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Market Outlook

US government shutdown and BoJ, ECB to set tone

The week drew to a close with a closedown affecting US government as the senators were unable to reach any consensus on the budget for the wall. Although Trump had a majority he failed to garner sufficient votes to avert the abrupt shutdown, once again bringing to the fore the predicaments he is encountering. Trump’s inflexible stance on immigration lies at the core of the discord with GOP. Talks are being held even on Sunday to carry on funding till Feb 6th.

The week kickstarted with Bank of Japan’s Kuroda striking a cheery note on the economy making yen increase with respect to the dollar with USDJPY plunging to 110.13 for the week. Kuroda returned on Wednesday to declare that BoJ would persist with its plan veering at 2.0% inflation. USDJPY climbed up to reach 111.48 before finishing the week at 110.50.

EURUSD had robust support at the week’s start after a hawkish ECB boosted it to 1.2332 but quickly came under pressure as Merkel was in for a new crisis as SDP pulled out from coalition dialogue. Merkel being the main advocate of EU, on her leadership of EU’s largest economy hinges the survival of EU or EURUSD.

GBPUSD which was goaded through most of the week by prospects of a lax Brexit preceding Friday’s retail sales, disappointed. GBPUSD rounded off the week at 1.3853 following an ascension of 1.3945.

Gold’s run up eventually ceased during the previous week following an uptrend of $1343/oz. a wee bit short of the resistance at $/oz.1350.

USDCAD closed the week with merely 20 pips profit, which was after oscillating and testing highs of 1.2540 & lows of 1.2360. Bank of Canada on Wednesday hiked rates but also warned on NAFTA.

Next week has two central bank interest rate verdicts, from BoJ and ECB. No rate changes are likely from either but the market would keenly look out for the tone and tenor of the fiscal announcement to form an idea of what to expect ahead.

On charts, USDJPY has robust support at the 110.00 handle, but if the US closedown persists it could witness that level being tested once more.

EURUSD is on firm footing and is likely to carry on like that in the week ahead barring any more negative press from Germany. EURUSD carries on within the uptrend channel which has maintained its position since December. Support will be likely at 1.2150 and resistance at 1.2300. The press conference following Thursday’s ECB fiscal meeting would be a decisive event on the calendar.

GBPUSD has two crucial economic updates, Wednesday’s labor statistics and Friday’s GDP numbers. On charts GBPUSD appears overextended and may see an amendment that could reach 1.3600.

Gold may find support in the week ahead backed by the US government closedown. On charts Gold has support at $1326/oz. and would try another move at $1350/o as long as $1326/oz. is maintained.

CAD has vital statistics to vouch for except the NAFTA peril. The week’s world economic forum at Davos should shed some light on NAFTA. USDCAD has support at 1.2400 and it would be tried this week yet again. USDCAD investors must keep an eye on this Friday’s inflation figures also.