HotForex Forex News

21:06 Two scenario analyses of the G10 currencies - Nomura

Analysts at Nomura explained that based on the estimated sensitivities, we carried out two scenario analyses of the G10 currencies.

Key Quotes:

"In the first scenario, we assume the Chinese economy will perform resiliently while the Fed hikes. We expect the yield spread between the US and the other countries to widen, commodity prices to rise and risk sentiment to improve as the US and Chinese economies remain solid. JPY would fall the most owing largely to the widening of the yield spread. The currencies of resource-rich countries such as CAD, NOK, NZD and AUD may trade more resiliently even after higher US rates, if commodity prices are supported by Chinese growth. If risk sentiment improves further, these currencies could even outperform."

"If the Fed raises rates because of a solid Chinese economy, a short position on JPY against commodity currencies would be attractive, based on our estimation. In contrast, if the Chinese economy begins to weaken as US yields rise, we would expect commodity prices to fall, even if US manufacturing data improve. Reactions in risk sentiment would be mixed amid weaker China data and stronger US data (assumed 0.5 standard deviation risk-off)."

"Based on our estimation, USD would strengthen on its own, largely owing to US yields rising, and a drop in commodity prices would weaken the currencies of resource-rich countries significantly. CHF and JPY would depreciate less, outperforming against the commodity currencies, especially if risk sentiment reacts more to a Chinese slowdown than to strong US data."


21:03 USD/CHF challenges the parity level

A decline of the US dollar across the board pushed USD/CHF to the downside on Tuesday. The pair broke an important support at 1.1050 and fell to test the parity level. So far it has been able to hold on top but it remains under pressure. 

Test continues 

During the European session USD/CHF traded momentarily below 1.0000. It bottomed at 0.9996, the lowest since November 16 and then it rebounded modestly. The recovery from the lows found resistance at 1.0035. It was about to end the day hovering around 1.0030, below the relevant 1.0050 (previous support) and the lowest in two months. 

The parity area continues to be challenged. A decline below could push the pair toward the next strong support area located at 0.9960 (May and July highs). 

Greenback needs to climb back above 1.0050 in order to reduce the short-term bearish pressure. On a wider perspective, the downside bias could remain in place as long as the price hold below 1.0190, where the 20-day moving average stands. 

Events ahead 

On Wednesday, economics reports from the US will be release. They include CPI, industrial production, and the Beige Book. The numbers could influence on the US dollar. The key event of the week for the is likely to be the European Central Bank on Thursday. Usually, the decisions and the press conference from Mario Draghi tends to move the Swiss franc across the board. Also, Trump’s inaugural speech on Friday could impact the markets. 

USD/CHF

 

 

 


 


21:03 GBP/USD back above a key SMA

The 200-period simple moving average, immediate resistance on 4hr chart, was hurdled in recent GBP/USD trading.

The GBP/USD was quoting below this dynamic resistance for at least two weeks. Now it could target the 800-SMA on the upside.

21:02 SAR still trailing the falling EUR/GBP rate

We see an injection of volatility in the already heavy looking EUR/GBP pair.

The washout in today's trading has expanded the Bollinger® bandwidth indicator for four consecutive hours beyond the maximum width seen in a week of trading. Moreover, the same 1hr charts show recent close prices printing below the 50-period EMA, a bearish condition that should it persist, would help keep the SAR indicator trailing above the price.

A change of direction would be quickly noticed by the SAR, implying EUR/GBP shorts are taking profit. Risks exist the volatility and the plummeting price action extend to higher time frames.

21:02 GBP/USD mid-term buyers gaining momentum

On the 4H GBP/USD chart, the MACD has moved above zero denoting an uptrend.

Such a momentum indication, unseen for at least for more that a week, indicates that key price breaks are on the horizon. Likely, momentum traders who had been waiting for this technical signal will likely try to push GBP/USD higher.

20:59 AUD/USD up to critical resistance levels through the 200 dma on 0.75 handle

Currently, AUD/USD is trading at 0.7548, up 0.97% on the day, having posted a daily high at 0.7564 and low at 0.7465.

AUD/USD has picked up the pace through the midpoint of the 0.75 handle, reaching aforementioned highs. The price has crucially popped through the 200 dma at 0.7501 as well, making for fresh 2017 highs and breaking the December highs of 0.7548 at this juncture and meeting the late October lows - indeed we are at a significant level here. The greenback is unwinding across the board and the Brexit fears have abridged to some degree by PM May's speech today, aiding a recovery in risk ahead of Trump's inauguration at the end of the week.

Commodity currencies and outlooks - Nomura

AUD/USD levels

With spot trading at 0.7548, we can see next resistance ahead at 0.7553 (Daily Classic R3), 0.7564 (Daily High), 0.7584 (Weekly Classic R1), 0.7668 (Weekly Classic R2) and 0.7813 (Annual High). Support below can be found at 0.7530 (Daily Classic R2), 0.7524 (Hourly 20 EMA), 0.7508 (Yesterday's High), 0.7503 (Daily Classic R1) and 0.7500 (Daily 200 SMA). 

 


20:24 US CPI preview: Inflation pressure to continue to build in 2017 - Wells Fargo

Tomorrow will be the busiest day regarding economic data in the US. Reports include inflation, industrial production, and the Beige Book. Analysts from Wells Fargo, expect a 0.3% rise (month over month) in the CPI headline, in line with market consensus and above the 0.2% of November. 

Key Quotes: 

“The CPI continues to steadily march higher, with the headline up 0.2 percent in November and 1.7 percent over the year. The core inflation measure, which excludes food and energy prices, also rose 0.2 percent in November and is now up 2.1 percent over the year. Higher energy prices have helped stabilize year-over-year growth in headline CPI in recent months, although milder weather exerted some pressure on utility prices in November.”

“Winter weather largely returned in December, which should support the headline reading for the month. With the drag from energy prices dissipating and wages continuing to rise as the labor market tightens further, we expect inflation pressure to continue to build in 2017.”

“Fed officials also anticipate steady progress toward the 2 percent target in the medium term, and market expectations for inflation have risen since the election on anticipation of inflationary policy enacted in the coming year.”


20:23 EUR/JPY falls to 120.50, 6-week low

Despite the strong rally of EUR/USD, that climbed above 1.0700, the euro was unable to recover against the yen. The Japanese currency remains strong in the market and hit the highest level in eight weeks against the euro.  The common currency weakened after the sharp decline in the EUR/GBP. 

EUR/JPY bottomed at 120.54 during the European session, the lowest since December 5. Then it bounced to the upside, during Theresa May’s speech, that triggered risk appetite in the market. After hitting 121.40, turned again to the downside. 

The pair was hovering around 120.80/90, marginally lower for the day, headed toward the second daily decline in a row and the sixth out of the last seven days. So far, EUR/JPY is holding above 120.00 ahead of Thursday European Central Bank meeting. 

Technical levels 

To the upside, resistance levels could be seen at 121.15/20 (Jan 12 low), 121.60 (Dec 29, Jan 13 low) and 122.30 (20-day moving average). On the opposite direction, support might lie at 120.50 (daily low), 120.00 (psychological) and 119.40 (Nov 30 low). 

EUR/JPY


20:04 USD/JPY: vulnerable to broader developments - Scotiabank

Analysts at Scotiabank noted that the JPY is strong, a mid-performer among the G10 in an environment of broad-based USD weakness.

Key Quotes:

"Yield spreads are narrowing in a JPY-supportive manner, and short-term measures of implied JPY volatility are climbing to drive a rise in the premium for protection against JPY strength.

The absence of domestic data should leave JPY vulnerable to broader developments through the remainder of the week, with considerable risk into Friday’s U.S. inauguration."


20:01 USD/JPY: embarking on strong support area in dollar s sell-off

Currently, USD/JPY is trading at 112.94, down -1.05% on the day, having posted a daily high at 114.31 and low at 112.68.

USD/JPY has dropped below the 113 handle falling from aforementioned highs, extending a run of seven days of decline. Indeed, the Trump rally in the dollar has pretty much all been unwound in the spot market with the euro headed towards the 1.08 handle and stock markets losing steam with a pick up on bonds and a slump in US yields. This move is a dollar move, but USD/JPY is now embarking on a strong area of support with 112.00 a major psychological level.

USD/JPY levels

With spot trading at 112.94, we can see next resistance ahead at 113.04 (Weekly Classic S1), 113.20 (Daily Classic S2), 113.43 (Hourly 20 EMA), 113.62 (Yesterday's Low) and 113.67 (Daily Classic S1). Support below can be found at 112.78 (Daily Classic S3), 112.68 (Daily Low), 111.50 (Weekly Classic S2), 109.24 (Weekly Classic S3) and 108.48 (Daily 100 SMA).

 

 


19:23 Commodity currencies and outlooks - Nomura

Analysts at Nomura explained that most of the commodity prices have gained momentum since the US Presidential election, while commodity prices had already been supported by the recovery in the Chinese economy before the US election.

Key Quotes:

"Prices of coal, iron ore and oil tend to be more sensitive to the Chinese economy. Chinese economic trends will be important for the relative value of G10 FX, even though USD is currently more determined by expectations for economic policy under the new US administration and Fed policy. It is also worth noting that USD is becoming less sensitive to commodity price movements.

If the Chinese economy performs resiliently even amid higher US rates, JPY is estimated to be the clear underperformer, while the commodity currencies, AUD, NZD, NOK and CAD are likely to perform. One standard deviation improvement in global equity prices (4.4%), the Chinese PMI (0.7pt) and the US ISM (1.6pt) are estimated to largely offset the negative impact of a 20bp increase in US rates on AUD/USD and other commodity currencies against USD. In contrast, the combination of higher yields with the Chinese economic slowdown would weaken commodity currencies more than JPY."


19:21 FTSE 100 digests May s plans; IBEX 35, CAC 40, DAX all down

Another speech, one less risk event in 2017. PM May's speech was worth cheering as she shared a brave and brighter future for the UK; where is the catch? It seems companies missed their usual doses in the form of future spending or the anticipated "partial membership" in the EU as European equities, especially the FTSE 100, traded on the losing side of the markets. 

Today's trading session has been a red tape for European indexes as the FTSE 100 trading at 7220.38, down -1.46% on the day, having posted a daily high at 7329.27 and low at 722038. Later the IBEX 35 trading at 9394.90, marginally down -0.16% having posted a daily high at 9429.00 and low at 9361.90, then the DAX trading at 11540.00, marginally down -0.13% having posted a daily high at 11583.43 and low at 11425.14, and finally the CAC 40 trading at 4859.69, down -0.46% on the day, having posted a daily high at 4889.16 and low at 4841.68.

Good Bye! Single Market

Lee Hardman, Analyst at MUFG, notes on today's speech, "Further reassurance has been provided by the government’s signal that it wants a transitional phase which would help to limit any initial Brexit disruption. Overall, the government has put forward an ambitious Brexit plan while acknowledging that negotiations with the EU will involve compromises. It remains to be seen how much of their plan that the UK government will be able to achieve. We remain hopeful that the UK and EU will both find it in their best interests to maintain favourable terms of trade and seek to dampen any disruption."

"In light of the update on the UK government’s Brexit plans, we have decided to leave our outlook for the pound unchanged for the year ahead. The plans were broadly in line with our expectations and have failed to trigger another adjustment lower for the pound. “Hard“ Brexit concerns may have just peaked in the near-term. We continue to believe that the bulk of the adjustment lower for the pound in response to Brexit concerns has already taken place which leaves the pound undervalued."

Elliott Wave Analysis: German Dax Intraday View

FTSE 100 Levels to consider

In terms of technical levels, upside barriers to consider in the FTSE 100 are up at the following resistances (daily chart): 7352, later 7578, and finally 7809. While support levels are aligned at 7122, then 6896 and below that 6660.

ftse100

Sterling will probably not hold the gain for long


19:01 GBP/USD volatility measures could spark profit taking

GBP/USD is capturing attention with its soaring volatility and northward streak.

The following technical observations are worthy of note: The search for a low in today's trading is reflected in the 2-standard deviation Bollinger Bands® expanding for several consecutive hours. Moreover, the near-term technical picture shows recent close prices respecting the 50 exponential moving average, a bullish condition confirmed by the SAR indicator.

Should the parabolic SAR switch direction the implications would be that longs are liquidating. Risks exist the volatility and unrelenting bid tone extend to higher time frames through the foreseeable future.

18:49 WTI licking wounds after sell-off from Saudi lead highs

WTI has started to settle after a significant drop from $53.38 down to $52.33 lows and currently trades $52.56 spot.

WTI has dropped, despite comments from Trump when he said that the US dollar was too strong over the weekend. Also, Saudi Arabia's energy minister said compliance with production cuts will help the market reach a balance between supply and demand by the middle of the year, which should be bullish for oil, but the rally did not last long and the price has dropped back from the highs.

Focus remain with the OPEC deal that although is in its early stages, the members have appeared committed so far and underpins a bullish tone towards $60.00 even as U.S. production has increased.  Focus will now torn to US output again this week and the US crude stockpiles data from API on Wednesday before the official EIA report, scheduled for release on Thursday.  The 200 dma is the big level to the downside to watch at 47.20 while $55.00 comes as the next psychological level to the top side.

 


18:48 United States 3-Month Bill Auction rose from previous 0.51%to 0.53%


18:48 United States 6-Month Bill Auction climbed from previous 0.59% to 0.605%


18:21 EUR/GBP: headed back towards 0.8000? - BTMU

Analysts at Bank of Tokyo mitsubishi explained that the market may now find it more difficult to find catalysts for fresh pound selling through the remainder of this year.

Key Quotes:

"The market’s focus could also shift away from Brexit to upcoming political risks in Europe helping to ease downward pressure on the pound in the coming months."

"It supports our view that the pound could be close to bottoming in the near-term especially against the euro. We expect EUR/GBP to fall back towards the 0.8000-level."


18:18 EUR/GBP drops to 0.8630, down more than 150 pips

The pound is having the best day in months across the board boosted after UK PM Theresa May speech regarding Brexit. EUR/GBP that traded above 0.8800 just printed a fresh weekly low 0.8629. 

It was trading at 0.8635/40, down 1.80% for the day, having the worst performance in months. 

May presented a speech signaling that there will not be a partial exit of the UK from the European Union. She said that the Parliament will vote on the final deal. The pound changed the tone dramatically, after opening on Monday with sharp losses across the board. 

UK PM said that they will leave the single market in order to gain control over immigration and also to be out of the jurisdiction of the European Court of Justice.

Technical levels

Today’s EUR/GBP bottom at 0.8630 is the immediate support level to consider, followed by 0.8605 (Dec 30 high) and 0.8540 (Dec 23 high). On the opposite direction, resistance now might lie at 0.8695 (Jan 13 low), 0.8745 (Jan 12 high) and 0.8815/20 (daily high). 

EUR/GBP


18:09 AUD/USD hesitates at 0.7560, US dollar rhetoric fades

Currently, AUD/USD is trading at 0.7546, up +0.92% on the day, having posted a daily high at 0.7563 and low at 0.7465.

The Australian dollar found renewed interest as market sentiment shifts due to PM May's conciliatory speech. It's evident that risk appetite increased and it is back on track as the pair gained 65-pips in the trading day. Later, AUD docket expects two news event: Westpac Consumer Confidence Index and Consumer Confidence readings. Although both have a moderate impact, the US dollar lacks catalysts, and any positive results can build further momentum to favor long-Aussie positions.  

RBA Ian Harper: recession risk downplayed

The Australian Business Review reports on the recession risk in Australia, "The Reserve Bank of Australia has indicated its growing concern around record levels of household debt, signaling a reluctance to lower interest rates further to avoid stoking the market. Sydney housing is already among the most expensive in the world.

"While the economy shrank 0.5 percent in the third quarter, the first contraction since early 2011, Mr. Harper downplayed the risk of recession, forecasting a rebound in economic activity."

AUD/USD Levels to consider

In terms of technical levels, on the daily chart, upside barriers aligned up to 0.7580 (previous support zone), 0.7680 resistance (previous resistance in Sept/Oct) and above that around 0.7770 (Nov. 2016 high). While supports are aligned at 0.7444 (value zone since Nov. 2016), 0.7317 (Nov. 2016 critical support) and below that around 0.7169 (Dec. 2016 low).

audusd

On the long-term view, although limited, the trading tone remains bullish and adding on pullbacks as long as prices do not break below 0.7469 near the 50 SMA. Furthermore, it is relevant to point that the Aussie trades against a critical resistance; 0.7542 (short-term 61.8% Fib). If prices close and open above such significant handle, then 0.7770 should be the immediate upside level to target and challenge.

audusd

AUD/USD analysis: Aussie remains strong, despite risk sentiment


18:04 GBP/JPY: hard rally post May s Brexit speech

Currently, GBP/JPY is trading at 139.85, up 1.74% on the day, having posted a daily high at 140.15 and low at 137.07.

PM May's conciliatory speech eases Hard-Brexit fears in the near-term - MUFG

GBP/JPY rallied hard on the back of UK P May's Brexit speech when She urged European officials not to "make Europe poorer to punish Britain". She has confirmed that the UK will leave Europe's single market, but will seek a deal that gives the greatest possible access, essentially warning Europe will suffer too if agreement can't be reached. She added that "no deal for Britain is better than a bad deal" and that if there was no deal, the UK can still trade (under WTO rules) and that (in a not particularly veiled threat), the UK has the freedom to set tax rates to attract foreign businesses, as explained by analysts at ING Bank, adding, "Moreover, not signing a deal with the UK would disrupt European supply chains and create barriers to exporting to the UK from Europe. She urged European officials not to "make Europe poorer to punish Britain".

GBP/JPY levels

Spot is presently trading at 139.86, and next resistance can be seen at 139.96 (Daily Classic R3), 140.15 (Daily High), 140.72 (Hourly 200 SMA), 140.81 (Weekly Classic PP) and 140.84 (Weekly High). Support below can be found at 139.10 (Hourly 100 SMA), 139.06 (Daily Classic R2), 138.27 (Daily Classic R1), 138.16 (Yesterday's High) and 138.14 (Hourly 20 EMA).


18:03 GBP/JPY stages powerful rally

Accordingly to the 1-hour MACD, the runaway GBP/JPY market has reached its highest intraday momentum of the last month of trading.

