Japan Publishes Deeper Trade Deficit, JPY Strengthens

Market Brief

The Asian stocks started the week deep in red. The Nikkei lost 2.51% as the Japanese trade deficit extended from Yen 1,292.9bn to Yen -1,302.1bn in December due to surging energy prices. The imports rose 24.7%, while the exports retreated to 15.3 % (from 18.4% prev). Some BoJ members explained the lack of exports momentum by Japan firms shifting business overseas and the declining Japanese competitiveness. Elsewhere, the Hang Seng dropped 1.95%, while Shanghai’s Composite retreated 1.02% (at the time of writing).

JPY crosses traded soft in Tokyo. USDJPY sold-off to 101.77 at Tokyo opening (from 102.31 at NY close) and recovered to 102.70 through the session. The bearish trend gained momentum suggesting the extension of losses to 100-dma (today at 100.97). Offers are seen at 103.00, while stops are building sub-102.00. EURJPY fell below 140.00 on Friday for the first time since December 6th. The sentiment remains solidly bearish.

EURUSD consolidated gains above the 21-dma (1.3643). Trend and momentum indicators improved; the MACD stepped in the green zone. We revise our tactical view to positive for a close above 1.3580. While some selling interest remains at 1.3635/50 area, option bids trail above 1.3700 for today’s expiry.

The Cable remained in the tight range of 1.6475/1.6517 in Asia, after aggressively erasing gains from the fresh high of 1.6668 on Friday after Carney said that such strength in GBP should weigh on exports. Technically, the trend momentum remains positive yet selling interest is seen below 1.6475.

Released on Friday, the Canadian CPI reading met the pessimistic market expectations in December. The CPI m/m fell to -0.2% in Dec from 0.0%, the CPI Core m/m retreated to -0.4% from -0.1% a month before. Already priced in, the markets gave little reaction to data. USDCAD rebounded from 1.1052 (intra-day low) and remained offered pre-1.1100.

Today, the economic calendar consists of German IFO Business Climate, Current Assessment and Expectations in January, US December Homes Sales m/m, US January Dallas Fed Manufacturing Actiivty, and French December Jobseekers Net Change & Total Jobseekers.