Japanese yen declines after weak GDP numbers
US stocks gained yesterday, continuing a four-day streak, as investors remain hopeful about a trade deal between the United States and China. The Dow, Nasdaq, and S&P gained by 117, 6, and 8 points respectively. Today, US Secretary of the Treasury Steve Mnuchin and Trade Representative Robert Lighthizer will meet with Chinese officials to try and come up with a deal. They are also scheduled to meet with Xi Jinping. Investors are also optimistic about avoiding the government shutdown. The White House has said that the President is likely to sign the deal negotiated between the Democrats and Republicans in Congress.
The Japanese yen weakened slightly against the USD after the country’s GDP numbers. The numbers showed that the economy expanded by 1.4% in the fourth quarter. This was in line with expectations and higher than the previously-released contraction of -2.6%. On a QoQ basis, the economy expanded by 0.3%, which was lower than the expected 0.4%. The GDP external demand contracted by -0.3%, which was better than the expected -0.4%.
Traders will also focus on the euro as they receive key data from the region. Germany will release the GDP numbers, which are expected to show an annual growth of 0.9%, lower than the previously-released 1.1%. the Wholesale Price Index (WPI) for January is expected to show an increase of 0.3%. for the EU27, the GDP is expected to have grown by 1.2% in the fourth quarter. These numbers are important because investors have been concerned about the systemic weakness of the European Union.
The EUR/USD pair moved up slightly ahead of the important GDP numbers from the EU. The pair reached a high of 1.12900. On the four-hour chart, this price is still above the 21-day and 42-day EMAs. The signal line of the MACD appears to be moving higher as shown below while the accumulation and distribution indicator has continued to move lower. The pair will likely resume the downward trend but this will depend on the GDP numbers from Europe and US retail sales.
The USD/JPY pair continued the upward momentum that was started on January 3. Since then, the pair has moved up from a low of 106.4 to a high of 111.12. On the four-hour chart, the pair’s current price is above the 42-day and 21-day EMA. The upward trend has also been accompanied by a rise in RSI, which has moved to a high of 76. This is considered an overbought area. The current price is also along the 61.8% Fibonacci Retracement level. While the upward momentum could continue, it could see a retracement to the 50% Fibonacci level of 101.20.
The price of gold rose slightly in overnight trading to a high of $1310. This week, the price declined sharply from a high of $1320 and reached a low of $1304. On the hourly chart, this price is slightly lower than the 21-day and 42-day EMA. It is also above the narrow channel shown above. There is a likelihood that the XAU/USD pair will continue to rise to the important resistance level of 1315.