Caution is advised not to trade into a buying climax as a torrent of selling could very well ensue. This could take the form of short-term profit taking or long-term sellers joining the market. The just printed hourly MACD value shows less acceleration, an early sign of a possible plunge in GBP/JPY price action.

17:55 GBP/USD approaches 1.2400, 2-week tops

The Sterling is the best performer by far on Tuesday, lifting GBP/USD to the boundaries of the 1.2400 handle, up more than 3%.

GBP/USD boosted by May, USD

The persistent selling pressure around the buck has been bolstering the upside in the pair since early today, although GBP found extra legs in the speech by UK’s PM Theresa May earlier in the session.

In fact, PM T.May highlighted the UK is leaving the EU and not Europe, although she ruled out staying in the single market. May stressed she wants to put her Brexit plans to a parliamentary vote, reiterating that she expects to maintain strong links with the euro area, calling at the same time for a more united UK.

GBP’s upside momentum has been also supported by higher-than-expected consumer prices during December, with the CPI rising at an annualized 1.6%.

GBP/USD levels to consider

As of writing the pair is gaining 2.67% at 1.2370 and a breakout of 1.2397 (high Jan.17) would aim for 1.2437 (high Jan.6) and finally 1.2564 (100-day sma). On the downside, the immediate support aligns at 1.2039 (low Jan.17) ahead of 1.1979 (low Jan.16) and then 1.1450 (GBP ‘flash crash’ Oct.7).

 


17:41 Fiscal policy uncertain, could affect monetary policy FOMCs L.Brainard

Lael Brainard, member of the Board of Governors of the FOMC, said on Tuesday that fiscal policy remains uncertain and carries the potential to affect monetary policy, while fiscal stimulus near full employment could prompt rate hikes.

In addition, Brainard argued that gradual normalization stays appropriate, although monetary policy adjustment could be faster than initially expected. He added that market expectations for hikes remain closer to the ‘dot plot’.


17:09 Gold rallies around 2% near $1,220

The ounce troy of the precious metal has climbed to fresh 2-month highs beyond the key barrier at $1,200 on Thursday backed by the persistent offered tone around the Dollar.

Gold stronger on Dollar weakness

USD continues to recede ground so far this week as Trumphoria seems to have lost momentum, helping at the same time the risk-associated assets to regain part of the ground lost in the recent USD-rally.

The sharp sell off in the buck seems to have been originated in recent comments by D.Trump, citing the greenback as (too?) strong, although the context was vs. the Chinese Yuan. Adding to this view, NY Fed W.Dudley argued earlier today that the strong Dollar could be a drag on imports and domestic prices.

Gold key levels

As of writing Gold is gaining 1.53% at $1,214.65 and a breakout of $1,219.05 (50% Fibo of the 2016 up move) would aim for $1,232.61 (100-day sma) and then $1,255.83 (38.2% Fibo of the 2016 up move). On the other hand, the next support is located at $1,182.27 (61.8% Fibo of the 2016 up move) ahead of 1,181.74 (55-day sma) and finally $1,176.50 (low Jan.11).


17:03 US stocks trade in red amid uncertainty over Trump s fiscal policies

Major US equity indices opened lower on Tuesday amid growing uncertainty over the incoming Trump administration's fiscal policies following President-elect Donald Trump's remarks on strong US Dollar. In an interview to the Wall Street Journal, Trump said that a strong US Dollar was killing competitiveness of domestic companies. 

Meanwhile, comments from UK Prime Minister Theresa May that the final Brexit deal would be put for a vote in both Houses of the Parliament eased market jitters and limited the losses. Also supporting the indices were upbeat results from Morgan Stanley and UnitedHealth Group Inc.

At the time of report, the Dow Jones Industrial Average was down around 60-points to 19,825, while the broader S&P 500 Index lost 8-points to 2,266. Meanwhile, tech-heavy Nasdaq Composite Index fell over 30-points to 5,543.

In other markets, the US treasury bond yields were slammed across all maturities, while the greenback remained under intense selling pressure with the key US Dollar Index losing over 1.0% for the day and plummeting closer to 100.00 psychological mark.

 


17:02 GBP/USD short-term extreme overbought

The 4hr RSI was printing below 50% most of the last three weeks and recently broke above the 60% mark.

GBP/USD was in sell mode -the 50SMA placed below the 200SMA on 4hr charts-, until it failed to cooperate with these trend indicators. Now the oscillators point to a short-term extreme overbought zone which may allow sellers to adhere to a continuation move with the prevailing down trend.

However, should the pair extend its recovery from multi-week lows into a new trend, short positions may require a contingency plan.

17:01 GBP/USD back above a key SMA

The 200-period simple moving average, immediate resistance on 4hr chart, was hurdled in recent GBP/USD trading.

The GBP/USD was quoting below this dynamic resistance for at least two weeks. Now it could target the 800-SMA on the upside.

17:01 AUD/NZD momentum switched to negative

Increased downward momentum in the AUD/NZD has brought the 4hr MACD to step in the red zone.

This technical condition would certainly not be of much help if the MACD hasn't been under zero for at least one week of trading. This reinforces the argument that room for further AUD/NZD depreciation is there.

The signal may be either taken by trend-following traders as a trigger to liquidate long positions as by potential sellers to prepare their short commitments.

16:43 PM May s conciliatory speech eases Hard-Brexit fears in the near-term - MUFG

Lee Hardman, Currency Analyst at MUFG, shared important comments regarding Prime Minister May’s Brexit strategy. 

Key Quotes

"UK Prime Minister May made a good speech in our view which was very conciliatory in tone and even promised parliament a vote on the final Brexit deal. The speech is helping to ease fears in the near-term over a “hard” and more disruptive Brexit adjustment. The key aims of the UK government make a lot of sense to us and are broadly in line with our expectations for the UK’s Brexit plan. The government soundly realises it would be an impossible task to remain a full-member of the single market, and instead will aim to strike a bold and comprehensive free trade agreement with the EU. The “cleaner” Brexit plan should help to smooth the Brexit negotiations."

"The government hopes that the free trade agreement could maintain the greatest possible access to the EU which may take in some elements of the single market. It is even willing to continue paying into the EU budget to maintain the greatest possible access. It also hopes to strike a bespoke agreement to remain part of the customs union. However, a new customs union agreement has to allow the UK to strike its own trade agreements with non-EU countries." 

"Further reassurance has been provided by the government’s signal that it wants a transitional phase which would help to limit any initial Brexit disruption. Overall, the government has put forward an ambitious Brexit plan while acknowledging that negotiations with the EU will involve compromises. It remains to be seen how much of their plan that the UK government will be able to achieve. We remain hopeful that the UK and EU will both find it in their best interests to maintain favourable terms of trade and seek to dampen any disruption."

"In light of the update on the UK government’s Brexit plans, we have decided to leave our outlook for the pound unchanged for the year ahead. The plans were broadly in line with our expectations and have failed to trigger another adjustment lower for the pound. “Hard“ Brexit concerns may have just peaked in the near-term. We continue to believe that the bulk of the adjustment lower for the pound in response to Brexit concerns has already taken place which leaves the pound undervalued."

"The main downside risk for the pound going forward is that the negotiations between the UK and EU could break down thereby increasing the likelihood of a more disorderly Brexit. However, we doubt that talks could break down as early as this year. The conciliatory tone of the UK government’s comments and plan for a “cleaner” Brexit have further dampened the risk of a more disorderly Brexit."

Sterling will probably not hold the gain for long 


16:41 New Zealand GDT Price Index: 0.6% vs -3.9%


16:34 United Kingdom CB Leading Economic Index dipped from previous 0.1%to 0% in December


16:32 NZD/USD taps 0.7200 handle after GDT price index

The NZD/USD pair was seen building on to its break-out momentum above the very important 200-day SMA and has now surged to the highest level since mid-December.

Plunging US treasury bond yields has kept selling pressure around the US Dollar intact and is seen boosting demand for higher-yielding currencies - like the Kiwi. Meanwhile, the release of Empire state manufacturing index provided little respite for US Dollar bulls.

Meanwhile, the outcome of latest dairy auction, showing a rise in the GDT dairy price index by 0.6% as compared a sharp fall of 3.9% at the last auction, provided an additional boost and helped the pair to extend its near-term bullish trajectory to a 5-week high. The pair was last seen hovering around 0.7200 handle, with strong gains over 1.3% for the day.

Technical levels to watch

A follow through buying interest beyond 0.7223 (Dec. 8 high) is likely to confront resistance near 0.7237 area (Dec. 14 high) above which the pair seem all set to head towards its next resistance near 0.7280 region.

On the downside, 200-day SMA near 0.7155-50 region now becomes immediate support, which if broken is likely to accelerate the slide back towards 0.7100 round figure mark, with some intermediate support near 0.7125 region.

 


16:08 Economic expansion expected to continue FOMCs Dudley

William Dudley, President of the New York Fed (voter, centrist), said on Tuesday that the likeliness of a shift to a much tighter monetary policy is quite low.

He added that inflation trends stay ‘very subdued’, while noting that the strong Dollar remains a drag on import and domestic prices.

Dudley, however, remains optimistic on a continuation of the economic expansion.


16:05 WTI clings to strong gains beyond $53.00 handle

WTI crude oil extended overnight gains and managed to move back above $53.00/barrel mark on Tuesday. 

Currently trading close to session peak, around $53.20-25 band, the black gold continues to benefit from positive comments from Saudi Arabia, OPEC's de facto leader, that oil market would rebalance by the end of the first half of 2017 and that it would adhere to its production cut pact between OPEC cartel and other major non-OPEC producers. 

Adding to this, a sharp slide in the US Dollar, led by a slump in the US treasury bond yields, provided an additional boost to the dollar-denominated commodities - like oil.

Investors will now be watching for signs of rise in US output as it could offset the effect of supply cut agreement between major oil producers. Hence, focus would be on the US crude stockpiles data from API on Wednesday and the official EIA report, scheduled for release on Thursday.

Technical levels to watch

Immediate upside resistance is seen at $53.50 (Jan. 12 high) above which the commodity seems to head towards $53.85 intermediate resistance, en-route $54.00 round figure mark. On the downside, renewed weakness below $53.00 handle could get extended towards $52.55 intermediate support ahead of $52.15 area (yesterday’s low).

 


16:02 EUR/USD stays firm, albeit off highs above 1.0700

After clinching fresh tops near 1.0720 in early trade, EUR/USD has now returned to the 1.0675/70 band.

EUR/USD boosted by USD-selling

Spot has advanced to fresh multi-week tops beyond 1.0700 the figure, as the increasing selling tone surrounding the buck continues to prop up the rebound in the riskier assets.

However, the bull run seems to have lost momentum in light of the strong rebound in GBP, which has in turn triggered a sharp sell off in EUR/GBP following the earlier speech by UK’s PM Theresa May.

Previously, mixed ZEW results in Germany and the euro area passed largely unnoticed, while the US Empire State manufacturing index missed estimates for the month of January, adding further downside pressure to USD.

EUR/USD levels to watch

The pair is now gaining 0.78% at 1.0684 and a break above 1.0719 (high Jan.17) would target 1.0798 (high Dec.5) en route to 1.0873 (high Dec.8). On the other hand, the next support lines up at 1.0577 (low Jan.16) followed by 1.0259 (20-day sma) and finally 1.0452 (low Jan.11).

 


16:02 Depressed EUR/GBP falls below key SMA

EUR/GBP has just crossed below its 200-hour SMA. The last such price-indicator cross has been registered at least over a week ago on this time frame, accentuating its significance.

Traders maintaining a downside bias, extend their projections to the 800-SMA, which corresponds to the 200-SMA on 4hr charts.

16:01 USD/JPY bounces off lows, bulls survive around 113.12

Currently, USD/JPY is trading at 113.12, down -0.90% on the day, having posted a daily high at 114.28 and low at 112.73.

When market participants were expecting the worst risk outcome, Theresa May's Global Britain and Brexit strategy plan, delivered a refreshing calm to international trade partners watching the broadcast. Furthermore, USD/JPY bulls were saved from crashing towards the psychological 112.00 mark due to a strong unity message and brighter days ahead for the UK amid the impending exit from the European Union. The expected chaos fades, at least in the short-term. 

PM May's positive message; Global Britain not a dream

James Knightley, Senior Economist at ING, shares important notes from British Prime Minister Theresa May' Brexit game plan:  
“She assumes that in the negotiations all participants will be “economically rational”. However, she acknowledged that some European officials may want to make an example of the UK. She stated that such actions would amount to “calamitous self-harm and not [be] the act of a friend”. In this regard she added that “no deal for Britain is better than a bad deal” and that if there was no deal, the UK can still trade (under WTO rules) and that (in a not particularly veiled threat), the UK has the freedom to set tax rates to attract foreign businesses. Moreover, not signing a deal with the UK would disrupt European supply chains and create barriers to exporting to the UK from Europe. She urged European officials not to “make Europe poorer to punish Britain”.”

Trump's Comments Send the Dollar Reeling

“In terms of the deal, she still assumes that both the divorce and the new trading environment with the EU can be agreed within the 2-year window set under Article 50. She dismissed the notion of an “unlimited transitional period”. Instead, she wants a “phased process of implementation” that would allow a “smooth and orderly Brexit”.”

USD/JPY Levels to consider
In terms of technical levels, the US dollar vs. Japanese yen recovered almost 40-pips from today's low. However, this should not be considered a scenario where bulls are back; not yet. Then, upside barriers are aligned up at 114.27 (today's high), 115.43 (Jan. 13, high) and above that at 116.85 (Jan. 11, high). While supports are aligned down at 112.73 (today's low), 111.35 (Nov. 28, low) and below that at 110.26 (Nov. 22, low).   

usdjpy

On the long-term view, bulls are trading above water after an energized Brexit speech. If in the next trading session prices do not close and open above its 100 weekly SMA, there is a bearish tone to keep playing towards 111.13 (short-term 38.2% Fib) and later, 109.55 (short-term 23.6% Fib). Without tangible actions, 118.72 seems a target far, far away for dollar bulls; not even a tweet can save those long positions anymore. 

usdjpy

Profit taken on USD/JPY short


15:31 United States NY Empire State Manufacturing Index registered at 6.5, below expectations (8.5) in January


15:21 GBP/USD takes a breather after over 200-pips sharp spike to 1.2350 area

The GBP/USD pair was seen building on to its strong recovery move and has now reclaimed control over 1.2300 handle.

A strong short-covering rally around British Pound, following UK PM Theresa May's much awaited speech on Brexit, helped the pair to recover over 300-pips from Monday's post flash-crash drop below 1.20 psychological mark. May's comments that the final Brexit plan would be put forward for a vote in both Houses of the Parliament surprised market participants and forced traders to cover their bearish bets, initiated in anticipation of comments on "hard Brexit”. 

As the dust settled, bulls took a breather following a sharp rally to seven-day rally amid mild greenback bounce from lows, as measured by the key US Dollar Index. The pair has now retreated few pips from session peak and is currently trading around 1.2320-25 region. 

Next in focus would be US economic docket featuring the release of Empire state manufacturing index and Fedspeaks, which would be looked upon for some additional respite for the US Dollar bulls. 

Technical levels to watch

1.2350 level now seems to have emerged as immediate resistance, which if cleared seems to lift the pair towards 1.2375 intermediate resistance, en-route 1.2400 handle and 1.2430 strong horizontal resistance (Jan. 5-6 highs). 

On the flip side, 1.2275-70 area seems to protect immediate downside, which if broken is likely to drag the pair back towards 1.2215-10 support area.

 


15:11 UK PM May s Brexit speech: Having her cake and eating it? - ING

James Knightley, Senior Economist at ING, notes that the British Prime Minister Theresa May has confirmed that the UK will leave Europe's single market, but will seek a deal that gives the greatest possible access, warning Europe will suffer too if agreement can’t be reached. 

Key Quotes

“Prime Minister Theresa May has set out her vision for Brexit and has confirmed that the UK will “not seek membership of the single market, but the greatest possible access to it”. This would include elements of the single market, but not all i.e. free movement of labour, in what would be a “bold and ambitious” agreement. She added that the final deal would put to a vote in parliament – both the House of Commons and the House of Lords.”

“She assumes that in the negotiations all participants will be “economically rational”. However she acknowledged that some European officials may want to make an example of the UK. She stated that such actions would amount to “calamitous self-harm and not [be] the act of a friend”. In this regard she added that “no deal for Britain is better than a bad deal” and that if there was no deal, the UK can still trade (under WTO rules) and that (in a not particularly veiled threat), the UK has the freedom to set tax rates to attract foreign businesses. Moreover, not signing a deal with the UK would disrupt European supply chains and create barriers to exporting to the UK from Europe. She urged European officials not to “make Europe poorer to punish Britain”.”

“In terms of the deal, she still assumes that both the divorce and the new trading environment with the EU can be agreed within the 2 year window set under Article 50. She dismissed the notion of an “unlimited transitional period”. Instead she wants a “phased process of implementation” that would allow a “smooth and orderly Brexit”.”

“However, we feel that this is an optimistic assessment. The UK doesn’t really have 2 years to negotiate, as outlined by Michel Barnier , the EU’s lead Brexit negotiator. There will be a 1-3 month period of preparation at the beginning and then 4-5 months at the end where the deal has to be approved by all of the national parliaments in the EU along with the UK parliament. This leaves just 15-18 months for real negotiations. As we saw with Wallonia and the Canadian-EU trade deal there are risks of delays – in any case Canada’s own trade deal took seven years to negotiate. We also have to consider that the election calendar in Europe is not particularly helpful in this process.”

“We now await the response from Europe…”


15:08 USD investors need more than just rhetoric to sustain a rally - Rabobank

Research Team at Rabobank suggests that the wobble in the USD since the start of the year has been evidence that investors need more than just rhetoric to sustain a rally.

Key Quotes

“The gains in the USD and US stocks into the end of last year were built around the assumption that Trump would slash regulation and increase fiscal spending to unleash a faster pace of economic growth.  While Trump failed to put any meat of the bones of his fiscal policies at last week’s press conference, the market is hopeful that Friday’s inauguration address may provide some detail.”

