Weak UK data, EUR/JPY sales and market sentiment

14 sty 2020

As we announced, this week is extremely full of various kinds of macroeconomic statistics. As yesterday's UK data showed, one should prepare for surprises and most likely with a “-” sign.

Data on GDP (-0.3% with a forecast of 0%) and industrial production in the UK (-1.2% with a forecast of 0%) justified the worst fears of experts.

The only positive point of yesterday's statistics on Britain was the data on the trade balance (and even then rather conditionally). The deficit was expected at -11.800 billion pounds, but in fact, it was at around 5.256 billion pounds.

In connection with such data, the support test of 1.2970 was more than logical. Nevertheless, the inability of the bears against such a fundamental background to take the level is symptomatic in itself. We refer to our recommendation to buy the pound, which so far has not lost its relevance. And the barrier between bulls and bears loomed even more clearly.

So while the pound is paired with the dollar above 1.2960-1.29970, its purchases, even against the backdrop of weak macroeconomic data, remain relevant. But if the pair goes lower, and against the backdrop of another portion of weak data (inflation statistics for the UK will be published on Wednesday and retail sales data on Friday), this will clearly indicate that the initiative is in the hands of bears.

Otherwise, the markets continue to monitor what is happening in Iran, await the signing of the first phase of agreements between the US and China and try to think exclusively positively, which can be seen in the dynamics of gold, the Japanese yen, and the US stock market. We already habitually maintain a moderate negative, as we try to look a little further than the time horizon of 2-3 days. And therefore, the purchase of safe-haven assets remains relevant to us.

In particular, the pair EUR/JPY entered very interesting places for sales. Also, intraday oil purchases from current prices look very attractive. Of course, with small stops, since the markets are now set to sell, but at the same time, potential profits definitely outweigh the number of risks expended.

What could trigger a rally in safe haven assets? At least reporting season in the USA. Weak financial results (especially the dynamics of profits) of companies in the overshot market can lead to a massive exodus from risky investments in gold and the Japanese yen.