Growth concerns intensify for the US economy

The USD remained relatively stable yesterday against its counterparts, yet we have to note that market worries about the growth of the US economy tend to intensify as also the US GDP advance rate for Q4 is due out next week. The main market worries seem to be focusing on the possibility that the Fed may overdo it with its monetary policy tightening and that the possibility of a soft landing may be thrown out of the window, exactly for that reason. It’s characteristic that all three major stock market indexes, namely the Dow Jones, Nasdaq and S&P 500, continued their journey southwards for a second consecutive day yesterday. Yesterday’s releases may not have been as bad as in the earlier days of the week, yet there were still some worrying signs. For example Netflix despite actually delivering better-than-expected results in its revenue figure, it was not able to surpass also the earnings per share expectations of the market, which could imply an overhead cost issue for the company. It was announced that Netflix’s co-chief executive Reed Hastings is to step down, a change that may also imply a shift in the company’s strategy, while on the positive side, the number of subscribers increased by seven million.

Overall we expect market sentiment to continue to be driven by market worries about the growth of the US economy and should they intensify, we may see US stock markets dropping even further. On the monetary front, we note that Fed Vice Chair Brainard yesterday was reported stating that she sees rates continuing to be high even should inflation slow down further, while similar messages were sent to the market also by Boston Fed President Collins, who was reported stating that rates are not to drop anytime soon, yet also mentioned that the bank could slow the pace of its rate hikes. Overall given that Fed policymakers are not to make any statements next week ahead of the Fed’s next interest rate decision, the statements of the last days tended to gain on importance, yet seem to send some conflicting messages. As for yesterday’s financial releases, we tend to note that economic activity in the US construction sector has slowed even further for December, given the slight drop of the number of building permits and housing starts, while the employment market seems to remain tight given the drop of the weekly initial jobless claims figure and economic activity is improving in the wider Philly area, yet is still in the negatives. 

USD/JPY edged higher breaking the 128.60 (S1) resistance line, now turned to support. We tend to maintain a bias for the sideways motion of the pair to continue given also that the RSI indicator is running along the reading of 50. Should the bulls take over, we may see the pair aiming if not reaching the 131.40 (R1) resistance line. Should the bears be in charge we may see USD/JPY breaking the 128.60 (S1) support line and aim for the 126.50 (S2) support level.

USD/CAD edged lower breaking the 1.3465 (R1) support line, now turned to resistance. We maintain a bias for a sideways motion given also that the RSI indicator is running along the reading of 50. Should the bears  take over, we may see the pair aiming if not reaching the 1.3335 (S1) support line. Should the bulls be in charge we may see USD/CAD breaking the 1.3465 (S1) line and aim for the 1.3570 (S2) resistance level.

Other highlights for the day:

In today’s European session we note the release of UK’s retail sales growth rate for December and Sweden’s GDP rate for December, while on the monetary front, SNB’s Chairman Thomas Jordan and ECB President Christine Lagarde are scheduled to speak. In the American session, we get the US existing home sales for December and Canada’s retail sales growth rate for November while we note that Philadelphia Fed President Harker and Fed Board Governor Waller are scheduled to speak. During Monday’s Asian session we note the release of BoJ’s minutes for the December meeting.

USD/JPY H4 Chart

Support: 128.60 (S1), 126.50 (S2), 124.00 (S3)

Resistance: 131.40 (R1), 134.80 (R2), 138.15 (R3)

USD/CAD H4 Chart

Support: 1.3335 (S1), 1.3230 (S2), 1.3140 (S3)

Resistance: 1.3465 (R1), 1.3570 (R2), 1.3685 (R3)

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