“Meanwhile Fed Chair Yellen is scheduled to deliver two separate speeches this week on Wednesday and Thursday night.  US economic data so far this year have produced adequate results, though it has not been exciting enough to warrant a continuation of enthusiasm demonstrated by the markets into the end of last year.  The Fed’s Bullard last week maintained a fairly pragmatic view on the US economy projecting only limited movements in rates and suggesting that there should not be any undue inflation.  Comments from Kaplan earlier last week were more upbeat.” 

“In addition to Yellen’s speeches and Trump’s January 20 inauguration, US CPI and industrial production data on Wednesday will be of note.”


15:01 GBP/USD powerful rally threated

From an hourly perspective, the GBP/USD has reached its highest momentum reading of the last 20 days of trading.

Recent GBP/USD longs are speculative and likely vulnerable. Unless they are fed with comforting releases, a torrent of selling could very well ensue in the form of profit taking and/or forced liquidation.

With the fresh printed hourly MACD showing less acceleration, the prospect for a base building or correction in the near future looks to be quite realistic.

14:52 EUR/GBP plummets below 0.8700 handle

The British Pound attracted strong buying interest after UK PM Theresa May's Brexit speech, with the EUR/GBP cross filling weekly gap higher and plummeting below 0.8700 handle.

At her much awaited speech May said Britain will not seek ‘partial’ EU membership and that the government will put final Brexit deal for a vote in both Houses of the Parliament. Additional comments that UK will not be paying huge sums to EU budget in order to gain access to the lucrative European Union's single market. 

Clarity on the process of Brexit eased some of market concerns of a 'hard Brexit' and triggered a sharp short-covering rally in the British Pound across the board, dragging the cross to a three-day low level of 0.8670. 

Technical levels to watch

Immediate support is seen near 0.8760 level below which the cross is likely to slide further towards 0.8635 level ahead of 0.8615-10 support area. On the upside, 0.8700 handle now becomes immediate resistance, which if cleared seems to lift the cross back beyond 0.8720 resistance, towards its next hurdle near 0.8755-60 region.

 


14:45 Germany: ZEW had a little perceptible impact - BBH

Analysts at BBH note that the German ZEW had a little perceptible impact as the January reading saw improvement, more in the assessment of the current situation (77.3 from 63.5 and 65.0 median guesstimates in the Bloomberg survey) than in expectations (16.6 from 13.8 and 18.4 median).  

Key Quotes

“The final estimate of Germany's December CPI will be released tomorrow.  It is expected to confirm the 1.7% preliminary estimate, and is a timely reminder ahead of the ECB meeting of the challenges of a one-zone fits all monetary policy.”


14:41 AUD/NZD: Flows point to growing appetite for upside - Westpac

Richard Franulovich, Research Analyst at Westpac, suggests that their real money and sovereign client flows point to an improved flow based backdrop for AUD/NZD near term strength.

Key Quotes

“Appetite for NZD has been fairly neutral in recent months both on the real money and sovereign fronts.”

“Against that real money appetite for AUD has been firming while sovereign interest in AUD continues to cool. The lack of sovereign interest in AUD fits the broad global trend of falling central bank reserves as capital outflows from Asia continue apace. Firming real money demand for AUD of course does not fit the Trump reflation story but it is not entirely out of sync with the atmospherics around AUD –China’s growth picture remains stable, bulk commodity prices have risen sharply and the RBA appears reluctant to cut rates. Either way, persistent real money inflow into AUD outpaces the lack of sovereign interest leaving the overall long term client flow picture a net positive for AUD  and overall much stronger than in NZD.”

“In the last 18 months appetite for AUD relative to NZD has taken on a contrarian profile vis-à-vis price action in the cross. Every time the cross has made a sustained push lower demand for NZD has evaporated relative to AUD and vice versa (see panel two). In the last three months flows into AUD have once again firmed relative to NZD, consistent with the cross trading with a heavy bias below 1.08 over much of that period.”

“It’s too early to tell whether a more profound shift in AUD client demand relative to NZD is taking place but for the time being the clear message is that there is more appetite for AUD than NZD. That would be consistent with the AUD/NZD cross finding a low recently just below 1.04. Of course as the cross continues to firm the contrarian profile to our flows suggests that appetite for AUD will begin to dry up relative to NZD, but we are not there yet.”


14:32 GBP/USD extends strong recovery move beyond 1.2250 level

The GBP/USD pair continues to gain strong buying interest during UK PM Theresa May's much awaited speech on Brexit.

The pair surged beyond mid-1.2200s as market cheered news that the government will put final Brexit deal for a vote in both Houses of the Parliament. Bulls also benefited from May's comments that Britain will work with Scotland, Wales, and Northern Ireland on Brexit.

May further added UK will not be paying huge sums to EU budget but only an appropriate contribution to gain access to the lucrative European Union's single market and echoed earlier statement from UK Finance Minister Philip Hammond that Britain would seek a comprehensive free trade arrangement with the Union. 

Market seems to have liked the proposal of the Parliament vote and government’s efforts to deliver a ‘clean Brexit’. Meanwhile, possibility of some stops getting triggered on a decisive move above 1.2200 handle could have also collaborated to the pair's strong up-surge in the last hour.

Technical levels to watch

Bulls would be aiming to clear 1.2265-70 immediate resistance above which the pair seems all set to reclaim 1.2300 handle and head towards 1.2315-20 resistance area (Jan. 12 high). On the downside, 1.2215-10 area now becomes immediate support, which if broken could accelerate the slide back towards 1.2160-55 region ahead of 1.2120-15 support area.

 


14:30 USD at its weakest against the CNY since mid-November - BBH

Analysts at BBH note that the USD lost 0.6% against the Chinese yuan and at a little below CNY6.86, the dollar is at its weakest against the yuan since mid-November. 

Key Quotes

“While this likely reflects the broadly weaker dollar, China's overnight repo rate jumped 23 bp to 2.40%.  This does not seem to be tied to the short squeeze officials engineered early this month in the offshore yuan.  Instead, the onshore pressure comes from the tightening of conditions ahead of the Lunar New Year holidays.  The PBOC has tried to offset the shortage by injecting a relatively large amount (net CNY270 bln or ~$39 bln) the most since last January.  The Lunar New Year holiday runs from January 27 through February 2.” 


14:26 NZD/USD: Consolidation pivot areas being defined Westpac

In view of the Tim Riddell, Research Analyst at Westpac, recent sharp rebounds and positive turns in weekly momentum of NZD/USD suggest that a solid base has for 1Q’17 formed at 0.7145-60.

Key Quotes

“Current rebounds remain within a tight uptrend but show signs of maturing above 0.7500, so forming an inter-week top. Daily momentum is high but not yet turning, so a top is still to be confirmed, The next decent move is likely to involve a test of the 0.6965-0.7000 area.”

“Until a top is confirmed, the uptrend could still force a final squeeze before the anticipated pullback develops.”

“A break below 0.7070 would increase the likelihood of an early and deeper pullback. As with AUD, the style and depth of the next pullback will determine the profile of subsequent squeezes higher.”

Conclusion: Broad consolidation patterns are forming. Rebounds off 0.6860-65 are near to completion Dips are seen as interim moves before another squeeze higher develops.”


14:26 We want customs agreement with EU UK s PM T.May

UK’s Prime Minister Theresa May added at today’s speech:

“UK must be free to clinch deals with any non-EU countries”.

“‘Cliff Edge’ after Brexit is in no one’s interest”.

“UK wants to reach an agreement with EU within 2 year”

“We don’t want to undermine the single market or the European Union”.


14:21 USD losses against the yen are being extended today - BBH

Research Team at BBH notes that the dollar's recent losses against the yen are being extended today as the greenback fell to almost JPY113.00, its lowest level since December 5.  

Key Quotes

“In addition to the broad dollar decline today, other drivers seem to be also encouraging short-covering of previously sold yen positions.  US 10-year yields are six basis points lower at 2.33%.  The low point last week was almost 2.30%.  Recall that the yield peaked near 2.64% in the middle of December.  Also, US equities are trading lower, with the S&P are called to open around 0.5% lower.   The Nikkei itself gapped lower (gap:19043-19061) and closed off 1.5%, for its biggest loss since the US election.  It closed on its lows, which has not been seen since December 8.”


14:15 We are leaving the EU but not leaving Europe PM T.May

UK’s PM Theresa May added:

“What I propose means cannot be member of single market”.

“UK will regain control immigrants from EU”.

“We will seek greatest access to the EU single market, not membership”.

“UK will not be required to contribute large sums to EU budget”.


14:09 Trump s comments likely weighed on the dollar - BBH

Analysts at BBH note that the US dollar is broadly lower against major and emerging market currencies and has given up yesterday's gains and more as the proximate cause appears to be comments by President-elect Trump in a Wall Street Journal interview.  

Key Quotes

“There are two parts of Trump's comments that would have likely weighed on the dollar separately, and together they seem to be worth between 0.5% and 1.0% for the major currencies.  First, Trump pushed against the "border adjustment" plan from Republicans that would have taxed imports and exempted exports.  He said it was "too complicated."  Recall, many economics, including Harvard's Martin Feldstein, argued that the tax would spur an "automatic" 20-25% increase in the dollar.”

“Second, Trump specifically said the dollar was too strong.  The context was about China, but the remarks seemed to have broader implications.  "Our companies can't compete with them [China] now because our currency is too strong.  And it is killing us."  He said the yuan was "dropping like a rock" and the central bank was supported it simply "because they don't want us to get angry."  

“The investment community, like Americans themselves, is grappling with how literal to take the seemingly visceral remarks.  Some of the strident positions taken during the campaign have been softened, including the nomination of at least five men from Goldman Sachs, not pushing for criminal charges against Clinton, and citing China as a currency market manipulator on Day 1 (which, in any event, is now said to be not the day after inauguration but Monday January 23).  It is the uncertainty that is weighing on the greenback today.”

“In the larger picture, of the numerous factors that impact foreign exchange rates, the wish and desires of officials do not often seem to be particularly salient.  Our long-term bullish outlook for the dollar is based on the divergence of monetary policy, the relative health of the financial system, the anticipated policy mix, and the uncertainty surrounding this year's elections in Europe.”

 

 


14:07 UK will take back control of its laws - PM T.May

At her much awaited speech today, UK’s PM Theresa May said:

“We will not seek partial or associate membership of EU”.

“We seek a new and equal partnership with EU”.

“The Government will put the final Brexit deal to a vote in both houses of Parliament”.


14:05 USD: Congress versus Trump coming into focus MUFG

Another reason why the dollar may run out of steam later this year is the potential for optimism related to US economic growth under President-elect Trump to fade expects Derek Halpenny, European Head of GMR at MUFG.

Key Quotes

“The IMF has signalled a likely positive effect with 2017 real GDP growth revised 0.1ppt higher to 2.3% while 2018 growth was revised more notably by 0.4ppt to 2.8%. The IMF did stress a wider than usual probability range due to greater uncertainty with the potential for fiscal stimulus to fuel even stronger growth but also highlighted that tightening financial market conditions could have a greater negative impact.”

“We clearly will have to wait and see what happens in the weeks and months following Friday’s inauguration. We expect much greater focus on comments from Paul Ryan – House Speaker – who in the past has indicated a desire for pursuing a legislative agenda focused on tax cuts and to a lesser degree infrastructure spending. Steps in that direction early on in Trump’s presidency will revive reflation optimism that has faded somewhat since the turn of the year.”

“Interestingly, a Wall Street Journal article (reported as being from Friday but updated at 11:47pm ET yesterday) is getting some attention as it highlights disagreement over House plans for a border tax which Trump called too complicated. The article also cites Trump as claiming the dollar was “already too strong” although this appears in specific reference to USD/CNY. How markets perceive the White House/Congress relationship will be key to shaping expectations on Trump reflation plans proceeding smoothly and the signs so far are not good.”


14:04 Financial services freedom must be in Brexit deal Chancellor Hammond

At his speech today, Chancellor P.Hammond said:

“Currency volatility introduces additional element for foreign purchases of UK government debt”.

“Will go forward understanding we cannot be members of single EU market”.

“Important that EU banks can continue operating in UK and vice versa”.


14:02 Investment remains a weak spot while Eurozone bank lending picks up - ING

Teunis Brosens, Senior Economist at ING, suggests that while low rates result in increasing demand for bank loans, most of it is fuelling housing markets but few loans result in additional business investment.

Key Quotes

“The slow but steady strengthening of the Eurozone economy is reflected in bank lending activity. According to the ECB’s Bank Lending Survey, banks saw a further increase in household mortgage demand in 4Q, with a net 36% of banks reporting higher demand (up from 23% in 3Q). Low rates, together with improving housing market prospoects, are the main driver. Mortgage demand was particularly strong in Italy and the Netherlands.”

“A sustainable recovery should not only depend on the housing market, but also on business activity. Here the survey data is more mixed. A mere net 16% of banks reported increasing business loan demand in 4Q. For now, business loan demand is failing to pick up steam. What is more, it is disappointing to see that only a net 2% of banks reported that business loan demand was strengthening as more investment was being planned. Taking advantage of low rates as well as financing M&A activity are much more important drivers for increasing demand.”

“On the ECB's uinconventional monetary policies, the bank lending survey shows that 60% of banks participated in the June 2016 round of TLTRO-II financing (when almost €400bn was borrowed, mostly replacing funding under the earlier TLTRO-I programme). Most funding needs appear to have been satisfied in June: only 37% of banks participated in the December 2016 round and just 26% of banks plan to participate in the upcoming March TLTRO-II.”

“For the majority of participating banks, the profitability of the scheme was the main motive to participate. Banks that did not participate cited a lack of funding problems and the cost of holding liquidity given the ECB’s negative deposit rate. The programme appears quite effective at realising its goal of increasing lending to the economy: 52% of banks say they use TLTRO-funding to lend to businesses, while 8% say they lend funds to households. The main other use of TLTRO-II-funding is the replacement of other sources of funding.”

“With unconventional monetary policies having their desired effects, and an extension of QE already announced until December, it is hard to think of a reason for Draghi to announce any change at Thursday's ECB governing council meeting.”


14:00 GBP/USD surges past 1.2200 handle as Mays Brexit speech gets underway

The buying interest surrounding the British Pound gained pace as the UK PM Theresa May’s much awaited Brexit speech gets underway, helping the GBP/USD pair to move back above 1.2200 handle.

May's initial comments that Britain would not retain ‘partial’ EU membership and it’s government’s job to deliver a ‘clean Brexit’ triggered by end March sparked a sharp rally in the GBP/USD major. May also reconfirmed that Article 50 would be triggered by end of March and the process of ending Britain’s membership with the European Union would be completed by March 2019.

Meanwhile, persistent US Dollar selling pressure further collaborated to the pair's strong follow through recovery move from post flash-crash low below 1.20 psychological mark.

Technical levels to watch

A follow through buying interest above 1.2200 handle, leading a subsequent strength above 1.2220-30 resistance area, might now trigger a sharp short-covering rally 1.2280-85 resistance area, en-route 1.2300 round figure mark.

On the downside, weakness below 1.2150 immediate support could accelerate the slide back towards 1.2100 handle, ahead of its next major support near 1.2070-65 region.

 

 


13:55 ECB Bank Lending data released today MUFG

Derek Halpenny, European Head of GMR at MUFG, suggests that the quarterly Bank Lending Survey will be released today and while not a market mover is always an important report given the emphasis the ECB places on the report.

Key Quotes

“President Draghi has cited the report in the past as providing evidence of the success of QE. Given the turmoil in Italian banks over recent months, the report may provide insight into the impact of that uncertainty.”

“Weak banks and political uncertainty are two factors that will ensure the ECB maintains its dovish bias even in circumstances of evidence of rising inflation. ECB Executive Board Member Praet spoke in Paris yesterday and emphasised that the focus of policy remains avoiding a slip into “a sort of deflationary trap” which was still possible given the length of the crisis was a “really big problem”.”

“The ECB meets later this week and today’s BLS may well shape to some degree the tone of communications although Praet’s comments yesterday signal the ECB remains focused on downside risks to price stability. While those risks may have begun to shift we suspect the shift is too recent to prompt any notable shift in ECB policy bias. Continued dovishness this week will help limit EUR upside from here.”


13:51 UK inflation surges to 2 and a half year high - ING

According to James Knightley, Senior Economist at ING, rising import prices relating to sterling's plunge is set to push the UK inflation above 3% later this year.

Key Quotes

“UK consumer Price inflation has spiked to a 2 and a half year high of 1.6%YoY in December from 1.2% in November. This was above the 1.4% consensus. Sterling’s plunge is the key factor driving this move given the rise in import prices. So far it is most evident in the energy component, which is rising 4.3%YoY, but food is also starting to put in a big swing given 40% of the food in the UK is imported. Food prices are falling 0.1%YoY having been falling 1%YoY for the past few months. Clothing prices have also been picking up.”

“With retailers warning of higher shop prices in coming months we expect other categories to experience sharply higher prices. Note that pipeline price pressures are accelerating with producer input price inflation jumping to 15.8%YoY from 13.3% while output prices rose 2.7%YoY.”

“Households are prepared for this with the You/Gov Citi inflation expectations series jumping to 2.5% from 1.7% in the space of a month last year. It looks as though inflation will break above 3% in the second half of this year, but we doubt that the Bank of England will respond with higher interest rates. Inflation has risen above 5% on two occasions since the Global Financial Crisis and the BoE has “looked through” this on both occasions.”

“The 2008 and 2011 inflation spikes were primarily caused by currency depreciation, commodity price rises and VAT hikes. However we don’t expect surging commodity prices or any other VAT hikes this time round, so the inflation peak should be lower. Instead, the risks to growth relating to Brexit uncertainty is likely to heavily influence the BoE’s thinking, while a squeeze on spending power from higher inflation may also weaken consumer spending. Rates are unlikely to be changed this year.”


13:47 Theresa May Brexit Speech - UK PM Coverage Today

Bristish Prime Minister Theresa May is expected to announce clean Brexit on her speech scheduled for today.

According to the information realeased by her office, May will dimiss a partial EU membership. The announcement will take place at Lancaster House and could be the most important speech regarding the strategy followed by the United Kingdom during next months in terms of Brexit. "Brexit means Brexit", has repeated May, soft or hard labels will be avoided in PM's discourse, but instead, the idea of a clean break with the EU will be set as the main priority. PM's announcement is expected to affect markets since the content of her speech has already been advanced partially and the Bristish currency plunged to $1.1986 yesterday:

“We seek a new and equal partnership – between an independent, self-governing, global Britain and our friends and allies in the EU. Not partial membership of the European Union, associate membership of the European Union or anything that leaves us half-in, half-out.”  

