Dollar/Yen has risen to the high 147-yen range in today’s Tokyo market. It continues to update its highest levels since the beginning of this year and is now at levels not seen since December 1st of last year, indicating a stronger dollar and weaker yen. Alongside the yen weakness, the strength of the dollar is also becoming more evident. The dollar index has reached a key resistance point, the 200-day moving average. It has broken above the consolidation range that lasted until the beginning of the week.
One reason behind the dollar’s strength is the belief that the market has overly priced in the possibility of rate cuts in the U.S. this year. While inflation has slowed down, the level of inflation itself is still not stable at the 2% target. Some U.S. monetary officials have been seen arguing against early rate cuts. In terms of inflation, concerns about the geopolitical risks in the Middle East are growing, and there is caution about rising energy prices again. In the U.S., the labor market remains robust, and domestic demand is strong, along with wage growth.
Both technically and fundamentally, the dollar seems to be gaining momentum. In the upcoming global markets, the focus will continue to be on the movement of the dollar and yen, as we try to find out how far the dollar strength and yen weakness will continue.
In the international markets later today, there will be a plethora of economic indicators such as the U.S. MBA Mortgage Applications (01/06 – 01/12), U.S. Retail Sales (December), U.S. Import Price Index (December), U.S. Industrial Production Index (December), U.S. NAHB Housing Market Index (January), U.S. Business Inventories (November), Canadian Industrial Product Prices (December), and Canadian International Securities Transactions (November). The highly anticipated U.S. Retail Sales consensus forecast is +0.4% MoM and +0.2% MoM excluding autos, with positive numbers expected to continue.
In terms of speeches, ECB President Lagarde, ECB Board Member Cipollone, Lithuania Central Bank Governor Vasiliauskas, Slovenia Central Bank Governor Bostjan Jazbec, France Central Bank Governor Villeroy de Galhau, Croatia Central Bank Governor Vujcic, Netherlands Central Bank Governor Knot, Germany Bundesbank President Weidmann, and other ECB officials will have speaking engagements primarily at the Davos Conference. From U.S. monetary officials, Vice-Chair of the Federal Reserve Bowman, and New York Fed President Williams are scheduled to speak at various events. There will also be a $13 billion auction of U.S. 20-year bonds, the release of the Beige Book, and other events.
Today, GBP has been significantly bought as UK CPI came in higher than expected. I plan to look for buying opportunities on pullbacks if the timing is right.
Additionally, I’ll keep an eye on the U.S. Retail Sales report. If a trend emerges for the USD following this report, I will consider following the flow.
