On Thursday, economic data for the United States came out generally disappointing. The Philadelphia manufacturing index was only 0.3% against the expected 8%, while the number of unemployment claims rose 234 thousand against expectations of 225 thousand.
At the same time, news about Trump's impeachment has little effect on quotes, primarily because there are no chances for impeachment to pass through the Republican-controlled Senate.
In general, market sentiment remains positive. US Treasury Secretary Mnuchin said on Thursday that the first phase of a trade agreement with China could be signed in early January, which is seen by markets as a sign of positive momentum in the negotiations. Moreover, US stock exchanges closed in the green zone, Asian indices are trading higher on Friday morning, and gold is stable - all these signs point to a slightly positive background, which gives an advantage to profitable assets.
USD/CAD
The Canadian dollar continues to feel confident, winning back a number of positive factors. These primarily include the reduction of global uncertainty, oil prices remain steadily above $ 60 per barrel, the dynamics of the yield spread of T-bills of the USA and Canada support the Canadian at least in the short term.
On the other hand, disappointment from a labor market report released last week was temporary, with Loonie staying in a downward range and updating a 1.5-month high against the dollar. There are also other negative factors, for example, the updated USMCA trade agreement between the USA, Canada and Mexico was approved by the US House of Representatives. For Canada, its benefits are far from as obvious as for the USA, but political arguments in this case outweigh the economic ones.
In general, short-term factors affecting the loonie look positive. The Bank of Canada's lack of intent to cut interest rates in the foreseeable future supports bond yields, while OPEC +'s reduced production raises oil prices, which in total provides CAD short-term support. USD/CAD is targeted at 1.3042, and thus, a decline in support will mean the vulnerability of the annual minimum of 1.3015. Therefore, a further decline is still unlikely without a correctional rollback.
USD/JPY
Inflation in November rose by 0.5% y / y, which is better than 0.2% a month earlier, but still hopelessly far from the target level of 2%. At the same time, a number of publications, for example, Mizuho Bank, hold pessimistic views on the prospects for the Japanese economy, while the increase in consumer tax does not produce the expected effect.
Both Japan's imports and exports fell markedly in November - by 15.7% and 7.9%, respectively, activity in the manufacturing sector was steadily below 50p, and output did peak at levels lower than 5 years ago before launching a large-scale reform.
On Thursday, the Bank of Japan left monetary policy unchanged, however, the sliding economy into a recession is becoming too obvious to ignore. As a result, there are more and more votes in favor of the Bank of Japan and the Abe government taking coordinated measures both in monetary and fiscal policies, since a drop in real interest rates threatens a large-scale banking crisis.
Now, USD/JPY continues to trade in a range. Most analysts are inclined to expect a breakthrough as global uncertainty is reduced. At the same time, it is obvious that the wave of positive in recent days has no serious basis, since it is based on political rather than economic factors.
If the positive is not offset by any unexpected factor, then USD/JPY breaking through the resistance zone 109.60 / 71 seems inevitable, even a weak dollar will not be able to prevent the yen from selling. However, if euphoria declines, then trading will continue in the range.
The material has been provided by InstaForex Company - www.instaforex.com