“We do not seek to adopt a model already enjoyed by other countries. We do not seek to hold on to bits of membership as we leave. The United Kingdom is leaving the European Union. My job is to get the right deal for Britain as we do.”


13:46 UK: Predictable pound selling yesterday might not last - MUFG

According to the Derek Halpenny, European Head of GMR at MUFG, there was a certain lack of logic to the selling of the pound given there has been nothing dramatically new provided in terms of the weekend press speculation that the UK would seek a deal with the EU on the basis of accepting the UK’s exit from the Single Market.

Key Quotes

“In or out of the Single Market really isn’t the issue anymore and what is far more important is what agreement is reached on how that is achieved. In other words, what measures will be taken to avoid any sudden dramatic change to the trading relationship between the UK and the EU?”

“So it is the transitional nature of the deal perhaps that may prove important going forward. We are unlikely to get much colour on that today, mainly given that will only become apparent once negotiations begin. But we believe market participants are perhaps under-estimating the potential for PM May to focus more today on stressing the focus of the UK will be ensuring a deal that limits the potential negative macroeconomic impact for both the UK and the EU. Post-Brexit, the UK will be as large an EU export destination as the US and hence such a deal will be in the interest of both sides during the Brexit negotiating process.”

“Expectations management will play an important role in market reactions to Brexit developments and what looks like an orchestrated leak of ‘bad’ Brexit news leaves much greater potential for the markets to respond more positively to the speech itself (11:45am GMT). Some surmise that simply assuming a repeat performance for the pound that followed PM May’s speech last October which signalled ‘hard Brexit’ is justification for shorting the pound again now. We doubt trading the pound will be that simple and today may highlight the fact that pound direction will be far more complicated than simply second-guessing Brexit events as being perceived by the markets as ‘hard’ or ‘soft’.”

“One additional variable to be incorporated into the outlook for the pound is of course the relationship with the US as UK-EU negotiations get underway later this year. President-elect Trump stated over the weekend that he thought “Brexit would be a great thing”, promising a close working relationship going forward. Throwing Trump into the Brexit negotiations equation certainly raises the potential for a better deal in the end – something the markets are giving little attention to at this stage.”

“Finally, our more bullish view on the pound for this year is partly based on our assumption that the monetary bias of the BoE may change later in the year given the fact that the UK economy continues to show resilience. Perhaps the biggest greatest surprise post-Brexit has been the strength of the UK economy and at some stage market participants are likely to begin questioning the need for the easing measures taken by the BoE last August. In a speech yesterday evening Governor Carney stated that there were “limits to the extent to which above-target inflation can be tolerated”.”

“A continued better than expected performance of the economy would therefore become a greater support for the pound as BoE monetary policy expectations begin to change. Signalling a limit to inflation tolerance will help provide a floor for the pound over the coming months. One key reason behind our view of a weaker US dollar later this year is that central banks outside of the US will begin to signal intent to follow the Fed in 2018. We include the BoE in that scenario and Carney’s speech reinforces our view on that.”


13:36 EUR/USD spikes through 1.0700 handle amid broad based USD sell-off

The greenback selling pressure has intensified in the past hour, pushing the EUR/USD pair to over one-month high beyond 1.0700 round figure mark.

The pair's near-term recovery move gained extra pace on Tuesday after a senior adviser to President-elect Donald Trump, Anthony Scaramucci, while speaking during a panel discussion at the World Economic Forum's annual meeting in Davos, raised concerns over rising US Dollar.

Moreover, growing uncertainty over Trump administration's proposed fiscal policies continues to fuel long-dollar unwinding trade, with the key US Dollar Index slammed below 101.0 handle, and assisted the pair to shrug-off disappointing reading on German ZEW economic sentiment index. 

Markets will keep a close eye on the UK PM Theresa May's speech on Brexit, which is expected to infuse a fresh bout of volatility in the FX market and could have a spillover effect on the major. 

Technical levels to watch

A follow through buying interest has the potential to continue boosting the pair further towards 1.0760-65 horizontal resistance, en-route its next major hurdle near 1.0800-1.0810 region. On the downside, 1.0675-70 area now becomes immediate support to defend below which the pair is likely to head back towards 50-day SMA, resistance turned support, near 1.0615-10 region.

 


13:32 USD/JPY drops further, testing sub-113.00 levels

The bearish note around the greenback stays intact on Tuesday, now dragging USD/JPY to levels below the 113.00 handle, fresh lows.

USD/JPY stronger on USD-selling

Spot is now intensifying its decline to fresh 7-week lows in the 112.85/80 band, as the buck remains well offered across the board.

The Trump-led rally that benefited the Dollar following the US elections in early November seems to be running out of steam for the time being, with scepticism on the rise over the ability of the upcoming administration to fulfil his promises –particularly regarding fiscal stimulus.

On the data front, the US regional manufacturing gauge tracked by the NY Empire State index is due along with speeches by New York Fed W.Dudley (permanent voter, centrist) and L.Brainard should keep the focus on the Dollar.

USD/JPY levels to consider

As of writing the pair is retreating 1.18% at 112.85 facing the next support at 111.98 (38.2% Fibo of the November-December 2015 up move) followed by 111.32 (low Nov.28) and then 109.91 (50% Fibo of the November-December 2015 up move). On the other hand, a break above 114.28 (high Jan.17) would open the door to 114.54 (23.6% Fibo of the November-December 2015 up move) and finally 115.53 (high Jan.12).

 


13:04 GBP/USD falls short of 1.2200 handle, retreats to 1.2160 ahead of May

The GBP/USD pair trimmed some of its upbeat UK CPI-led gains to 1.2200 neighborhood, albeit has managed to hold strong recovery gains off Monday's post-flash-crash low below 1.20 psychological mark.

Bears rushed to cover their bearish bets after UK CPI print for December surpassed expectations and came-in to show a yearly rise of 1.6% as compared to 1.4% expected and 1.2% recorded in November. The pair, however, quickly retreated around 70-pips and dropped back to 1.2117 level before regaining some traction to currently trade around 1.2160 region. 

Meanwhile, an offered tone surrounding the greenback, with the key US Dollar Index sliding further below 101.00 handle, is also supporting the strong bid tone surrounding the major as markets now eagerly await for UK Prime Minister Theresa May's much awaited speech on Brexit.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet notes, "according to the 4 hours chart, the upward potential remains limited, given that technical indicators have recovered from oversold territory and head higher, but still below their mid-lines, whilst the price its 20 SMA that anyway maintains a bearish slope."

She further writes, "Above the daily high, the next resistance comes at 1.2220, with a break above it supporting an upward extension up to the 1.2260/80 region. A break below 1.2130 on the other hand, will lean the scale towards the downside, with 1.2080 and 1.2040 as the next intraday supports."

 


13:03 EUR/USD could reach 1.12 in a years time Danske Bank

Thomas Harr, Global Head of FICC Research at Danske Bank, noted the pair could edge higher towards the 1.1200 area within a year’s time.

Key Quotes

EUR/USD has moved higher in the past few weeks, driven by a narrowing of the US-EU interest rate spread, the indirect effect of a lower USD/CNH, which transmitted to a more broad-based long USD covering”.

“Moreover, the pricing of reflation has been taking a breather due to, among other things, the high uncertainty about Trump’s economic policy plans”.

“Near term, we believe growth and relative rates will continue to move in favour of a stronger USD”.

“We target EUR/USD at 1.04 in 1M (1.02 previously) and 1.05 in 3M (1.04 previously) but stress that risks are skewed on the downside in the short term, conditional on Trump and the Fed”.

“Longer term, we maintain our long-held view that the undervaluation of the EUR and the wide eurozone-US current account differential are EUR positives. In addition, the Fed may become worried about the strength of the trade-weighted USD, which would mitigate rate increases. We target EUR/USD at 1.08in 6M and 1.12in 12M”.

 

 


13:01 EUR/GBP MACD fails to challenge recent highs

EUR/GBP could be facing downside pressure as its MACD failed to test recent highs.

A bearish divergence between EUR/GBP spot behavior and the MACD over the last few weeks suggests downside vulnerability ahead. Further, the MACD line crossed below its signal line on a 4-hour closing basis, an event that can be interpreted as a bearish omen.

12:58 GBP/USD stays neutral, could drop to 1.19 UOB

Cable’s outlook remains neutral in the near term and there is scope for a visit to the 1.19 area, suggested FX Strategists at UOB Group.

Key Quotes

“We turned neutral last Friday after when the bearish stop loss was taken out at 1.2290”.

“The gap lower this morning was clearly unexpected and the immediate risk has shifted to the downside again”.

“However, it is uncertain whether the current GBP weakness can be sustained even though on a shorter-term basis, there is room for extension lower towards 1.1900”.

“Last Friday’s low near 1.2120/25 is acting as a strong resistance but only a move above 1.2200 would indicate that the immediate downward pressure has eased”.

 


12:54 WTI leaps to $53.30 on weaker USD

Crude oil prices have jumped to session tops on Tuesday, lifting the West Texas Intermediate to fresh daily tops in the $53.30 area.

WTI focus on API

Prices for the WTI are extending yesterday’s moderate gains above the $53.00 mark following a continuation of the offered bias around the US Dollar, as risk aversion sentiment in the global markets seem to have lost momentum.

Traders remain vigilant on the output cut compliance following the OPEC-non OPEC deal to limit the production, being the almost exclusive driver behind the price action for the time being.

Regarding the latter, Saudi Energy Minister said on Monday that the current deal is unlikely to be extended beyond the first half of the year, while OPEC Secretary M.Barkindo sees prices stabilizing this year.

Later in the NA session, the weekly report on US stockpiles by the API is due ahed of tomorrow’s official DoE report.

WTI levels to consider

At the moment the barrel of WTI is gaining 1.45% at $53.13 facing the next up barrier at $53.34 (high Jan.17) followed by $53.50 (high Jan.12) and finally $54.32 (high Jan.6). On the other hand, a break below $50.71 (low Jan.10) would expose $49.95 (low Dec.15) and then $48.88 (100-day sma).

 


12:34 Theresa May Brexit Speech - UK PM Coverage Today

Bristish Prime Minister Theresa May is expected to announce clean Brexit on her speech scheduled for today. According to the information realeased by her office, May will dimiss a partial EU membership.

The announcement will take place at Lancaster House and could be the most important speech regarding the strategy followed by the United Kingdom during next months in terms of Brexit. "Brexit means Brexit", has repeated May, soft or hard labels will be avoided in PM's discourse, but instead, the idea of a clean break with the EU will be set as the main priority. PM's announcement is expected to affect markets since the content of her speech has already been advanced partially and the Bristish currency plunged to $1.1986 yesterday:

“We seek a new and equal partnership – between an independent, self-governing, global Britain and our friends and allies in the EU. Not partial membership of the European Union, associate membership of the European Union or anything that leaves us half-in, half-out.”

“We do not seek to adopt a model already enjoyed by other countries. We do not seek to hold on to bits of membership as we leave. The United Kingdom is leaving the European Union. My job is to get the right deal for Britain as we do.”


12:28 Trumps adviser Scaramucci urges caution over rising USD - RTRS

The US President-elect Donald Trump’s adviser Scaramucci crossed the wires last hour, via Reuters, speaking at the World Economic Forum (WEF) in Davos.

Key Headlines:

Trump administration wants independent Fed

Urges caution over rising dollar


12:16 EUR/GBP retreats from 0.8860, eyes on May

The European cross is losing ground for the second straight session so far on Tuesday, fading yesterday’s spike to tops around 0.8860.

EUR/GBP remains unable to pick up pace after mixed ZEW results showed the Economic Sentiment in both Germany and the euro area have missed expectations for the current month. On the bright side, German Current Conditions have surprised to the upside during the same period.

Adding to GBP strength, inflation figures in the UK saw consumer prices rising more than expected during December, up 1.6% over the last twelve months and 0.5% inter-month.

Both EUR and GBP keeps the bullish note so far today amidst an increasing selling bias around the buck.

At her speech later today, UK’s PM Theresa May is expected to confirm her plans for a ‘clear Brexit’, which include the country withdrawing from the customs union and the single market.

EUR/GBP key levels

The cross is now retreating 0.22% at 0.8782 facing the next support at 0.8645 (100-day sma) ahead of 0.8609 (20-day sma) and then 0.8446 (low Jan.3). On the upside, a break above 0.8860 (high Jan.16) would aim for 0.9055 (high Nov.2) and finally 0.9143 (high Oct.11).

 

 


12:14 EUR/USD fails near multi-week tops on mixed ZEW

The buying pressure seen behind the euro eased a bit following the release of mixed ZEW surreys from Germany, sending EUR/USD slightly away from near five-week highs scored last week at 1.0687.

EUR/USD remains capped below 1.0700 on ZEW

Currently, the spot now advances +0.63% to 1.0668, extending the retreat towards the mid-point of 1.06 handle. The EUR bulls were disappointed by a miss on the German ZEW headline numbers, which showed that the economic sentiment improved below expectations for the month of Jan, coming in at 16.6 versus 18.3 expected. While the sub-index current conditions jumped to 77.3 versus 65.0 expected and 63.5 last.

However, the bid tone around EUR/USD remains intact amid massive selling in the US dollar against a basket of major currencies, after stops triggered below 113.80 in USD/JPY and knocked-off the buck along with it. Moreover, risk-off market profile ahead of the UK PM May’s Brexit speech also keeps the sentiment around the funding currency euro somewhat buoyant.

Markets also continue to monitor fresh selling seen behind EUR/GBP, and further GBP moves on the UK PM May’s speech for any “rub-off” effect on the EUR/USD pair.

EUR/USD Technical Levels

In terms of technicals, the pair finds the immediate resistance 1.0700 (round figure). A break beyond the last, doors will open for a test of 1.0746 (Nov 17 high) and from there to 1.0781 (100-DMA). On the flip side, the immediate support is placed at 1.0633 (5-DMA) below which 1.0594 (10-DMA) and 1.0554 (50-DMA) could be tested.


12:13 Spain 6-Month Letras Auction down to -0.364% from previous -0.327%


12:12 Spain 12-Month Letras Auction down to -0.291% from previous -0.229%


12:01 Germany ZEW Survey - Current Situation registered at 77.3 above expectations (65) in January


12:01 European Monetary Union ZEW Survey - Economic Sentiment below expectations (24.2) in January: Actual (23.2)


12:01 Germany ZEW Survey - Economic Sentiment came in at 16.6 below forecasts (18.3) in January


11:46 IEAs Birol: US oil production expected to rise again in 2017 - RTRS

Fatih Birol, executive director of the International Energy Agency (IEA), the Paris-based global energy watchdog, noted on Tuesday that he sees the US oil output to start rising once again this year.

Key Headlines via Reuters:

US oil production expected to rise again in 2017

If oil investments don't recover, will see a big gap in global supply within 2-3 years


11:45 EUR/GBP drops to session low and rebounds after UK CPI

The EUR/GBP accelerated its reversal move from Monday's two-month high and dropped to 0.8760 level after upbeat UK CPI print.

According to the data release just a short while ago, UK consumer inflation, as measured by CPI, rose to an annualized pace of 1.6% in December. The reading surpassed consensus estimates pointing to a rise to 1.4% from previous month's reading of 1.2%. 

The cross, however, has managed to rebound around 20-pips from session low and was last seen trading around 0.8780 region as market seemed disappointed from a slight miss in the PPI figures. 

Meanwhile, investors also seemed reluctant to place fresh bets ahead of the keenly awaited Brexit speech by UK Prime Minister Theresa May, which might continue infusing volatility across GBP crosses. 

Technical levels to watch

A follow through retracement could get extended towards 0.8750 support below which the cross is likely to accelerate the slide towards 0.8725-20 support ahead of 0.8700 handle.

On the upside, 0.8800 handle now becomes immediate resistance, which if cleared seems to assist the cross back towards 0.8850 resistance area (yesterday's high).

 

 


11:38 GBP/USD eyes 1.2200 post-UK CPI, eyes on May

The buying interest around the Sterling is now picking up pace vs. the greenback, pushing GBP/USD to fresh daily tops near 1.2200 the figure.

GBP/USD bid on data

The pair gained extra pace after UK’s inflation figures tracked by the CPI rose more then expected during December, with consumer prices rising at an annualized 1.6% and 0.5% inter-month vs. initial forecasts at 1.4% and 0.3%, respectively.

The offered bias in the greenback remains intact, lending extra support to the pair’s upside while market participants keep waiting for the speech by PM Theresa May.

According to The Telegraph, May’s speech could unveil her plans for a ‘clean Brexit’, including at the same time an exit from the single market and the customs union.

In the meantime, spot has managed to fill yesterday’s gap lower to the 1.1980 region, although it still navigates the area of 3-month lows around the 1.2200 handle.

Adding to the fragile perspective around GBP, speculative net shorts have climbed to fresh 4-week highs during the week ended on January 10, as shown by the latest CFTC report.

GBP/USD levels to consider

As of writing the pair is gaining 0.99% at 1.2168 and a breakout of 1.2189 (high Jan.17) would aim for 1.2230 (20-day sma) and finally 1.2318 (high Jan.12). On the downside, the immediate support aligns at 1.1988 (low Jan.16) followed by 1.1450 (GBP ‘flash crash’ Oct.7).

 


11:34 UK Dec CPI rises to the highest rate since July 2014

The UK consumer prices prolong its northwards momentum in December, arriving at 1.6% versus November’s +1.2% and bettered estimates of a 1.4% rise, the Office for National Statistics (ONS) revealed on Tuesday.

While the core inflation gauge also outperformed in December, coming in at +1.6 y/y versus 1.4% last. Markets had predicted the core figures to show an increase of +1.5%.

On monthly basis, the UK inflation figures also showed an acceleration, rising +0.5% last month, as compared to +0.2 % previous and +0.3% expected.

ONS reports, “The main contributors to the increase in the rate were rises in air fares and the price of food, along with prices for motor fuels, which fell by less than they did a year ago.”


