Trading without Americans means low volatility

There was no session on Wall Street yesterday in the United States. Americans celebrated Martin Luther King Day. Thus, not much is happening in the currency market either. The EUR/USD pair has once again climbed above 1,0860 but the move has so far proved to be short-lived. Currently, the quotes are at 1,0826. For several hours on the market of the main currency pair we have a narrow consolidation. The market is waiting for the next impulse. Strong increases in EUR/USD over the past weeks suggest that a technical correction is approaching.

As expected

Today we will get some more macro data. At 8:00 am Germany presented CPI inflation and HICP dropped out at the point of expectation (8,6 percent and 9,6 percent, y/y). The United States will publish the NY Empire State Index. Additionally, John Williams will speak in the evening hours of our time.

Wednesday promises to be a bit more interesting. The euro zone will announce the final result of the HICP index for December (there will be no surprises here). For the US, the producer price index (PPI) and retail sales will be presented, which will show how strong consumers are at the moment. In addition, we will get to know the Beige Book. Patrick Harker, Esther George, James Bullard, Raphael Bostic and Lorie Logan - representatives of the Fed will speak. Perhaps we will get more opinions on the interest rate decision, which will take place on February 1.

EUR/USD quotes have been "suspended" above the level of 1,08 and still no idea what to do next. The scale of recent increases from 1,05 to close to 1,0870 suggests that in the short term we should see a technical downward correction at least around 1,0720 - this is where the December highs fall. The most important this week seems to be Wednesday and it is probably on this day that we will get an answer to the question of what's next for the main currency pair.

Jen is still getting stronger

It is a topic that is being talked about more and more Bank of Japan interest rate decision. Decision-makers are unlikely to change the level of the cost of money, but it is possible that the bank will again increase the current 10-year bond yield limit. Currently, the upper limit is 0,5%. A change from 0,25 percent. took place in December. Recall that BoJ pursues a policy of controlling the bond yield curve.

The recent changes have been officially described as a move that should not be treated as part of the normalization of monetary policy. However, the market perceived it as a step towards monetary tightening. As a consequence, the yen strengthens regularly. The appreciation movement against the dollar has been going on since the second half of October. Couple USD / JPY fell during this time from 151,70 to 127,50.

This morning we got to know the data on the condition of the Chinese economy in the fourth quarter. GDP increased by 2,9 percent. y/y, which means a result much higher than the estimates. The positive surprise resulted from higher consumption. The current high wave of covid infections at the beginning of this year will certainly affect the poor result in the first quarter. However, the abandonment of the "zero-covid" policy gives hope that economic activity will return to normal in the coming months.

Source: Łukasz Zembik, OANDA TMS Brokers