Seems like groundhog day for risky assets as they keep on bouncing and going up. This week is the ceremony of the phase 1 deal signing which is where this support is coming from. Lets see if Trump can extract as much positive spin out of it as he possibly can for markets. Last weeks payrolls were a little weaker than expected but there were still signs of job growth which is what the FED would’ve been looking at. USDJPY is now trading around the high 109.’s and important resistance of 109.70/75, and with risk on the frontfoot there is a very good chance we test 110.115/20 support lies at 109.40.
EURUSD traded with a negative bias last week and was given very light support on Friday from the weaker NFP but nothing too exciting. We feel the single currency will remain in a range this week but still with a tilt to the downside, 1.1160-1.1040 should cover it. Later on the week we have IP data and GDP from Germany.
GBPUSD as we anticipated has fallen hitting a fresh 2 week low of 1.2965 this is as a result of an over long market following the Conservatives landslide win and the possibility of a rate cut becoming more real. Carney began proceedings last Thursday being very dovish on the UK economy , followed by Tenreyro on Friday saying “my indication is towards a rate cut if downside risks emerge” and finally Vlieghe on the weekend saying he’s “ready to cut interest rates if data does not improve” and that forthcoming interest rate meetings are very much live ones. Very much will depend on forthcoming data, November’s data was very bad so the market will be looking very closely at this weeks UK data of CPI and retail sales. The market now expects the BoE to cut interest rates around May, but Carney may cut even sooner to get ahead of the curve as he waits for fiscal stimulus from the Government. 1.3000/10 is now immediate resistance followed by 1.3020 and 1.3055. The danger now is the short term market gets itself short at poor levels ahead of the data and should the data come out better than expected then we should see a little relief rally which would offer better levels to sell cable. We still believe GBP goes lower and are looking for at least a test of 1.2900 with a break of this level looking at 1.2800. GBPEUR is 1.1675