11:31 United Kingdom Producer Price Index - Output (YoY) n.s.a below expectations (3%) in December: Actual (2.7%)


11:30 United Kingdom DCLG House Price Index (YoY) came in at 6.7%, above forecasts (6.3%) in December


11:30 United Kingdom Core Consumer Price Index (YoY) came in at 1.6%, above expectations (1.5%) in December


11:30 United Kingdom Consumer Price Index (MoM) above expectations (0.3%) in December: Actual (0.5%)


11:30 United Kingdom Producer Price Index - Input (MoM) n.s.a came in at 1.8%, below expectations (2.4%) in December


11:30 United Kingdom Producer Price Index - Input (YoY) n.s.a came in at 15.8%, above expectations (15%) in December


11:30 United Kingdom PPI Core Output (YoY) n.s.a below forecasts (2.2%) in December: Actual (2.1%)


11:30 United Kingdom PPI Core Output (MoM) n.s.a below expectations (0.2%) in December: Actual (0%)


11:30 United Kingdom Consumer Price Index (YoY) came in at 1.6%, above expectations (1.4%) in December


11:30 United Kingdom Retail Price Index (YoY) came in at 2.5%, above expectations (2.3%) in December


11:30 United Kingdom Producer Price Index - Output (MoM) n.s.a came in at 0.1% below forecasts (0.4%) in December


11:30 United Kingdom Retail Price Index (MoM) above forecasts (0.4%) in December: Actual (0.6%)


11:28 Gold jumps to 8-week high ahead of Brexit speech

Gold extended bullish break-out momentum above 50-day SMA hurdle and touched nearly 8-week high amid persistent worries over Brexit.

Currently trading around $1214 region, spot gained fresh traction on Tuesday and rose to the highest level since Nov. 23 amid prevalent risk-off mood ahead of the much awaited speech by UK Prime Minister Theresa May, where she is expected to unveil her plans for negotiating Britain's exit from the European Union.

Meanwhile, receding market expectations over prospects of stronger US economic growth, led by aggressive fiscal stimulus measures by the incoming Trump administration, is weighing heavily on the US Dollar and boosting demand for dollar-denominated commodities - like gold. 

Moreover, bearish sentiment surrounding European equity market is further lending support to traditional safe-haven assets and contributing to the strong bid tone surrounding the precious metal.

Tuesday's key focus would remain on May's speech on Brexit, which would drive market risk sentiment and provide fresh impetus for the yellow metal.

Technical levels to watch

A follow through momentum above $1215 level is likely to confront resistance near $1221 area (Nov. 22 high) above which the commodity seems all set to head towards its next hurdle near $1230 zone ahead of 100-day SMA resistance near $1240 region.

On the downside, $1205 level now becomes immediate support to defend, which if broken is likely to drag the metal back below $1200 handle, towards testing 50-day SMA resistance break, now turned support, near $1185-83 region.

 

 


11:20 Downing Street Office: UK PM to give Brexit speech at 11:45 GMT

Livesquawk reported latest announcement from the British PM office, with the 10 Downing Street headquarters noting that the UK PM Theresa May will deliver the Brexit speech at 11.45GMT.


11:16 Italy Global Trade Balance above expectations (3.84B) in November: Actual (4.203B)


11:10 China Cabinet issues measures to further open economy, foreign investment - RTRS

Reuters reports latest headlines from China, citing that the Chinese cabinet issues measures to further open economy as well as foreign investment.

Key Details:

To lower restrictions on foreign investment in banking, securities, investment management, futures, insurance

To lower restrictions on foreign investment in credit ratings, accounting

To allow foreign-invested firms to list on shanghai, Shenzhen exchanges and new 3rd board

To allow foreign-invested firms to issue corp. & convertible bonds


11:05 SNBs Jordan: Monetary policy movements expected to be gradual - RTRS

The Swiss National Bank (SNB) Chairman Thomas Jordan crossed the wires now, via Reuters, expressing his taking on the global central banks’ monetary policy stance.

Key Points:

Normalization of monpol in the US is positive

Not worried about divergence with Europe

Monpol movements expected to be gradual


11:04 Italy Trade Balance EU dipped from previous 0.452Bto 0.235B in November


10:57 French FinMin Sapin: UK finally needs to embark on Brexit talks

French finance minister Sapin was on the wires last minutes, via Reuters, commenting on Brexit during a press conference on Tuesday.

Key Headlines:

France wants clarity on Brexit

UK govt appears to be improvising

UK finally needs to embark on Brexit talks


10:51 GBP/USD: Upside capped near 1.2140 ahead of UK CPI

The GBP/USD pair extends its struggle to rise above 1.2140 resistance in the European session, as the bulls now enter a consolidation phase, as we move closer to the UK CPI release.

GBP/USD: 1.2050 or 1.2150 on UK data?

GBP/USD’s more-than a big figure recovery from daily lows of 1.2018, appears to have lost legs in Europe, as markets turn on a cautious mode and book profits ahead of the risk events for the pound lined up later today, with the all-important UK PM May’s speech on Brexit guidelines.

Also, a minor bounce attempted by the greenback versus its main peers, combined with negative European equities added to the renewed downslide in the major.

Markets eagerly await the UK CPI data, which is expected to tick higher to 1.4% y/y in Dec versus 1.2% booked previously.

GBP/USD Levels to consider            

In terms of technical levels, upside barriers are lined up at 1.2164 (10-DMA), 1.2180 (key barrier) and 1.2200 (zero figure). While supports are aligned at 1.2039 (daily pivot) and 1.1988 (multi-week low) and below that at 1.1850 (post-Flash crash low).


10:49 USD/JPY slides further, now eyeing to test 113.00 handle

The USD/JPY pair remained under intense selling pressure during early European session on Tuesday and has now moved within striking distance of 113.00 handle.

Persistent worries over Brexit coupled with uncertainty over President-elect Donald Trump's fiscal stimulus plans triggered a fresh wave of risk-aversion across global financial markets and is benefitting the Japanese Yen's safe-haven demand and collaborated to the pair's sharp slide to the lowest level since December 8.

Moreover, possibilities of some near-term stops being triggered and (or) fresh selling interest on a sustained break below 50-day SMA support also seems to have aggravated the selling pressure. At the time of writing, the pair was trading around 113.25-30 region, having dropped to a fresh session low near 113.10 region. 

Today's speech by UK PM Theresa May is expected to trigger a fresh bout of volatility in the FX market, which would eventually derive Yen's safe-haven demand and provide fresh impetus for the major. Later during NA session, Empire state manufacturing index and Fedspeak would also be looked upon for some immediate respite for the US Dollar bulls. 

Technical levels to watch

Immediate support on the downside is pegged at 113.00 round figure mark, which if broken has the potential to accelerate the fall towards 112.85 intermediate support ahead of 112.50-45 important horizontal support. On the upside, 50-day SMA near 113.70 region now becomes immediate resistance, which if cleared might trigger a short-covering bounce towards 114.00 handle, en-route session peak resistance near 114.30 area.

 


10:46 EUR/NOK seen lower in the next months Danske Bank

Senior Analyst at Danske Bank Kristoffer Lomholt suggested the Norwegian Krone remains poised for further appreciation during the current year.

Key Quotes

“As expected, EUR/NOK rose to the upper end of the 8.90-9.10 trading range in the final month of 2016 on year-end seasonality. Yet, in the new year, we still expect the cross to move gradually lower on normalising growth and real rates, valuation and oil markets stabilising further”.

“In terms of the oil price-NOK relationship, we emphasise that we do not expect the oil price rise to continue at the same pace as seen since the OPEC agreement as non-OPEC procuders gradually increase production. As such, we still forecast the oil price to reach USD59/bbl at end-2017. Yet, we think even a stable oil price on balance should be a NOK positive given the other factors mentioned above”.

“We shift lower our EUR/NOK profile, forecasting the cross at 9.00 in 1M (from 9.10.), 8.90 in 3M (9.10), 8.80 in 6M (9.00) and 8.70 in 12M (8.80)”.

 

 


10:40 EUR/USD keeps the constructive tone above 1.0500 UOB

In view of FX Strategists at UOB Group, EUR/USD should stick to its positive stance while above the 1.0500 handle.

Key Quotes

“There is no change to the current view wherein we expect EUR to remain supported in the short-term as long as 1.0500 is intact”.

“However, it is unclear at this stage if EUR can move higher in a sustained manner even though technically, the next significant resistance above last week’s peak of 1.0684 is at the 1.0872 high seen in early December”.

 


10:36 EUR/JPY could slips towards 119.45 Commerzbank

In opinion of Karen Jones, Head of FICC Technical Analysis at Commerzbank, the cross could lose further momentum and attempt a test of the mid-119.00s.

Key Quotes

EUR/JPY remains under pressure and is now trying to erode the bottom of its range at 120.93. Failure here however will trigger a deeper corrective retracement back towards 119.45 zone and possibly the 118.45/ 21st July 2016 high and the 200 day ma at 118.06 and here it should recover”.

“Should it recover it will meet hefty resistance at the top of the range circa 123.71/124.08 (15th Dec high). The intraday Elliott counts are negative and implying that rallies will flounder circa 122.00. Above 124.08 lies the 124.77 38.2% retracement (of the move down from 2014) and the 125.89 2015-2016 resistance line, is expected to act as critical resistance/break up point”.

 

 


10:31 France Budget increased to -68.98B in November from previous -85.5B


10:31 EUR/USD firmer, 1.0700 closer ahead of ZEW

Increasing USD selling is now lifting EUR/USD to test fresh daily tops in the 1.0670 region ahead of key data in Euroland.

EUR/USD attention to releases, May’s speech

The pair has resumed its upside momentum after Monday’s moderate correction lower, gaining nearly a cent since recent lows in the vicinity of 1.0570 and trading closer to the key barrier at 1.0700 the figure, all amidst a broad-based USD weakness.

The selling pressure around the buck – when tracked by the US Dollar Index - has been growing bigger since early trade in Asia, surrendering yesterday’s gains and allowing the current rebound in the risk-associated space.

On the data front, the ZEW Survey in Germany and the euro area is next on tap, while the upcoming speech by UK’s PM Theresa May will also grab investors attention. Across the Atlantic, the NY Empire State index and speeches by New York Fed W.Dudley (permanent voter, centrist) and L.Brainard should keep the focus on the Dollar.

EUR/USD levels to watch

The pair is now gaining 0.55% at 1.0659 and a break above 1.0687 (high Jan.12) would target 1.0798 (high Dec.5) en route to 1.0873 (high Dec.8). On the other hand, the next support lines up at 1.0577 (low Jan.16) followed by 1.0259 (20-day sma) and finally 1.0452 (low Jan.11).

 

 


10:13 EUR/GBP flat around 0.88 handle ahead of UK CPI and Brexit speech

The EUR/GBP cross failed to capitalize on Monday’s weekly bullish gap up opening and has now retreated back to 0.8800 handle.

A strong recovery move around the GBP/USD major, following previous session's slump closer to October flash crash lows, helped the cross to fill yesterday's gap higher to over two-month high level near mid-0.8800s.

The British Pound, however, remained a relative underperformer against its European counterpart as market participants keenly await for today's speech by UK Prime Minister Theresa May, which would remain continue infusing volatility around GBP crosses. 

In addition to this, investors will also confront the release of UK CPI print, which is expected to have ticked-higher to an annualized pace of 1.4% for December as compared to previous month's 1.3%. From the Euro-zone, German ZEW economic sentiment index for January might also provide some impetus for short-term traders during European session.

Technical levels to watch

A follow through retracement below 0.8760 support is likely to get extended towards 0.8725-20 horizontal support, en-route 0.8700 round figure mark. On the upside, momentum above session peak resistance near 0.8820 region might continue to confront resistance near 0.8850 level (yesterday's high) above which the cross seems all set to head towards reclaiming 0.8900 handle.

 


09:55 Commodity bloc vulnerable after strong start to the year - BNPP

Research Team at BNP Paribas thinks that both AUDUSD and USDCAD are at risk to a resumption of USD strength or a turn weaker in the global risk environment.

Key Quotes

“The CAD has additional vulnerability heading into this week’s Bank of Canada meeting. Our economics team thinks the Bank will deliver a final 25bp rate cut this week as the Bank seeks to avoid a tightening of financial conditions while activity remains soft, in contrast to market pricing and consensus forecasts calling for unchanged policy. If a rate cut is delivered, we would expect USDCAD to move quickly towards our 1.36 three-month target, but even steady policy will leave the CAD vulnerable in the context of gradually rising US rates. We remain positioned for USDCAD gains via a 1.34/1.36 call spread recommendation.” 


09:52 GBP/USD: Downtrend persists, squeezes likely to be limited - Westpac

Tim Riddell, Research Analyst at Westpac, notes that GBP remains in a downtrend off 2014’s 1.7115 high and the post Brexit vote fall from 1.5015-20 is underscoring the downtrend, however, this trend is now becoming mature (at risk of basing at some point). 

Key Quotes

“Despite the longer term prospect of the downtrend maturing, falls from Nov.’s 1.2775 interim high could accelerate on a close below near term measured targets around 1.1890.”

“A squeeze above 1.2180 may reduce the current downside bias, but a close above 1.2315 is needed to suggest that a near term base may have formed.”

“If rebounds continue to falter in front of 1.2100, the risk of the downtrend becoming more dynamic will increase. A fall through 1.1985 could then trigger a slide to at least the interim targets in the  1.1860-90 area amidst risk of extending towards 1.1750-60 and 1.1670-75.”

Conclusion: The downtrend is maturing but remains firmly in place.  Current bias is for declines towards 1.1750 and 1.1675 (possibly even 1.15).  A close above 1.2315 is needed to reduce current downside risks.”


09:47 Trump trade unwind continues: STEER remains short USDJPY - BNPP

Analysts at BNP Paribas note that this morning the USD is broadly weaker across the board, in sympathy with the US curve moving lower and flatter, with EURUSD rising above 1.0650 and USDJPY below 113.50.

Key Quotes

“In an interview with the Wall Street Journal last Friday, US President-elect said the USD was probably “too strong” and also that the proposed “border adjustment” tax plan (which the market views as likely to be very USD bullish) is too complicated.”

“Our short-term fair value model, BNP Paribas STEER™, continues to signal short USDJPY currently targeting 112.70. On Thursday, the ECB press conference may note further improvement in activity and reduced downside risks. However, our economists expect the ECB to remain very wary of fueling premature speculation about an end to QE. With the ECB emphasizing a preference for sticking with the plan and ongoing asset purchases capping nominal rates, stronger activity data in Europe is likely to keep real rates low, leaving the EUR vulnerable. We remain positioned for EURUSD downside via a EURUSD ratio put spread with KI (buy 1x 1.05, sell 2x 1.03 with 1.0150 KI) (14-Feb expiry).”

 


09:43 EUR/USD: Overlapping of rebounds suggest limited corrections - Westpac

According to the Tim Riddell, Research Analyst at Westpac, the overlapping of recent EUR/USD bounces off the 1.0340-50 lows suggests that rebounds are corrective (rather than dynamic trend driving) and so the bias is that further gains will struggle to reach previous midrange levels (1.0975-1.1040 area).  

Key Quotes

“Further rebounds are unlikely to breach 1.0730-35 and the risk of an early top at 1.0685 is now increasing.”

“However, slippage should also be contained and hold above 1.0460-70 in advance of a secondary corrective squeeze forming. Such a secondary squeeze would be likely to force a test of 1.0740-1.0830 area before EUR establishes an interim range high.”

Conclusion: The breach of broader range support has been brief but suggests that there will be another spike lower in order to complete patterns off 1.16’s.  Interim gyrations will form a frustrating correction before this leg-lower develops”


09:35 AUD/USD conquers 200-DMA barrier at 0.75 psychological mark

Having dropped to session low at 0.7465 level, the AUD/USD pair regained traction and surged through 0.750 psychological mark to the highest level since Nov. 16.

Currently trading around 0.7515-20 region, off around 15-pips from session peak, broadly weaker greenback, in wake of a slump in the US treasury bond yields, helped the pair to finally break through the very important 200-day SMA barrier. However, slightly cautious sentiment around commodity space, especially weakness in Copper prices, failed to provide an additional boost and seems to be the only factor responsible for the pair's mild retracement from 9-week peak. 

Long-dollar unwinding has been the key theme prevalent in the FX market amid growing uncertainty over the incoming Trump administration's fiscal stimulus measures, which further got amplified after President-elect Donald Trump failed to provide any clarity over his probable policy action and has been supportive for the pair's recovery. This coupled with upbeat Chinese economic data also collaborated to the pair's bullish trajectory since the beginning of 2017. 

Investors on Tuesday will remain focused on the crucial Brexit speech by UK PM Theresa May, which is expected to infuse a fresh bout of volatility in the FX market and might provide some fresh impetus. Also in focus would be the release of Empire state manufacturing index from the US and speeches from various Fed officials, which would drive demand for higher-yielding currencies - like the Aussie.

Technical levels to watch

Immediate downside support is pegged at 200-day SMA near 0.75 psychological mark, which if broken is likely to drag the pair back towards 0.7475 horizontal support ahead of 0.7450 support area. On the upside, momentum above session peak resistance near 0.7535 area is likely to get extended towards 0.7555-60 resistance area before the pair attempts a move towards 0.7600 round figure mark.

 


09:33 UK: PM May expected to lay out some detail of her Brexit plans - Rabobank

Research Team at Rabobank suggests that the UK PM May is expected to lay out some detail of her Brexit plans during a speech today.

Key Quotes

“Following her remarks in a TV interview earlier this month, the market is bracing itself for signs that the cabinet is preparing to take the UK out of the EU’s single market.  Although Downing Street has remarked that this is “speculation”, sterling was again under pressure with GBP/USD dipping below the 1.20 level for the first time since the October flash crash.  Several weekend UK newspapers promoted the view that a hard Brexit was the government’s favoured route.  May’s meeting with the New Zealand Prime Minister on Friday and English’s remarks that he wanted to negotiate a “high quality” free trade agreement was cited as evidence that the UK was seeking to strength its trade position outside of the EU (even though New Zealand has a population of under 4.5 million).” 

“UK Chancellor Hammond took a different approach. He told Germany’s Welt an Sonntag that he hoped the UK would remain a European style economy with a corresponding tax and regulation system.  That said, he threatened that the UK economy could be “forced to be something different” it is was “closed off” from the single market.  This sparked speculation that the UK could slash corporation tax to gain a competitive advantage.  Sterling is trading above its overnight low, but in our view it remains a vulnerable currency given the weight of political and economic uncertainty.” 


