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Market Brief
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The Office for National Statistics released figures before the London open, showing that the unemployment rate in the United Kingdom stood at 4.1% for the three months to November. This is 0.4% lower than the previous quarter and better than expected. In the Labour Market Overview, the employment rate increased by 0.2% to 75.5% compared to the previous quarter. While economic inactivity was 21.3%, which is 0.2% lower than it was before the pandemic. The number of vacancies grew by 11.4% compared to the prior trimester and reached 1,247,000 in three months to December, marking a new record.
The pound versus the US dollar is currently holding around the previous descending trendline that had acted as resistance before. I am of the opinion that as the 20 and 50 EMA cross over the 200 EMA we will then see a resumption of the GBPUSD to the upside.
The forex heatmap is mixed today though the yen is clearly the weakest of the news from Japan overnight and the CAD is the strongest as oil moves higher.
In the overnight session, Bank of Japan Governor Haruhiko Kuroda said that the Japanese economy has seen a “noticeable” improvement since the previous monetary policy meeting.
Kuroda told a press conference after the central bank kept interest rates unchanged that a rate hike is not being discussed at this point, adding that the lender is not planning to change its current monetary policy. Kuroda also commented on a weakening yen, stating that the trend is likely to have a positive impact on Japan’s economy.
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The USDJPY is finding the daily 20 EMA is acting as dynamic resistance but is making higher highs and higher lows as the uptrend looks set to continue.
Saudi Arabia retaliated against the deadly attack on petroleum facilities and an airport in the United Arab Emirates, which Houthi forces in Yemen claimed responsibility for. Crude oil futures reached levels not seen since October 2014 after the Saudi response.
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Brent has now cleared the significant resistance and is make impulsive moves higher on the back of the troubles in the middle east and at the Ukrainian border. The UK have moved self-defence weaponries into the Ukraine as fears grow of a Russian invasion.
As US Treasury yields climb higher after the Martin Luther King bank holiday, US stock futures declined, as investors waited for a fresh batch of earnings reports. The Dow, S&P 500, and Nasdaq 100 futures each declined by 0.2% and 0.5%, respectively. This week, the benchmark US 10-year yield climbed above 1.8% on expectations of interest rate hikes in the US in the very near future, with some analysts looking to next week’s FOMC meeting as a live date for the first possible hike. The consensus is for the March meeting to be the first-rate hike date after the Fed completes the asset purchase tapering. A rising interest rate environment increases the importance of earnings and business performance, according to analysts.
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The EURUSD is trading within a rising channel with price above the 20 and 50 EMA which could slow any further moves lower.
Today the German and European ZEW economic sentiment data will push the Euro forex crosses and German bund yields. The retail trader sentiment indicator on the ActivTrader platform shows the majority of traders are long the EURUSD but this is not at an extreme level.
