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FX Weekly Outlook: USD/JPY, GBP/USD, EUR/GBP, CAD Analysis

By Justin Mcqueen


Updated

Global Currencies.
Global Currencies. Photo: Getty Images

JPY: An overall choppy week for USD/JPY as former BoJ official Kazuo Ueda appears from seemingly nowhere to look like the most likely successor to current BoJ Governor Kuroda. This also looks to have come amid Deputy Governor Amamiya's refusal to take the job. That said, the move in USD/JPY through 130.00 had been brief with the pair back above 131.00. Perhaps the biggest news of the week for the Yen had been the largest jump in wages in almost 26 years, which ultimately suggests that the path for BoJ policy will be for an eventual exit. However, tactically, risks may be slightly skewed to the upside given the pull from US yields. In the short-term, eyes are on next week’s US CPI where a higher-than-expected print could see the pair take out resistance at the 55DMA (132.66) to rise above 134.00. Should we see a lower-than-expected print, fresh 2023 lows are likely. 

USD/JPY vs US 10Y Yield

USDJPY vs US 10YR Yield chartUSDJPY vs US 10YR Yield chart. Photo: capital.com. Source: tradingview

GBP: Last week I highlighted the reasons to be less bearish GBP against the Euro as the cross closed in on the 0.90 handle. While the logic has been there for EUR/GBP with the central bank divergence in rhetoric from the ECB and BoE. This has been a theme that has been in play since December and thus the narrative appeared somewhat long in the tooth. Nonetheless, the cross failed to reach 0.9000 topping out around 0.8980 and has since fallen back to low 0.88s. As I have said, the cross often mean-reverts with a move above 0.9000 typically short-lived. 

EUR/GBP Chart: Daily Time Frame

 

USD/JPY

156.66 Price
-0.090% 1D Chg, %
Long position overnight fee 0.0108%
Short position overnight fee -0.0190%
Overnight fee time 21:00 (UTC)
Spread 0.010

AUD/USD_zero

0.66 Price
+0.100% 1D Chg, %
Long position overnight fee -0.0073%
Short position overnight fee -0.0010%
Overnight fee time 21:00 (UTC)
Spread 0.00006

AUD/USD

0.66 Price
+0.100% 1D Chg, %
Long position overnight fee -0.0073%
Short position overnight fee -0.0010%
Overnight fee time 21:00 (UTC)
Spread 0.00006

EUR/USD

1.08 Price
0.000% 1D Chg, %
Long position overnight fee -0.0080%
Short position overnight fee -0.0002%
Overnight fee time 21:00 (UTC)
Spread 0.00006
EUR/GBP daily chart.EUR/GBP daily chart. Photo: capital.com. Source: tradingview

Following the raft of central bank speak throughout the last few sessions, the focus now turns towards the plethora of tier 1 data on tap. UK inflation and jobs will garner a bulk of the attention for GBP traders, which should we see beats in both CPI and wages, would more or less confirm a 25bps hike at the March meeting. Outside of UK data, the latest US inflation print is due and after three consecutive months of lower-than-expected readings, the recent increase in used car prices as well as the rise in commodities after the last few weeks does raise the risk of a hot CPI print. GBP/USD thus far remains boxed in between the 55 and 200DMA, the bias would be to await breakouts.

CAD: A monster jobs report brings life to the Canadian Dollar and should we see a window of USD strength, given the Loonie’s low beta to the USD. CAD on the crosses may perform well, particularly against the NZD given the raft of soft NZ data ahead of the RBNZ’s Feb rate decision. A close below the YTD low opens the door towards 0.8250.

NZD/CAD Chart: Daily Time Frame

NZD/CAD daily chartNZD/CAD daily chart. Photo: capital.com. Source: tradingview

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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