09:30 UK CPI preview: What to expect of GBP/USD?

GBP/USD made a solid comeback so far this session, extending its Asian advance beyond 1.21 handle in early Europe. However, the spot appears to have run into resistances located near 1.2140 region, as traders turn cautious and refrain from creating fresh long positions ahead of the UK CPI report, which will be published later this session at 9.30GMT.

However, limited reaction is expected on the data-release, as the main risk event for the pound is expected to be the UK PM May’s speech scheduled around 11.00GMT later today.

UK CPI to accelerate in December

The UK consumer prices are expected to tick higher to 1.4% in December y/y, after having booked a 1.2% reading in November. While core figures, excluding volatile food and fuel costs, are also expected to tick higher to 1.5% in the reported month versus 1.4% previous.

On monthly basis, the consumer prices are also seen higher by 0.3% in Dec versus 0.2% last.

Analysts at TDS see upside for the UK CPI for December, with a headline reading of 1.5% y/y versus market consensus of 1.4%.

Deviation impact on GBP/USD

Readers can find FX Street's proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined between 15 and 60 pips in deviations up to 2 to -3, although in some cases, if notable enough, a deviation can fuel movements of up to 75 pips.

GBP/USD Technical Levels

Haresh Menghani, Analyst at FX Street explains, “A follow through buying interest above 1.2100 handle is likely to boost the pair towards 61.8% Fibonacci retracement level resistance near 1.2135 area. On a sustained move 1.2135 resistance, the pair seems all set to aim towards reclaiming 1.2200 handle and head towards testing its next major resistance near 1.2220-30 region.”

“On the flip side, retracement back below 1.2075-70 immediate support seems to drag the pair back towards 23.6% Fibonacci retracement level support near 1.2045 level. Weakness below 1.2045 support now seems to find support near 1.2015-10 region. However, a decisive break below 1.20 psychological mark would confirm near-term bearish bias and drag the pair towards sub-1.1800 support area, marking 61.8% Fibonacci expansion level of 1.3445-1.1980 downslide and subsequent retracement.”

 


09:26 Australia: Q4 inflation to provide the RBA with some comfort - ANZ

Jo Masters, Senior Economist at ANZ, expects Australia’s Q4 inflation data (to be released on 25 January) to provide the RBA with some comfort that inflation is stabilising and the strong disinflationary forces are starting to abate. 

Key Quotes

“That said, inflation is expected to remain weak across both tradable and nontradable sectors, and core inflation is forecast to remain below the RBA’s policy target until H2 2017. The core themes driving inflation over the past year are likely to continue. The global inflation pulse may be turning, but retail price competition, weak wage growth, and developments in the housing sector continue to weigh.”

“Headline inflation is forecast to have risen by 0.5% in Q4, which would see year ended inflation at 1.4%, compared to 1.3% in the year to Q3 2016. Fruit and vegetable prices are forecast to fall sharply (following a surge in prices in the previous quarter), while fuel prices are forecast to have risen by 6%. We are also expecting seasonal increases in tobacco and domestic airfare prices in Q4.” 

“We expect both the trimmed mean and weighted median to have risen by 0.5% q/q in Q4, leaving the average of the two measures up 1.6% on a six-month end annualised basis (compared with 1.7% in Q3). This is broadly in line with the forecasts outlined in the RBA’s latest SoMP.” 

“Policy implications: We do not expect the Q4 inflation print to have any immediate policy implications. Inflation looks to be stabilising (albeit at weak levels), but continued strength in the housing market is likely to keep concerns about financial imbalances on the table.”


09:25 GBP stays under pressure, looks to May Danske Bank

Jens Sorensen, Chief Analyst at Danske Bank, noted the stance on the Sterling remains fragile, with May’s speech later today being the salient risk event.

Key Quotes

“Furthermore, the return of Brexit fears has led to a sell-off in the GBP. However, the sell-off lost momentum during the session yesterday and EUR/GBP fell back below the 0.88 after trading above 0.8850 temporarily”.

“Today, UK Prime Minister Theresa May’s speech on Brexit plans will attract the market’s attention, and we are probably in for another volatile session in

GBP crosses”.

“Although GBP looks a bit oversold short term, we still see risks skewed to the upside for EUR/GBP today as the market might respond to May’s hard stance on Brexit”.

“However, remember that May’s speech is not the only milestone for GBP this month as the Supreme Court ruling also is due any time soon. If the Government loses in the Supreme Court appeal, it has to negotiate with the parties in parliament in order to secure a vote in favour of triggering Article 50 and thus making a hard Brexit less likely”.

“Given the past weeks’ sell-off, this could lead to a temporary short-covering rally in GBP. However, we still expect GBP to remain under pressure in coming months as the triggering of article 50, which we expect by the end of March, moves closer”.

“We have lifted our 1M EUR/GBP target to 0.89 (previously 0.84) and 0.88 (0.87) in 3M but stress that the risk is skewed to the upside in the near term. Longer term, we still expect EUR/GBP to stabilise within the 0.84-0.88 range, targeting the cross at 0.86 in 6M and 0.86 in 12M”.

 

 


09:17 USD/JPY expected to recover from 113.20 Commerzbank

In view of Karen Jones, Head of FICC Technical Analysis at Commerzbank, the pair should find strong support around 113.20.

Key Quotes

USD/JPY is downside corrective and is inching lower towards the 55 day ma at 113.26. The market continues to indicate that this is an ‘a-b-c’ correction only and the market should hold down here and recover. We are unable to rule out at this stage a deeper retracement to the 111.98 area. This is the 38.2% retracements of the move up from November”.

“Key short term resistance is the 16 month resistance line at 118.43. We need a close above here to confirm upside scope. Above the 118.60/66 recent highs we target 120.00/120.10, the 78.6% retracement of the move down from 2015. The 120.10 level is regarded as the last defence for the June 2015 high at 125.86”.

 

 


09:15 German ZEW and UK PM Mays speech amongst market movers today Danske Bank

Analysts at Danske Bank suggest that the main event today will be the UK Prime Minister Theresa May's speech on Brexit.

Key Quotes

“Details from the speech were leaked yesterday, indicating a 'hard Brexit'. This will continue to add pressure on GBP vis-à-vis the other major currencies. Furthermore, UK inflation data is also due to be released today and should show a continued rise in inflation.”

“In addition to the events in the UK market, Germany is due to publish the ZEW indication, where we expect a solid rise in the indicator. Finally, we have a speech by the Fed's William C. Dudle and the Empire manufacturing PMI is due out.”


09:12 USD/CAD sinks to 1.3100 on weaker Dollar

The selling pressure around the greenback has gathered further traction on Tuesday, now dragging USD/CAD to test daily lows in the 1.3100 neighbourhood.

USD/CAD attention to oil, US docket

The pair has resumed its recent downside today, fully fading yesterday’s bullish attempt and returning to the region of 2-week lows near 1.3100 the figure in response to a sharp sell off in the buck.

In fact, risk aversion sentiment – which has prevailed throughout Monday’s session – seems mitigated for the time being, encouraging USD-sellers to quickly step in and erode recent gains.

However, the consolidative theme around crude oil prices seems to be somewhat undermining CAD upside and thus alleviating the downside bias in spot. The barrlel of West Texas Intermediate is down smalls just above the $52.00 mark ahead of the opening bell in Euroland.

Later in the session, US inflation figures measured by the CPI and the regional manufacturing gauge tracked by the NY Empire State index should keep the interest around the buck. In addition New York Fed W.Dudley (permanent voter, centrist) and L.Brainard are due to speak later in the NA session.

USD/CAD significant levels

As of writing the pair is losing 0.54% at 1.3106 facing the next support at 1.3098 (low Jan.17) followed by 1.3028 (low Jan.12) and finally 1.3002 (low Oct.19). On the flip side, the initial hurdle lines up at 1.3189 (high Jan.16) followed by 1.3276 (100-day sma) and then 1.3311 (38.2% Fibo of the 2016 drop).

 

 


09:06 Ex-RBI Chief Rajan: Any US border taxes will have dramatic global impact

Former Reserve Bank of India (RBI) Governor Raghuram Rajan was on the wires, via Reuters, making a scheduled speech in Hong Kong.

Key Headlines:

Any US border taxes will have dramatic global impact

Recovery from recession picking up around the world

Fear, anger very real in industrialized nations

Geo-political friction in many areas, something has to give

My worry is that we've got used to liquidity for ever

No reason why India won't become a growth engine in the future


09:02 Has the correction in USD/NOK run its course?

Although positively aligned, the 50- and the 200-period SMAs see the USD/NOK quoting between both averages on 4H charts.

The shift from a steady rally to the unfolding of a corrective pattern has brought RSI below its 35% level, considered oversold territory in an otherwise bullish context.

While still above its 200 SMA, buyers may try to keep the upward trajectory in place. If taken out, a slide below the 200 moving average would suggest an increased risk that the corrective process has developed into a new downward trend. A close back above the 50 SMA would delay the current stumbling and spur ideas that another wave of demand is likely.

09:01 Forex Today: UK PM Mays Brexit speech Big event in Europe

Risk-off sentiment extended into Asia Tuesday, and emerged the main underlying theme, as investors brace for another volatile session ahead, with plenty of risk events, with the Big one being the UK PM May’s speech, in which she may unveil her Brexit plans. Also, a massive USD slump was witnessed in Asia; with most traders unwinding their USD longs after yesterday’s rally backed by aggressive selling in the GBP/USD pair.

The European calendar ahead is expected to emerge eventful, with the UK CPI report to kick-start an action-packed session, which will be followed by ZEW economic sentiment for the Euroland and Germany. The UK PM May’s speech pointing to a ‘clean Brexit’ is scheduled around 1100GMT, and will hog the limelight today.

While in NA session, we have FOMC member Brainard and Dudley up on the rostrum alongside the US treasury Secretary Lew. The NZ GDT price index will be also closely eyed for fresh direction on the Kiwi.

Main topics in Asia

Brexit fears mounting up on more Telegraph news for May's Brexit 12 point plan delivery speech

The Telegraph put out another news today and is gearing up the markets for some hard Brexit talk from UK Prime Minister on Tuesday that the 'Media Group say will fall in as a 12 point Brexit plan.

Asian stocks extend the drop ahead of UK PM May’s speech

The Asian markets extend losses for the second straight session on Tuesday, as impending Hard-Brexit concerns continue to dampen sentiment, as investors gear up for the UK PM May’s speech due later today. 

IMF: China is the new fastest-growing large economy

The International Monetary Fund (IMF) published a latest report on 2016 growth rates, noting that China is the new fastest growing large economy across the globe.

OPEC’s Sec-Gen Barkindo: Stability to the oil market will be restored this year

OPEC’s Secretary General Barkindo said in his speech on late-Monday, he forecasts that stability would return to oil markets this year.

Key focus for the day ahead

UK: CPI and PM May’s Brexit speech in focus – TDS

Research Team at TDS sees upside for CPI for December, a headline reading of 1.5% y/y (mkt 1.4%) but any market reaction to stronger inflation data should be limited, with all eyes on PM May’s Brexit speech. 

UK: Hard Brexit fears returns with May’s key speech on Brexit in focus today – Danske Bank

According to the Senior Analyst, Mikael Olai Milhøj at Danske Bank, Brexit has moved back into the spotlight after a recent TV interview with PM Theresa May.

EUR/USD extends the bullish break to 1.0650, ZEW in focus

A fresh bout of USD selling across the board helped EUR/USD to extend the break above 1.06 handle, as focus remains on the upcoming macro news for further momentum.

Gold strongest since mid-Nov, eyes 100-DMA

Gold accelerates its bullish momentum into early Asia, as the traditional safe-haven asset remains in demand as we progress towards the UK PM May’s speech, which is expected to suggest a Hard-Brexit.

Kiwi to get a boost from what futures are pricing into this week's GDT price index?

The market for the Kiwi has been relatively subdued at the start of the week with much of the focus on the pound and the hard-Brexit concerns that have given way to a phase of risk aversion once again in Global markets.


08:59 USD/JPY plunges below 50-DMA to six week lows

The greenback continues to lose altitude, with the USD/JPY pair breaking below 50-day SMA support to test the lowest level since Dec. 8.

Currently trading below mid-113.00s, the pair extended its bearish trend for the seventh straight trading session amid a fresh bout of global risk-aversion on growing prospects of a 'hard Brexit'. Hence, investors on Tuesday will remain focused on a key speech by the UK Prime Minister Theresa May, where she is expected to unveil plans to end Britain's association with the European Union.

Meanwhile, growing uncertainty over the incoming Trump administration's fiscal policies continues to force investor to unwind their bullish US Dollar bets and is also seen collaborating to the pair's ongoing slide to six week lows.

Later during NA session, the release of Empire state manufacturing index and Fedspeaks would now be looked upon for some immediate respite for the bulls.

Technical levels to watch

A follow through selling pressure below 113.13 level (Dec. 8 low), leading to a subsequent break below 113.00 round figure mark, would turn the pair vulnerable to head towards its next support near 112.00 handle with 112.85-80 region acting as intermediate support.

On the flip side, 50-day SMA support break-point near 113.70 region now becomes immediate resistance above which the pair is likely to recover back to 114.00 handle before attempting a move back towards session peak resistance near 114.30 area.

 

 


08:45 EUR/USD still upside corrective Commerzbank

Karen Jones, Head of FICC Technical Analysis at Commerzbank, said the pair should find good support around 1.0615.

Key Quotes

EUR/USD continues to stall ahead of the 1.07 recent spike high, but continues to remain corrective. The 60 minute Elliott wave count has turned more positive and is currently indicating that the dips should hold circa 1.0615”.

“Should the market go above 1.0700, we remain unable to rule out a move to 1.0820 50% retracement. Nearby support lies 1.0450 and failure here would cast attention back to the 1.0372/40 recent lows. We await a close below the 1.0372/40 lows from mid December 2016 to trigger another leg lower”.

 

 


08:43 UK: CPI and PM Mays Brexit speech in focus TDS

Research Team at TDS sees upside for CPI for December, a headline reading of 1.5% y/y (mkt 1.4%) but any market reaction to stronger inflation data should be limited, with all eyes on PM May’s Brexit speech. 

Key Quotes

“Judging from the weekend press, the speech is going to have a bit more content than what we had expected, with May reportedly going to confirm that the UK is prepared to leave the single market in order to gain control over immigration. Another thing we’ll be watching for is what May says about the possibility of a transition agreement, as a long transition agreement will give firms much more time for a gradual adjustment to Brexit, and pushes the actual event much further into the future.”

“EUR: Germany ZEW survey for January, and we’re more or less in line with expectations in looking for gains of a couple of points for both current conditions and expectations. We also get the ECB’s quarterly bank lending survey this morning, where we’ll be watching to see how Eurozone banks are faring with continuing low rates.”

 


08:42 GBP/USD returns to 1.2100 ahead of UK CPI, May

The generalized selling pressure around the buck is prompting GBP/USD to cover Monday’s gap and advance to daily highs near 1.2130, just to ease some pips afterwards.

GBP/USD focus on May’s speech, CPI

The Sterling remains under pressure despite today’s correction higher, as inflation figures tracked by the CPI are due later for the month of December. Consensus expects consumer prices to have risen at an annualized 1.4% during the last month of 2016.

In addition, market participants will closely follow today’s speech by PM Theresa May later in the European morning. According to The Telegraph, May’s speech could unveil her plans for a ‘clean Brexit’, including at the same time an exit from the single market and the customs union.

In the meantime, spot has managed to fill yesterday’s gap lower to the 1.1980 region, although it still navigates the area of 3-month lows below the 1.2200 handle.

Adding to the fragile perspective around GBP, speculative net shorts have climbed to fresh 4-week highs during the week ended on January 10, as shown by the latest CFTC report.

GBP/USD levels to consider

As of writing the pair is gaining 0.48% at 1.2108 and a breakout of 1.2136 (high Jan.17) would aim for 1.2230 (20-day sma) and finally 1.2318 (high Jan.12). On the downside, the immediate support aligns at 1.1988 (low Jan.16) followed by 1.1450 (GBP ‘flash crash’ Oct.7).

 

 


08:31 US Dollar sinks to daily low near 101.00 handle

The greenback, as measured by the key US Dollar Index, added on to its recent corrective pull-back from 14-year highs and is now flirting with lows near 101.00 handle. 

The greenback came under some fresh selling pressure during early European session and reversed previous session’s tepid recovery gain. On Monday, the index perked up in wake of a fresh wave of global risk-aversion led by amplifying worries of a 'hard Brexit'. The gains, however, turned short-lived as uncertainty surrounding the incoming Trump administration's fiscal policies continued fueling long-dollar unwinding trade.

In absence of any fresh fundamental development, a strong short-covering rally witnessed around the GBP/USD major seems to be only factor collaborating to the greenback’s sharp slide in the past hour. 

Investors on Tuesday will remain focused on the much awaited UK Prime Minister Theresa May’s Brexit speech, which is expected to infuse a fresh bout of volatility in the FX market and eventually provide some impetus. 

Later during the day, Empire state manufacturing index would be looked upon for short-term trading impetus. Investors, however, are likely to remain on the sidelines ahead of Donald Trump's inauguration as the US President on Friday and might thus, keep the greenback suppressed. 


08:20 UK: Hard Brexit fears returns with Mays key speech on Brexit in focus today Danske Bank

According to the Senior Analyst, Mikael Olai Milhøj at Danske Bank, Brexit has moved back into the spotlight after a recent TV interview with PM Theresa May where she repeated that control over immigration and national sovereignty are higher on the government’s priority list than access to the EU single market.

Key Quotes

“Over the weekend and ahead of PM Theresa May’s important Brexit speech today, Brexit headlines have dominated the UK media. According to a story in The Times, Theresa May should be prepared to leave both the EU single market and the custom union in order to regain control over immigration. The Britons seem to support this stance, as 46% agree that greater control over immigration is more important than access to the single market (39% against), see Reuters. In general, PM Theresa May and the Conservative Party still enjoy huge support in opinion polls.” 

