Manufacturing data from EU the main focus for today

The USD closed the year stronger against its counterparts supported by skyrocketing inflation, rapid interest rate increases by the Federal Reserve and persistent geopolitical risks. On the contrary US stock markets closed the year sharply lower, with the tech weighted Nasdaq100 shedding more than a third of its value and the S&P500 closing the year with one fifth of its value lost respectively. Yesterday, the International Monetary Fund made some stark comments in regards to the global economy. The managing Director Georgieva commented that the new year is going to be “tougher than the year we left behind”, as the main engines of the global economy namely the US, Europe and China, all experience weaking activity and projections foresee recessions across many other nations could weigh down global growth outlooks. The IMF projects that one third of the world will be hit by a recession in 2023. Amid illiquid conditions due to holidays the Bank of Japan once again kept Yen traders on their toes. The central bank during last week was reportedly forced to conduct further purchases of JGBs as the newly reformed 0.5% band was once again exceeded. Earlier today, in the early Asian session traders assessed news entailing that the BOJ is now actively paying more attention to inflation metrics since November’s CPI print indicated a rise to the 3.7% level its highest since 1980’s and almost two times above the 2% target. Yen as a consequence strengthened significantly since the report hinted that the central bank may be considering a pivot from its ultra-loose monetary policy stance. Today out of the Europe, Euro traders will be paying attention to the manufacturing PMI data stemming from both Germany and the Eurozone as a whole. According to estimates both figures are expected to remain unchanged at 47.4 and 47.8 for Germany and Eurozone respectively.

Should the actual figures meet the expectations we may see the Euro experience some support as the results may point out that even though manufacturing capabilities of both Germany and Eurozone as a collective, are still contracting they are contracting at a slower pace and are recovering ground, which it signifies their resilience amidst a challenging environment. Tomorrow out of China, traders will be actively looking closer for the final Caixin Manufacturing PMI figure for December which will shed more light into how the largest manufacturing powerhouse in the world in navigating a crucial period of relaxed covid 19 related measures and surging infection cases. According to estimates the figure is expected to ease to 48.8 compared to the 49.4 figure of the prior month. Should the actual figure meet expectations we may see the AUD weaken due to the intricate close ties of the two nations.

EUR/USD capitalized on the dollar’s weakness and climbed above the 1.0680 resistance level now turned (S1) support. We hold a bullish outlook bias given the break above the upper bound of the previous channel which has confined the pair’s price action since the 14th of December. Should the bulls reign, we may see the index break the 1.0785 (R1) line and aim for the 1.0890 (R2) level. Should the bears take over, we may see the price action break below 1.0680 (S1) line and aim for the 1.0580 (S2) support level.

USD/JPY extended its fall in today’s early Asian session moving closer to the 130.60 (S1) support level. We hold a bearish bias for the pair and supporting our case is the RSI indicator that registers a value of 28. Should the reign take over, we may see the pair breaking the 130.60 (S1) support line and aim for the 128.630 (S2) support level. Should on the other hand buyers take charge of the pair’s direction, we may see the pair rising, breaking the 132.00 (R1) resistance line and head for the 134.00 (R2) resistance barrier.

EUR/USD 4時間チャート