The Asian stock market is growing after the Fed chairman Powell admitted on Friday, that future hikes will depend on data, and the Fed is also watching the situation in the world. A better-than-expected report from the US labor market also helps to improve moods and dismisses the fear of a recession. Finally, information about the meeting of US and Chinese delegates to talk about a trade agreement gives hope for progress in relations. The increase in risk appetite can be seen in the currencies and emerging markets.
Fed leader Powell stated on Friday that the Fed is not on the pre-determined path of interest rate increases and will pay attention to the negative risks that the market pricing. Comments were taken as dovish and, above all, they calmed investors that Fed policy would not tighten financial conditions.Together with the very good result of the NFP report, the markets received an injection of optimism that continues to this day. On Wall Street, the indexes ended the Friday's session with strong rallies (SP500 close at +3,43%). After the weekend, the increases are continued in Asia - Chinese Shanghai Composite grows 0.7%, and Japanese Nikkei gained 2.44%.The risk appetite is also supported by reports that the US government delegation headed by trade representative R. Lighthizer is heading for Beijing for talks after which trade tensions between countries are expected to ease.The currency market is on the neutral mode all along the line. Risky currencies, such as AUD and NZD, benefit from improving sentiment (especially with regard to China). But JPY and CHF are the best performers for now, which is a bit interesting, given the adverse conditions for safe havens.USD / JPY moved down from 108.70 on Friday to 108.10. EUR / USD, after touching 1,1344 after NFP, now approaches 1.1420.
On Monday, the 7th of January, the event calendar is light in important data releases, but the global investors should keep an eye on Retail Sales data from Germany, Sentix Investor Confidence data from Eurozone, ISM Non-Manufacturing data from the US and Ivey Purchasing Managers Index data form Canada.
USD/JPY analysis for 07/01/2019:
ISM Non-Manufacturing gauge of business conditions in non-manufacturing industries, based on measures of employment trends, prices and new orders. Though non-manufacturing sectors make up the majority of the economy, the ISM Non-Manufacturing has less market impact because non-manufacturing data tends to be more cyclical and predictable. However, these sectors do account for a considerable portion of CPI. As a result, the figure gives insight into conditions which can impact output growth and inflationary pressures.
The ISM Non-Manufacturing Index is based on a sample survey of purchasing and supply executives, weighted according to industry contribution to GDP. The Index is calculated using 50% as the centerline between positive and negative expectations; the figure is reported in headlines as the percent change. For the current month, the global investors expect the ISM to be released at the level of 59.6, which is lower than the last month figure of 60.7.
Let's now take a look at the USD/JPY technical picture at the H4 time frame. After the flash crash, the price returned to the technical resistance at the level of 108.69 but the bulls are too weak to break through yet. Moreover, the price is still trading below the dashed black trend line as well. If the data will be better than expected, then there is a change for the bulls to move higher above the 108.69 towards the next technical resistance at 109.46. The nearest important support is seen at the level of 106.75.