“In a comment in the Sunday Times, Brexit Secretary David Davis has not rejected a transitional deal between the UK and EU to make the process as smooth as possible. To some extent this is also the spirit of the so-called ‘Great Repeal Act’, where existing EU laws will be transposed in UK domestic laws on exit date.”

“As expected, the UK has begun to use taxation and regulation as negotiation weapons. Chancellor Hammond has hinted that UK could become a corporate tax haven with looser regulations if the EU tries to punish the UK. The Dutch Prime Minister Lodewijk Asscher has said he will block any EU-UK deal unless it includes a deal on taxations.” 

“In an interview in The Times conducted by Michael Gove (one of the leading Conservative Brexiters), President-elect Donald Trump said he wants a trade agreement between the US and the UK secured ‘very quickly’. Trump also said that ‘Brexit is going to end up being a great thing’.”

“The EU Commission’s chief Brexit negotiator, Michel Barnier, tweeted Saturday that the ‘EU would need special vigilance on financial stability risk’, as he recognises the importance of the City of London to EU businesses. He noted, however, that the City should not expect a special deal.” 

“We are currently reviewing our GBP forecast but we see potential for further GBP weakness in the coming months as the triggering of Article 50 moves closer. As such, EUR/GBP once again touching 0.90 should not be ruled out.”


08:14 Gold strongest since mid-Nov, eyes 100-DMA

Gold accelerates its bullish momentum into early Asia, as the traditional safe-haven asset remains in demand as we progress towards the UK PM May’s speech, which is expected to suggest a Hard-Brexit.

Gold on its way to $ 1230

Currently, gold jumps +1.30% to fresh nine-week highs of $ 1212, now eyeing a test of 100-DMA located at $ 1221.22. The renewed uptick in gold is mainly attributed to increased flight to safety as investors look to protect their capital from the UK PM May’s Brexit speech-induced market unrest, by parking funds in the ultimate safety bet gold.

Further, gold also benefits from prevalent risk-off mode in the market, indicated by heavy declines in the Asian equities and falling treasury yields. Meanwhile, the USD index slumps -0.50% to fresh three-day lows at 100.99.

Al eyes remain on the UK PM May’s speech on Brexit, which will determine whether the bulls will retain control going forward.

Comex Gold Technical Levels                                  

The metal has an immediate resistance at 1215 (round figure) and 1221.22 (100-DMA). Meanwhile, the support stands at 1202.35 (5-DMA) below which doors could open for 1195.32 (daily S2).


08:14 NZ: Robust economy with high business confidence - ANZ

In view of the Con Williams, Agri Economist at ANZ, a continuation of the good times looks to be on the cards with business confidence remaining high and experienced activity robust for New Zealand.

Key Quotes

“Capacity constraints remain acute, and there are some signs of inflation stirring, especially for construction and services. Retailing remains a tough gig.”

“Key results

“The outlook for the New Zealand economy is robust with business confidence remaining high. There was a modest softening in experienced demand and future expectations of own activity for the next quarter, consistent with our expectation that economic growth will slow from a gallop (4%) to a canter (3%) in 2017.”

“This partly reflects that capacity constraints remain acute, with the CUBO rebounding to 92.7%. Capacity utilisation on the part of builders rebounded, while there was a slight easing for manufacturers and exporters. A record-high percentage of firms (20%) report that capacity is their greatest constraint on expansion at present.”

“There are some signs of inflation stirring, with a modest pick-up in pricing indicators across the economy.”

“The key will be whether planned price increases actually occur. The December quarter saw reality match expectations – a net 7% of business expected to raise prices coming into Q4 and they managed to do this. NZIER expects inflation to gravitate toward 2% in 2017.”

“Average cost indicators remained steady though. Experienced costs for manufactures remained fairly stable, eased for services and increased for merchants and the building industry. Next quarter cost indicators eased a touch leading by services. The remainder of the sectors cost expectations remain fairly steady.”

“Business confidence remains high across all sectors highlighting the broad-based nature of the expansion. Regional confidence remains high, especially outside the upper North Island where confidence eased a touch.”

“Own expected and experienced trading activity eased slightly in December. This easing largely reversed the previous quarter’s gains. Manufacturers experienced output increased in December with robust exports leading the way. This is consistent with a global cyclical upswing for manufactures, commodities and trade. The volumes of services, merchant sales and building industry output also increased in the December quarter. This highlights that under the surface own activity remains fairly robust.”

 

 


08:06 UK: What to look out for in the May speech and how short is GBP positioning? Deutsche Bank

Oliver Harvey, Macro strategist at Deutsche Bank, notes that at 11.45 Tuesday, Prime Minister May will deliver the most anticipated speech on Brexit since the UK’s referendum to leave the EU last June.

Key Quotes

“Weekend press suggested that May would use it as an opportunity to outline a hard initial stance. What issues are at stake and what should the market look for?”

“Will the UK seek customs union access? The most material news on Sunday, if confirmed, was that the Prime Minister was prepared to give up access to the customs union. As noted by the House of Lords, this is an early decision the UK will make in the Brexit process as third country trade deals are impossible without clarity on this issue. A customs union exit would be consistent with WTO rules (although some exceptions exist), and therefore ‘hard Brexit.’ It would be the most economically disruptive outcome in terms of trade with the EU, but an early decision would also open the door to negotiate trade deals with the rest of the world in parallel to EU talks.”

“What, if any, industrial sectors will aim to receive special treatment? The UK government recognizes that customs union access is important for certain UK export sectors. The UK may seek specific access to the customs union for some sectors, watering down the terms of trade shock of hard Brexit, or an interim deal.”

“What kind of interim agreement will the UK seek? Recent rhetoric suggests that the government recognizes the dangers of a ‘cliff edge’ if no deal is reached by the end of the two years under Article 50. On this front, will May seek assurances on a transitional period at a very early stage of the negotiations (more bullish)? Is a transitional deal seen as contingent on a wider EU deal (less bullish – currently Brexit Secretary David Davis’s position) or used to play for time? Will a transitional deal be sector specific?” 

“What treatment for the City of London? Similarly, recent reports suggest the EU recognizes the potential dangers for EU financial stability of a sudden loss of UK passporting or migration of financial infrastructure to the continent. Does the UK seek agreement on continued passporting for UK banks (most bullish)?, or a third party equivalence regime (recently argued for by Policy Exchange and more disruptive for the UK financial sector in the short run)?”

“What are the UK’s red lines? Perhaps most importantly, the quid pro quo for UK economic demands will be the ability to compromise on other issues in the negotiation. The most important are immigration, the scope of EU law and contributions to the EU budget. On immigration, it will be important to see if May defines further the phrase ‘full control of the borders.’ If taken in a narrow sense this could mean simply repatriating power over immigration consistent with articles in the EEA Treaty. A more specific definition (e.g. prescriptive sector based quotas or a points-based system) would make the UK stance less flexible and imply less prospect of compromise. Similarly on EU law, is the question one of regaining primacy (closer to EEA)? or regulatory independence (less scope for compromise)?. EU budget contributions are the least problematic compromise given that government ministers have indicated contributions could continue to be made in exchange for economic concessions.” 

“A UK-wide Brexit? The Scottish Nationalist Party (SNP) have made continued access to the Single Market a precondition of the Brexit negotiations and called for a second Scottish independence referendum if this is not met. A lack of concessions from the UK government for Scotland could raise longer term risks of a UK break-up, but also be problematic if the Supreme Court were to rule that the devolved authorities must be consulted before the triggering of Article 50. We anticipate a decision on the latter in the next two weeks. Immigration red lines, the scope of EU law, customs union access and the timing of striking an interim deal are most important. It is possible much detail may not be forthcoming. In general, the more prescriptive demands on migration and EU law are the less prospect of compromise. A lukewarm attitude to the customs union should also be more bearish for sterling.”

“How short is sterling positioning? Finally, given the focus on tomorrow’s speech, it is worth a recap of sterling positioning. Headline IMM positioning suggests sizeable sterling shorts, but benchmarking sterling positioning to the referendum date (see charts below) suggests both the overall market and the leveraged fund shorts are not at extreme levels yet. Similarly, our CORAX report suggests profit taking on sterling shorts in recent weeks from leveraged funds and asset managers.”


07:48 PBOC adopts mid-term credit tool as old benchmark fades away - BBG

Bloomberg carries a story this Tuesday, citing that the Chinese central bank (PBOC) is increasingly managing the flow of credit with more finely-tuned instruments than its old methodology.

Bloomberg reports, “With the new tool playing its part in stabilizing the economy -- data Friday is estimated to show a 6.7 percent expansion for 2016 -- the People’s Bank of China is switching its focus to risk management. Another advantage of targeted lending: it adds funds without signaling broad easing that adds to downward pressure on the yuan and fuels further capital flight.”

According to Tommy Xie, an economist at OCBC Bank in Singapore, “The mid-term lending program is the central bank’s way of adapting as the economy evolves.”


07:36 EUR/USD extends the bullish break to 1.0650, ZEW in focus

A fresh bout of USD selling across the board helped EUR/USD to extend the break above 1.06 handle, as focus remains on the upcoming macro news for further momentum.

EUR/USD regains 5-DMA and beyond

Currently, the spot now advances +0.44% to flirt with daily highs of 1.0650 reached some minutes ago. The EUR/USD pair broke the overnight consolidative mode to the upside and rallied sharply higher, in response to aggressive broad USD sell-off and negative Asian equities, as investors remain on the back foot ahead of the much-awaited UK PM May’s speech.

Moreover, expectations of an improvement in the German ZEW economic sentiment figures can be also partly attributed to the latest leg higher in the main currency pair, as we head towards the European opening bells. The German ZEW headline numbers are expected to arrive at 18.9 for January versus 13.8 last.

Besides, the German macro news, we have the US regional manufacturing index and a couple of Fedspeaks due later in the NA session. While markets may closely watch out for EUR/GBP moves on the UK PM May’s speech for any impact on the euro.

EUR/USD Technical Levels

In terms of technicals, the pair finds the immediate resistance 1.0667 (daily R2). A break beyond the last, doors will open for a test of 1.0687 (5-week tops) and from there to 1.0700 (zero figure). On the flip side, the immediate support is placed at 1.0591 (10-DMA) below which 1.0553 (50-DMA) and 1.0536 (20-DMA) could be tested.

 


07:33 GBP: Impacted by the twin 2016 black swans - ANZ

Research Team at ANZ suggests that the GBP affected by the twin political black swans of 2016 – the Brexit vote and Trump win – remains volatile and uncertain.

Key Quotes

“Having briefly dipped sub-1.20 on expectations that PM May will outline a “hard Brexit” in her speech on Tuesday, GBP stabilised. But confidence remains fragile and the market continues to probe the downside as concerns over financing the twin deficits (estimated to be 7.5% of GDP collectively this year according to the Bloomberg consensus) and what the appropriate risk premium for Sterling should be in that circumstance continues to dominate.”

“Politically, countries facing massive trade uncertainty – the UK and Mexico – continue to experience weak exchange rates, which should help facilitate anticipated adjustments and support domestic activity. Sentiment remains negative, but it is important to remain open minded in case worst-case scenarios don’t materialize, and the market will be closely scrutinizing PM May’s speech tomorrow for near term direction. It is thought the speech may be about 11.45 am GMT, but that hasn’t been confirmed.”


07:30 Short EUR/CHF Deutsche Bank

Oliver Harvey, Macro strategist at Deutsche Bank, suggests to go short on EUR/CHF cross as their preferred G10 trade idea of the week.

Key Quotes

“Target 1.02, entry 1.0730, stop 1.10”

“Monday’s sight deposit data show another round of intervention last week from the SNB, with deposits rising by nearly CHF 2bn. We think the prospect for continued indefinite intervention is slim, however, given increasing risks to the public finances from the balance sheet rising nearly twice as high as before the EUR/CHF floor break in January 2015 and annual returns on the balance sheet well over 10% of Swiss national debt. Now that the SNB have paid out last year’s profits to the cantons, watch this space for a move lower in EUR/CHF.”  


07:12 USD/JPY hits fresh lows in tandem with DXY, 113.50 eyed

The bears are back in control during late-Asia, sending USD/JPY back below 114 handle amid aggressive USD selling seen across the board over the last hour.

The spot was last seen exchanging hands at 113.83, hovering close to session lows struck at 113.78 last hour. The major keeps the offered tone intact this session, with any upside attempt above 114 handle sold-off into broad based US dollar weakness and persistent risk-off trades, as markets flock to the safe-haven yen amid Brexit-related anxiety ahead of the UK PM May’s speech.

While renewed weakness in the US treasury yields also highlights that risk-aversion remains in full swing, also as the Nikkei 225 index drops over 1%. Nothing of note for the major in terms of economic events in the day ahead, and hence, focus remains on the UK PM May’s Brexit speech and Fedspeaks due later on Tuesday.

USD/JPY Technical levels to watch 

The major finds immediate resistance at 114.35 (5-DMA). A break above the last, the major could test 115 (zero figure) and 115.50 (psychological levels) beyond the last. While to the downside, the immediate support is seen at 113.50 (key support) next at 113.23 daily S2) and below that at 113 (round number).

 


07:02 Commodities: Mixed as political uncertainty negated positive fundamentals - ANZ

Analysts at ANZ note that commodities were mixed in the last session, with political uncertainty negating some positive fundamentals.

Key Quotes

“Crude oil prices inched higher as OPEC left open the option to extend the production cuts they started implementing this year. Saudi Arabia’s energy minister, Khalid Al-Falih, said it’s unlikely they will need to continue production curbs, but “all players have indicated their willingness to extend, if necessary”. However, Nigeria announced its December crude output rose by 400kb/d to 1.94 mb/d.”

“Base metals were weaker across the board as investors took profits amid political uncertainty in Europe and North America. Nickel led the falls, with traders still reacting negatively to the news that Indonesia will allow exports of nickel ore under certain circumstances. We view the new policy as bearish for the nickel price in the short term, with inventories of nickel ore likely to seep into the market. Zinc also dropped sharply, with new data showing output reaching a two year high in November. This is raising concerns that capacity closures last year are now being reversed.”

“Iron ore surged higher as sentiment in the Chinese steel market continued to increase. Steel rebar futures climbed 5.7% in China as traders speculated that further capacity cuts at mills will boost steel prices. We believe there is also some level of end of year buying by traders as they look to cover needs over the Chinese New Year holiday.”

“Gold continued to find support on the back of political uncertainty. Traders remain cautious ahead of UK Prime Minister Theresa May’s speech on Tuesday, where she is expected to signal a full break with the EU market. A weaker equity market in Europe also saw investor appetite improve. This saw ETF holdings rise 2.5 tonnes to 1,771.7 tonnes (according to Bloomberg data).”

“Agriculture markets were closed for Martin Luther King Day in the US.”


06:49 Wood Mackenzie: Asia-Pacific oil production declining at record levels - CNBC

Angus Rodger, Wood Mackenzie’s Asia-Pacific upstream research director, noted in its latest research report, oil production in Asia-Pacific is declining at a rate and a big chunk of losses comes from China alone, CNBC reports.

Key Quotes:

"We estimate 2016 production of 7.5 million barrels per day will fall by over a million barrels per day by 2020." 

"Lower oil prices and the severe cuts to upstream capex (capital expenditure) to mature assets has increased decline rates."

"Regional oil production will be underpinned by giant fields in Indonesia, Malaysia and China but these fields are super mature and will require expensive techniques, high break-evens and capex cuts." 

"The scarcity of new oil discoveries over the last two decades combined with lower prices and hefty capex cuts, particularly to legacy fields, will see decline rates spiral across the region."


06:34 Japan Capacity Utilization rose from previous 1.4%to 3% in November


06:34 Japan Industrial Production (YoY) remains unchanged at 4.6% in November


06:34 Japan Industrial Production (MoM) in line with forecasts (1.5%) in November


06:31 NZ: Housing market is cooling gradually - ANZ

In view of the Phil Borkin, Senior Economist at ANZ, a gradual cooling in momentum is still their main takeaway from the latest REINZ housing data market figures of New Zealand for December 2016.

Key Quotes

“In December, turnover dipped, days to sell lengthened and house prices were largely unchanged. The market is certainly not weak, but it has cooled from its dizzy mid-2016 heights. While an ongoing housing shortage needs to be kept in mind and will support the downside, we believe prudential restrictions and recent mortgage rate increases will ensure cooler momentum persists.” 

“Key results

  • Seasonally adjusted national sales volumes dipped in December, falling 0.9% m/m. While there has been some monthly volatility, this continues a cooling trend evident since around April 2016. As a share of the housing stock, we estimate 3-month average turnover has now fallen to its lowest level since late 2014. 
  • The median time to sell ticked a little higher, lifting 0.3 days to 34.3 days. While this is not quite its recent high of 34.6 days seen in October, it is still well up from its mid-2016 lows of close to 30 days. 
  • House price growth momentum has also softened. Our preferred measure of house prices – the REINZ Stratified House Price Index – was largely unchanged in the month (+0.4% m/m). While this is the fourth consecutive monthly increase, and annual growth remains elevated (at 14% y/y), the pace of price growth has certainly slowed vis-à-vis mid2016. In three-month annualised terms, prices are running at just 4.3%, which is down from close to 25% in the middle of 2016.
  • From a regional perspective, the picture is mixed. Auckland sales volumes have fallen for eight consecutive months (to be down 23% from their high), although sales are down elsewhere too (17% over the same period). More modest price growth has been a relatively broad-based story, although Auckland and Christchurch are underperforming, with Wellington and other South Island regions leading the way.”

06:28 AUD/USD rebounds sharply to test 0.7500

The AUD/USD pair stalled its overnight downslide near 0.7460 region, and from there made a solid comeback in a bid to regain 0.75 handle.

AUD/USD back above 100-DMA at 0.7484

Currently, the AUD/USD pair trades +0.16% higher at fresh daily highs of 0.7492, extending the upmove from 0.7465 levels. The Aussie caught a fresh bid-wave last hours after the greenback weakened dramatically across the board, as markets resorted to profit-taking on their USD-longs after yesterday’s massive rally, triggered by a slump in GBP/USD.

However, it remains to be seen if the Aussie sustains the bounce as tumbling Asian equities as well as copper prices are expected to hit the sentiment around the higher-yielding commodity currency.

