Markets during the AisaPac session traded predominantly lower on Wednesday following the release of Japan's trade data for January. The report from Japan's Ministry of Finance, showed that Japans exports jumped 6.4% last month on strong demand from China. Machinery Orders also grew for December adding to the positivity, but the overall Balance of Trade for Japan didn’t hit market expectations.
Mainland Chinese stock markets remained closed for the Lunar New Year's holidays, but Japan’s Nikkei dropped 0.62% having seen some large gains this last week. The dollar is currently trading flat against the Japanese yen and at the time of writing is at 106.043.
The rhetoric around China from the new US administration is quite tough as President Biden said last night that there will be repercussions for China in relation to the reported human rights abuses.
The UK just released its annual inflation data and the UK inflation rate is up a very modest 0.7% for January which is an 0.1% improvement from the December reading. We are in a UK-wide coronavirus lockdown, so any signs of an improving economy under these conditions is a real positive. In the last hours of yesterday’s regular trading, the stock markets took a dip from their all-time highs as the yield curves and bonds are signaling the market's anticipation of higher inflation to come for the US and that could lead on to the G7 countries positioning monetary policy towards higher inflation expectations too.
GBPUSD on the daily chart printed a spinning top indecision candle yesterday, which could become a market top, as we have already tested yesterday’s low in today’s trading. If we close below the low from the 15th, that would be my signal to start looking for further downside in the coming days but for now, we haven’t broken any market structure which is acting as a key support, so it could be just a time to take some profits for those traders who are long from last year’s lows.
Oil continues to try and push for higher highs as the key level of $60 is still being tested. Oil traders will need to see the recent swing high get taken and then for that to be tested for support or face the prospect of the 59.00 level being tested first, which may then lead to lower prices as traders look for where value is lower down. The global economy is not in the greatest shape and the higher prices will most likely be rejected for the simple reasons of if you are unemployed or on lower wages, your capacity to inability to absorb higher fuel costs, and added inflationary costs to your general expenditure, will mean that you end up spending less and therefore forcing the economy to contract again. For now, the oil charts are showing that prices are in a very neat rising trend so seeing a break of market structure to the upside or downside should offer areas on the charts for managing your risk.
Tonight, we have the very important tier 1 data from FOMC minutes from their January meeting and the scheduled press conference after. Looking ahead to the next trading sessions we may get some movement during the London open and then a quieter market as we get closer to 7pmGMT.