the inflation data is favorable, or provide a cushion if the data is negative.
Practical Tips and Case Studies
Ultimately, the outcome of the US inflation data release could have a wide-reaching impact on the global economy and financial markets. Traders and investors will need to closely monitor the data and its implications on the Japanese Yen, Oil, and Bitcoin in order to make informed decisions about their positions in these markets.
For traders looking to capitalize on potential market movements, it is important to have a solid understanding of risk management strategies and to use technical analysis to identify key support and resistance levels for these assets. Case studies from previous inflation data releases can provide valuable insights and patterns to help guide trading strategies.
First-hand experiences and lessons learned from seasoned traders can also provide valuable guidance for navigating these uncertain times and making sound investment decisions.
In conclusion, the US inflation data release this week has the potential to be a major market mover for the Japanese Yen, Oil, and Bitcoin. Traders and investors will need to closely monitor all relevant economic data and market developments in order to break through resistances and stay ahead of potential volatility. With proper risk management and a sound understanding of market dynamics, traders can navigate these uncertain times and find opportunities for success.
