Weaker than expected Japanese GDP growth casts doubt on reflation and higher rates, sending the Yen lower as the week begins.
- One of the biggest events in the market last week was the unusually strong rise in the Japanese Yen, which gained by almost 3% against several other major currencies. This rise was triggered by the landslide election victory of the new Japanese government which now seems to have all the tools needed to pursue its policies of reflation and economic growth. However, Japanese GDP data released earlier today was disappointing in light of these goals, with GDP growing by only 0.1% in Q4, narrowly missing a technical recession after Q3's contraction of 0.7%. The consensus expectation was a quarterly increase of 0.4%, so this was a significant undershot. In annualized terms, the economy expanded by 0.2% and not the expected 1.6%. The GDP data has reduced the perceived chance of a rate hike at the Bank of Japan's March meeting from 20% to 10%, so weakness in the Yen might be a feature today.
- Stock markets generally are weakly bullish but are mostly off their highs.
- Last week ended with expectations on the pace of US rate cuts becoming more dovish with the CME FedWatch tool now expecting three rate cuts of 0.25% each between June and December. This might produce a somewhat weaker US Dollar over the course of this week, in line with the greenback's long-term bearish trend.
- Gold is the strongest of all precious metals, but it is trading below the key round number at $5,000, which means it is looking less bullish. I will avoid buying Gold until it again breaks to a new long-term high and that will probably not be for several weeks or even months.
- Bitcoin is still looking essentially bearish as it keeps failing to break above the key resistance level at $71,762. At the time of writing, the short-term price action is consolidative as it trades below the resistance level at $69,323.
- In the Forex market, since today's Tokyo open, the strongest major currency has been the Australian Dollar, while the weakest has been the Japanese Yen, putting the AUD/JPY currency cross in focus as it rebounds from its huge decline last week.. The pair I see as most suitable for day trading today is the AUD/USD on the long side. .
- There are no data releases of high importance scheduled for today.
- It is a public holiday today in the USA and Canada, and all week in China.