Forex Signals US Session Brief, Jan 21 – Sentiment Turns Mildly Positive on Comments From Davos
Skerdian Meta • 4 min read
The sentiment has improved now, after the first week of this year when risk assets tumbled due to the increased tensions in the Middle East, between US and Iran. Although, traders remain cautious due to fears on the corona virus outbreak in China. Today we heard about a new case in Taiwan, so that’s one thing to keep an eye on, because it might mess with the sentiment if it spreads further.
Today we had the UK employment report being released earlier, as well as the ZEW economic sentiment from Germany and the Eurozone. Earnings didn’t decline further in Britain after softening for the last several months and employment increased, while int he Eurozone the investor sentiment improved further, having come from negative levels last year. Although, the Davos summit is the main event and traders are waiting for major global players to give us some direction. Donald Trump commented earlier, sounding positive about the deal with China and pointing to Phase Two deal, so the sentiment has been mildly positive in the European session, with risk assets grinding higher and safe havens retreating.
The European Session
- BOJ’s Kuroda Remains Patient – The Bank of japan governor Kuroda was speaking earlier this morning, saying that he doesn’t see a change in the inflation trend. Below are some of his main comments:
- Downward revision to inflation forecasts reflect fall in oil prices
- Downward revision to inflation forecasts are minor
- Upward revision to growth forecasts are due to the government’s stimulus package
- There will be a lag before growth helps to boost inflation
- Does not think that there are big side effects as a result of BOJ easing policies
- Inflation is still far from the 2% target
- Wage growth is weak compared to labour market tightness
- Too soon to adjust monetary policy framework at the moment
Trump-Macron Tariffs Truce – France’s Macron and Pres. Trump spoke on the phone on Sunday. A French diplomat commented on that call saying: that The two leaders agreed to a truce on tariffs until the end of the year and leaders also agreed to pursue talks on the digital tax proposed by France until the end of the year. Earlier today, France’s Le Maire added that Macron, Trump had a very constructive discussion
- UK Earnings Report – Average weekly earnings kept increasing last year, topping at 4.0% in July despite a weakening economy in the UK, but they have cooled down in the last several months. They declined to 3.2% in october and were expected to tick lower again to 3.1% for November, but they remained unchanged at 3.2%, as today’s report showed. Average weekly earnings (ex bonus) +3.4% vs +3.4% 3m/y expected down from +3.5% previously. December jobless claims change 14.9k. Prior 28.8k; revised to 14.9k.
- Eurozone/German ZEW Economic Sentiment – The Eurozone and German ZEW economic sentiment were deteriorating last year, bottoming at around -44 ponits in August. But the sentiment started improving in September as the trade war rhetoric declined and in December they came back to negative territory. The sentiment improved again this month, more than expected both in Germany and the Eurozone, so the trend seems to be ok now.
The US Session
- Donald Trump Commenting in Davos –It’s that time of the year again and the annual World Economic Forum in Davos is underway. Main economic and political actors around the world gather up there, to plan the world domination for the new year, as they do every year. US President Donald Trump was speaking just a while ago, making the comments below:
- US is in the midst of an economic boom like never seen before
- Trade deals with China, Mexico represent new model for the 21st century
- US economy was in a dismal state under the previous administration
- Says he is creating the most ‘inclusive’ economy in the history of the country
- Fed has raised rates too fast and lowered them too slowly
- Our relationship with China has never been better
- My relationship with Chinese president Xi is an extraordinary one
- Phase Two negotiations will start very shortly
- Most of the tariffs will remain in place during Phase Two negotiations
- We’re being paid billions and billions of dollars
- China Seems Satisfied With Phase One Deal – The Chinese vice premier Han Zheng said a while ago that Phase One deal is good for US, China and the world. Underlying trend of the Chinese economy remains unchanged. The Phase one trade deal is good for the US, China and good for the world.
- Mnuchin Speaking – The US Treasury Secretary Mnuchin was also speaking a while ago, saying that:
- US growth projections for this year’s too low and that
- Recent trade deals will lift growth.
- He added US trade issues it didn’t hurt global economic growth.
- US growth projections for this year’s too low
- Recent trade deals will lift growth.
- US trade issues it didn’t hurt global economic growth.
- Pres. Trump wants to do more on infrastructure
- China, India have to work on climate issues
- Regulation moved way too far after financial crisis
- We don’t believe in overregulation
- I think we will see very low-inflation and near term
Trades in Sight
- The retrace is over for GBP/USD
- The trend has turned bearish
- MAs have turned into resistance
- The 100 SMA has turned into resistance
The 100 SMA has turned into resistance now
GBP/USD surged in December, after UK Conservatives won the elections by a clear margin, which finally gives a direction for Brexit, as well as making UK politics more certain. But, the optimism faded quickly after traders realized that a trade deal with the EU in one year is not enough and the UK economy is continuing to weaken.As a result, GBP/USD has turned bearish now, continuing to decline in the last month or so and making lower highs, which shows that the pressure is on the downside now. Earlier today we saw the UK earnings beat expectations and remain unchanged for November after softening for several months and employment increased.
As a result, the GBP reversed higher and turned bullish for some time. But, I think that the retrace is now complete and the 100 SMA seems to have turned into resistance on the H4 chart. That moving average rejected the price in the first attempt and now GBP/USD is pulling back lower. We opened a sell signal at the 200 SMA so we are in profit right now.
Markets continue to remain relaxed and slow today as well, as they wait for more comments from Davos and the virus outbreak in China is keeping traders on its toes, just in case it turns into a pandemic. Most of the comments coming from China sound positive, so the sentiment is slightly positive as well.