Summary:

• Safe haven currencies (CHF, JPY) give back some of their gains made during the last week, US dollar trade flat as new week gets underway
• Japanese NIKKEI (JAP225 on xStation5) begins the new trading week with a decent pick-up bouncing off the pivotal support
• Some second-tier macroeconomic releases from New Zealand and Japan, there were no market movers though

Having looked at a technical analysis one may suspect that this week could belong to the US dollar. The dollar index (USDIDX) drew a bullish engulfing on Friday and therefore the currency might witness a more notable rebound in the oncoming days. However, before we take a look at the greenback let us point out that safe haven currencies, which had the impressive past week, are giving back some of their gains being among the worst performing ones in the G10 basket at the time of writing. Partly it may be an effect of a brilliant start to the week in Asia (keep in mind that China is still on holiday) where we have seen healthy increases in equities. Oil prices are enjoying increased demand in the morning as well, WTI is trading 0.8% higher while Brent is adding over 1.2% at the same time. Do notice that the latest Baker Hughes report (oil rigs grew by 7 in the past week) did not daunt investors.

The US dollar looks pretty well from a technical standpoint as the price drew a bullish engulfing. Thus, one may count on a rebound at least toward an upper boundary of a descending channel. In turn, should the limit break, bulls would pave the way for an extended move toward 90.5. Source: xStation5

Writing about the US dollar one cannot forget about the Friday’s data which could have bolstered investors’ confidence to some extent. Let us recall that both housing and consumer confidence releases turned out to be better than expected. While the greenback is trading subtly higher in the morning, it could change when the week unfolds going forward. Having said that, given the long-term attitude shared among FX investors a more long-standing resurrection of the USD seems to be unlikely.

Looking beyond the FX it needs to underline an impressive beginning to the week in Japan where the NIKKEI grew almost 2%. Over the past hours we were offered the Japanese trade data illustrating a -943.4 billion JPY deficit beating forecasts set at -1020.2 billion JPY. Moreover, exports grew 12.3% yoy (a 14th consecutive month of gains) topping the consensus at 9.4% yoy, whereas imports rose 7.9% yoy being actually in line with the street’s call at 7.8% yoy. The data was for January, hence there is the likelihood that it could have been distorted by the Chinese New Year to some extent.

The NIKKEI bounced off its crucial support line at 20900 points, hence one cannot preclude a rise at least toward a bearish gap it emerged at the beginning of February. Source: xStation5

At the end let’s mention New Zealand services PMI for January which came in at 55.8 slightly falling from 56 registered in the prior month. The details showed that the sub-index of new orders/business slid below the 60 point mark for the first time since April 2017 and given it’s a lead indicator for activity/sales it deserves more attention in the next few months.

NZ services PMI deepened its last month’s decrease as opposed to the gauge for manufacturing. Source: Macrobond, XTB Research