Yen retreats after weak Japan GDP data
The Japanese yen weakened against the US dollar after relatively weak economic numbers. According to the statistics agency, the country’s economy expanded by 2.8% in the fourth quarter, slightly below the median estimate of 4.1%. This led to an annualised expansion of 11.7%, also lower than the expected 12.7%. Capital expenditure increased by 4.3% while external demand and private consumption increased by 1.1% and 2.2%, respectively. Meanwhile, household spending dropped by 7.3% on a month-on-month basis in January. This was a worse performance than expected.
The euro declined against the US dollar ahead of the final reading of the Eurozone’s GDP numbers. Economists expect the data to show that the European economy contracted by 0.6% in the fourth quarter and by 5% on an annualised basis. They also see the employment change rising by 0.3%. The pair will also react to the latest trade numbers from Germany. Economists polled by Reuters expect the numbers to show that total imports declined by 0.5% in January while exports fell by 1.3% because of the lockdowns. This will lead to a trade surplus of more than 16.5 billion euros.
Global stocks are rebounding after falling sharply yesterday. In the United States, the Nasdaq 100 index has risen by more than 150 points after it entered a correction zone. The Dow Jones and S&P 500 indices have also gained by more than 0.50% in the futures market. This performance is partly because US Treasury yields have declined slightly, with the 10-year falling to 1.57% and the 30-year falling to 2.28%. In Europe, the FTSE 100 and DAX index futures have also bounced back.
The EUR/USD declined to a multi-month low of 1.1835. On the hourly chart, the pair is slightly below the 25-period and 15-period exponential moving averages (EMA). The signal and histogram of the MACD are also below the neutral line. It has also formed a narrow descending channel that is shown in yellow and is slightly below its upper side. Therefore, the pair may resume the downward trend as bears attempt to retest the lower side of the channel at 1.1832.
The USD/JPY pair rallied to a multi-month high of 109.15. On the four-hour chart, this price is above the 15-day and 50-day moving averages. Also, the Relative Strength Index (RSI) and the Average Directional Movement (ADX) have continued to rally. The price is also above the dots of the Parabolic SAR. While the overall trend is bullish, a short-term pullback cannot be ruled out on profit-taking.
The USD/CHF rally accelerated in the overnight session. The pair rose to a high of 0.9375, which is the highest level since July last year. On the daily chart, the pair managed to move above the important resistance level at 0.9300. The Relative Strength Index and money flow index have moved to a multi-month high. Therefore, while the pair may continue rising, there is also a possibility of a pullback.