Markets Rise As Chinese Data Confirms The Economy Is Weakening

The partial US government shutdown continued into the fourth week as disagreements between the White House and Congress remain. Over the weekend, Donald Trump offered Democrats a deal that would include extending protections for DACA individuals. These are people who were brought to the country illegally as children. In response, Nancy Pelosi said that Trump’s proposals were a non-starter that didn’t go far enough. Investors will now give more attention to the shutdown, with attention being focused to the big three rating agencies, who could downgrade US bonds.

The euro was little moved in early trading as traders continued to focus on Brexit and the Eurogroup meeting that will start today. They are also focusing on key economic data from Europe that could solidify the view that the economy is slowing down. The Eurogroup meeting will happen in Brussels. Meanwhile, data from China confirmed that the country’s economy was indeed slowing. In the fourth quarter, the country’s GDP rose by 6.4%, which was lower than the Q3 growth of 6.5%. This was the slowest rate of growth since 2009. On a positive note, the country’s industrial production increased by 5.7%, which was higher than the expected 5.6%.

Investors will start focusing on the annual World Economic Forum (WEF) meeting that will happen in Davos. The meeting takes place annually and brings together business and political leaders from around the world to discuss key pressing issues. Last week, key headliners of the event such as Donald Trump and Theresa May cancelled their plans to attend the meeting. Trump failed to do so because of the government shutdown while May cancelled because of the pressing issues around Brexit.

EUR/USD

On the 10th of this month, the EUR/USD pair started to drop after reaching a high of 1.1570. Since then, the pair has continued to drop, and today, it reached a low of 1.1360, which is slightly higher than Friday’s low of 1.1350. On the four-hour chart below, the pair’s price is below the 21-day and 42-day EMA. The RSI is slightly above the oversold level of 30, while the momentum indicator is just above the 100 level. The pair could continue the downward trend, and if it does, it will likely test the important support level of 1.1270.

USD/JPY

Early this month, the USD/JPY pair started to move up. Since then, the pair has climbed from a low of 106.42 and reached a high of 109.87 on Friday. The current price is above the short and medium-term moving averages as shown below. The parabolic SAR is currently lower than the trend, which is an indication that the momentum could continue. The same is shown by the double EMAs shown below. There is a likelihood that the pair will continue moving up, to test the psychologically important level of 110.

GBP/JPY

The GBP/JPY pair has been moving up since the year began. The pair has moved from a low of 133 and has continued moving up to Friday’s high of 142.24. On the hourly chart below, the pair’s current price is almost along the 21-day and 42-day EMA, while the RSI has eased from the overbought level of 82 to the current 43. This is an indication that the pair could ease a bit, potentially to the 140 level before it resumes the upward momentum.