Next on tap for the major remains the Fedspeaks due later on Tuesday ahead of tomorrow’s US CPI report.

AUD/USD Levels to watch   

The pair finds the immediate resistance at 0.7503/05 (200-DMA) above which gains could be extended to the next hurdle located 0.7550 (psychological levels) and 0.7600 (round figure). On the flip side, the immediate support located 0.7452 (daily S1). Selling pressure is likely to intensify below the last, dragging the Aussie to 0.7422 (10-DMA) and below that 0.7360 (50-DMA).


06:22 USD longs edged lower, EUR shorts dropped - Rabobank

Research Team at Rabobank lists down the IMM net speculators’ positioning as at 10 January, 2017.

Key Quotes

The bearish EUR sentiment that surged in early November has continued to unwind and is now at the lowest level since June. EUR shorts had already dropped sharply following the December ECB policy meeting and continued to move lower into the end of last year. At the start of 2017 stronger than expected German and Eurozone inflation data re-opened the debate about the appropriateness of easy ECB policy settings.”

Yen bears have also lost their nerve with short positions dropping markedly last week. The levels of yen shorts had already fallen back modestly the previous week signalling that the momentum behind the carry trade has stalled.”

Net USD longs edged lower but the tone is essentially consolidative. With a lot of good news already priced-in to the USD, investors are awaiting fresh direction.”

Having declined since the start of December, bearish bets against the pound have pushed higher for the past two weeks. Even though recent UK data releases have been constructive, focus remains drawn to Brexit related political news and fears of a ‘hard’ Brexit.”

Having briefly jumped into positive territory in late December, CHF positions fell back into negative ground before the end of the year and have since continued to extend. Positions remain influenced by expectations regarding the outlook for the USD and safe haven demand.”

Following the sharp fall in CAD net shorts at the end of December, speculators have further increased them during the past two weeks. Oil prices are in focus, though this week’s BoC meeting and Trump inauguration should draw attention back to the economy. AUD speculators’ positions dropped into negative territory at the end of last year for the first time since June 2016. Shorts grew modestly last week.”


06:14 Asian stocks extend the drop ahead of UK PM Mays speech

The Asian markets extend losses for the second straight session on Tuesday, as impending Hard-Brexit concerns continue to dampen sentiment, as investors gear up for the UK PM May’s speech due later today. According to the UK Press, May will announce a "clean" and "hard" Brexit today.

Moreover, President-elect Donald Trump's inauguration at the end of this week, also keep markets on the edge. Hence, demand for the safe-haven yen remains on the rise, weighing down on the Japanese exports-oriented stocks tumbled over 1% after increased flight to safety pushed the yen higher across the , dragging the benchmark index lower.

The Japanese benchmark, the Nikkei 225 index slumps -0.81% to 18,940. The Australian benchmark, ASX 200 index drops -0.80% to 5,702 points. Mainland Chinese markets extend losses, with both Shanghai composite and Shenzhen’s CSI 300 index sliding nearly 0.40%. Hong Kong's Hang Seng gains +0.44% to 22,818. 


05:21 USD/JPY attempting recovery once again on 114 handle

The USD/JPY pair is seen trading quite choppy so far this session, with the bulls making yet another attempt to take on the recovery above 114 handle.

The spot was last seen exchanging hands at 114.14, having posted a day’s low at 113.84 and a day’s high at 114.28. Risk-off sentiment appears to have cool-off a bit amid a minor-recovery seen in the Japanese stocks, which in-turn diminishes the safe-haven bids for the yen, now pushing USD/JPY back above 114 handle.

However, further recovery looks to lack momentum as the greenback meanders near lows versus its main competitors, as the treasury yields keep losses.

Further, markets remain cautious ahead of the UK PM May’s speech on Brexit, which may point towards huge economic uncertainties for the British economy and therefore, could trigger another bout of risk-aversion across the financial markets.

USD/JPY Technical levels to watch 

The major finds immediate resistance at 114.35 (5-DMA). A break above the last, the major could test 115 (zero figure) and 115.50 (psychological levels) beyond the last. While to the downside, the immediate support is seen at 113.73 (Jan 12 low) next at 113.50 (key support) and below that at 113 (round number).

 


05:07 Ex-PBOC adviser Yu: Free-Floating Yuan is nothing to fear

Yu Yongding, a scholar at the China Academy of Social Sciences (CASS) and former China’s central bank adviser, made the comments amid a growing debate among Chinese economists about whether the yuan should be allowed to trade more freely in the official Shanghai Securities News today, as cited by Reuters.

Key Quotes:

“How the future exchange rate will go depends on central bank policy and I have no way of reading their minds, but I want to say that we should overcome the irrational fear of a free-floating yuan.” 

“(China) should be the country least afraid of a fluctuating exchange rate.”

He suggested the central bank set a “bottom line” of 25 percent for the yuan to depreciate.


05:01 USD/NOK sticking to tight trading ranges

The USD/NOK hourly chart is not very telling: the pair lacks price direction and also volatility.

Notice the 50-SMA has slipped between the 200- and the 800-period SMAs, denoting an absence of a strong trend. The ADX tracking below 30 at the moment signals the same sideways condition.

The prospect for the building of triangles, rectangles, and pennants looks to be quite realistic. Traders may also opt to capitalize on divergences between price and oscillators.

04:59 IMF: China is the new fastest-growing large economy

The International Monetary Fund (IMF) published a latest report on 2016 growth rates, noting that China is the new fastest growing large economy across the globe.

Key Details:

 India shot itself in the foot when it cancelled 90% of its cash in circulation 

India's growth slowed to 6.6% in 2016 from 7.6% in 2015

China's economy grew by 6.7% in 2016

IMF says 2017 growth in India, though, is expected to be 7.2%, which will put it back in front

Then 7.7% projected for 2018

China forecast is 6.5% in 2017 % 6.0% the following year


04:49 Gold regains $ 1205 amid risk-aversion

Gold remains on the front foot in the Asian trading, with flight to safety back in vogue amid increased Hard-Brexit concerns as we head towards the UK PM May’s speech due later today.

Gold benefits from risk-off

Currently, gold trades with size-able gains and hits fresh session highs at $ 1205.45, heading for a retest of multi-week highs reached yesterday at $ 1208.45. After a brief profit-taking spree witnessed in the last US session, the yellow metal regained lost momentum and once again took advantage of persisting risk-off market profile, as Hard-Brexit fears continue to plague markets, weighing heavily on most risk assets such as equities, treasury yields etc.

While subdued trading activity seen around the greenback versus its major rivals also adds to the renewed upside seen in gold prices. A weaker US dollar makes gold cheaper for the buyers in foreign currency.

Attention now turns towards the UK PM May’s speech on Brexit and Fedspeaks for further impetus on the shiny metal.

Comex Gold Technical Levels                                  

The metal has an immediate resistance at 1208.45 (2-month tops) and 1210 (round figure). Meanwhile, the support stands at 1201.15 (5-DMA) below which doors could open for 1195.32 (daily S2).


04:27 GBP/USD fades a spike to 1.2060 on risk-off, UK PM May eyed

The GBP/USD pair managed to survive above 1.20 handle so far this Tuesday, although the recovery ran out of legs near 1.2060 region, as risk-off prevails ahead of the UK PM May’s speech due later in the day.

GBP/USD making lower tops on hourly charts

The cable is back in the red zone, after a brief peek into positive territory, as markets refrain from placing any directional bets on the GBP ahead of the main risk event for the upcoming months - the UK PM May’s speech, which is rumored to be scheduled around 11.00GMT.

The UK Press has outlined 12 key points on which PM May will hold her speech on Brexit, signaling that the UK will not have "partial" membership of the EU "that leaves us half-in, half-out." Her comments pointing towards a Hard-Brexit will pose a big economic slowdown threat for the UK economy and hence, will heavily weigh on the pound.

However, markets may not leave any opportunity to unwind the GBP shorts if the UK PM May’s speech disappoints markets and does not have a huge negative bearing on GBP/USD pair.

Meanwhile, the immediate focus now remains on the UK CPI data, which will be published ahead of the UK PM May’s speech.

GBP/USD Levels to consider            

In terms of technical levels, upside barriers are lined up at 1.2095/99 (5-DMA/ daily R1), 1.2157 (10-DMA) and 1.2200 (zero figure). While supports are aligned at 1.1988 (multi-week low) and 1.1850 (post-Flash crash low) and below that at 1.1800 (key psychological support).


04:10 GBP/JPY attempts recovery ahead of UK PM Mays speech

The GBP/JPY cross is attempting a break above 137.58 (50% fib retracement of Nov 9 low - Dec 15 high) ahead of the UK PM May’s speech, which could offer insights into whether the government is ready for ‘hard Brexit’.

Supported by monthly 5-MA

The sellers ran out of steam around the monthly 5-MA level of 136.98 on Monday. The pair clocked a high of 138.15 on Monday after PM May’s spokesperson denied ‘hard Brexit’ talks.

However, the bounce was short-lived as the markets did not buy the denial.  It remains to be seen if PM May’s Hard Brexit talk later today is well received by the markets.

GBP/JPY Technical Levels

The pair was last seen trading around 137.58 (50% fib). A break above the same would open the doors to 138.51 (Nov 29 low) and then to 138.97 (5-DMA). On the other hand, a breakdown of support at 137.09 (session low) would expose 136.45 (previous day’s low) and 136.01 (100-DMA).


04:01 RBAs Harper: I d like to see the AUD rate weaker

The Australian Today reports comments from RBA’s board member Ian Harper, following his interview with the WSJ earlier today.

Key Points:

“Economists say that a serious trade battle between the world's two biggest economic powers (US & China) would likely hammer the Australian dollar ... in that scenario, a weaker Aussie dollar would help the local economy, while policy makers in Beijing would also likely take action to prop up Chinese growth ... "You would expect some countervailing action to stimulate Chinese economic activity"

"I'd like to see the (Australian-dollar) rate weaker than where we've seen it over the last 2-3 years, that's for sure"

But he does not a sudden decline on the horizon

Forecasting a rebound in economic activity from the unexpectedly weak third quarter

Economy was weak in the absence of strong non-mining investment and government spending

"Non-mining business investment ... It has been growing, but it needs to grow faster."

Employment growth is weak

Retail spending isn't as strong as it otherwise could be


03:52 OPECs Sec-Gen Barkindo: Stability to the oil market will be restored this year

OPEC’s Secretary General Barkindo said in his speech on late-Monday, he forecasts that stability would return to oil markets this year.

Key Quotes:

"And stability to the oil market that has eluded us for nearly three years will be restored on a sustainable basis in the interest of producers, consumers and the global economy."


03:42 IMF warns on Chinas credit fueled recovery, upgrades 2017 GDP forecast

The International Monetary Fund (IMF) revised China’s 2017 GDP forecast to 6.5%, which is 0.3 percentage points higher than their October forecast.

However, the Fund warned that China’s credit fueled recovery could only end up in deeper problems.

“Continued reliance on policy measures, with rapid expansion of credit and low progress in addressing corporate debt, especially in hardening the budget constraints of state-owned enterprises, raises the risk of a sharper slowdown or a disruptive adjustment”, the IMF said.


03:30 NZD/USD Doji formation ahead of GDT auction

The NZD/USD pair formed a Doji candle on Monday, which suggests indecision on the part of traders ahead of the Global Dairy Trade price auction.

Hovers around 0.71 handle

The spot was last seen trading around 0.71 handle. At the last auction, the average price of whole milk powder (WMP) fell almost 8%. The GDT price numbers came out weak at -3.9%. The decline in prices at the start of the year rocked the dairy futures.

As per NZ Herald reports, "Futures market trading is pointing to a mild improvement in dairy prices at this week's GlobalDairyTrade auction after a surprisingly weak start to the year."

NZD/USD Technical Levels

A break below 0.7086 (200-DMA) would open doors for the downward sloping 50-DMA level of 0.7062. A violation there would expose 0.70 (zero levels). On the other hand, a break above 0.7118 (session high) could yield a rally to 0.7150 (100-DMA) and then to 0.7170 (Nov 30 high).

 


03:17 PBOC sets USD/CNY at 6.8992 vs 6.8874

PBOC sets USD/CNY at  6.8992 vs 6.8874


02:48 Outlook for antipodean cross, AUD/NZD, and rates - Westpac

Analysts at Westpac offered an outlook for the antipodean cross, AUD/NZD, and rates.

Key Quotes:

"Corrections appear to be continuing and could run as far as 1.0450 during the days ahead. Thereafter the multi-week rally should resume.

AUD/NZD 1-3 month: Higher to the 1.0650-1.0770 area, mainly for valuation reasons. The cross remains well below fair value estimates implied by interest rates, commodity prices and risk sentiment. However we acknowledge the AUD’s higher sensitivity to China news, as well as Australia’s AAA downgrade risk, any such action likely to delay any return towards fair value during the next few months (11 Jan).

AU swap yields 1 day: The 3yr and 10yr should open around 2.10% and 2.90%, respectively.

AU swap yields 1-3 month: The 3yr has probably based at 1.60%, the RBA expected to sit tight at a 1.5% cash rate for some time. (7 Nov).

NZ swap yields 1 day: NZ 2yr swap rates should open at 2.40%, the 10yr at 3.40%.

NZ swap yields 1-3 month: The RBNZ ended its easing cycle on 10 Nov and will remain on hold for a long time. That will anchor the short end somewhat (although the 2yr-OCR spread – one measure of stretchedness – could rise further given historical precedents) with the long end free to follow offshore yields. The curve steepening trend should continue."


02:37 USD/JPY: dropping below 114 handle in risk-off mode before PM May s Brexit speech

Currently, USD/JPY is trading at 113.88, down -0.19% on the day, having posted a daily high at 114.25 and low at 113.83.

USD/JPY opened in Tokyo with a decisive offer following on from the better offered feel at the start of this week while consolidating the initial supply that started when markets returned for 2017.

Brexit fears mounting up on more Telegraph news for May's Brexit 12 point plan delivery speech

There is an air of uncertainty again that has been sparked by the weekend's news and today's reported in the Telegraph that PM May's keynote speech will include a 12 point plan that will leave no room for a soft exit. This, coupled with the reversal of the Trump trade offers the Yen support ahead of Trump's inauguration on Friday.

Meanwhile, US markets were closed overnight but the US premium has been diminishing of late with a rise in yields and the Fed's fund rate, but for the day ahead in the US session we only have NY Fed's Dudley who will speak on consumer behaviour and Williams is also speaking. The key event remains with Wednesday's CPI and Friday's inauguration.

USD/JPY levels

Spot is presently trading at 113.92, and next resistance can be seen at 114.01 (Daily Classic S1), 114.14 (Monthly Low), 114.14 (Weekly Low), 114.14 (Daily Open) and 114.19 (Hourly 20 EMA). Next support to the downside can be found at 113.83 (Daily Low), 113.62 (Yesterday's Low), 113.44 (Daily Classic S2), 113.04 (Weekly Classic S1) and 112.72 (Daily Classic S3).

 

 


02:33 Australia New Motor Vehicle Sales (YoY) climbed from previous -1.1% to 0.2% in December


02:33 Australia New Motor Vehicle Sales (MoM) increased to 0.3% in December from previous -0.6%


02:31 Australia Home Loans came in at 0.9%, above expectations (0.1%) in November


02:31 Australia Investment Lending for Homes: 4.9% (November) vs 0.7%


02:23 USD/CNY fix model: Projection at 6.9028 - Nomura

Nomura's model projects the fix to be 154 pips higher than the previous fix (6.9028 from 6.8874) and 52 pips higher than the previous official spot USD/CNY close of 6.8976. The basket implied change is 151 pips higher than the previous official spot USD/CNY close (6.9127 from 6.8976), Nomura adds. 


02:01 Signs of exhaustion apparent in NZD/USD

Outlined from an hourly perspective, the [pair] is being carried into new low ground but reflecting an extremely low volatility.

Usually associated with the formation of narrow consolidation ranges, there is a chance for volatility to expand again and for price to break out and start a new upward trajectory. Conversely, an extra selloff is also likely should the immediate range support fail.

Traders are advised to maintain a degree of neutrality until a strong break in either direction ensues.

01:59 Kiwi to get a boost from what futures are pricing into this week s GDT price index?

The market for the Kiwi has been relatively subdued at the start of the week with much of the focus on the pound and the hard-Brexit concerns that have given way to a phase of risk aversion once again in Global markets.

However, focus will soon turn to New Zealand and the correlation between the kiwi and global dairy prices. We have seen a slump in global demand of late, but as the NZ Herald reports, "Futures market trading is pointing to a mild improvement in dairy prices at this week's GlobalDairyTrade auction after a surprisingly weak start to the year."

The consensus of world dairy prices for the year ahead is that production in decline should be supportive while supply is speculated to continue to contract in major producing countries, except the US where there is a strong domestic demand for butter, along with a range of commodities as a whole.

"Whole milk powder prices look likely to improve a little after dropping 7.7 per cent at the previous sale in what was later seen as a rebalancing between the main products on offer," explained Jamie Gray, a business reporter for the NZ Herald.

NZD/USD 1-3 month:

Analysts at Westpac expect the bird to move lower to 0.6800. "The US dollar has had an impressive rise since the US election and has potential to rise further during the months ahead. The Fed’s assertive tightening projections plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar. Against that, the NZ economy is strong and dairy prices have risen, but these forces are subservient to the US dollar’s trend."


01:36 Brexit fears mounting up on more Telegraph news for May s Brexit 12 point plan delivery speech

The Telegraph put out another news today and is gearing up the markets for some hard Brexit talk from UK Prime Minister on Tuesday that the 'Media Group say will fall in as a 12 point Brexit plan.

"The Prime Minister will say that Britain is quitting the single market and although she will be less explicit on the issue of the customs union, her remarks will make clear that after Brexit the UK will no longer be a member," wrote Peter Dominiczak, political editor of the Telegraph.

The keynote speech and the 12-point plan for Brexit is likely to send the pound lower as PM May vows that the UK will not have "partial" membership of the EU "that leaves us half-in, half-out" and subsequently, this will expose the UK to huge economic uncertainties. However, those hoping for a softer Brexit or not one at all will be looking out for the result of the Supreme Court that delivers a ruling this week on whether Theresa May has the power to trigger Article 50 using a royal prerogative, rather than by an Act of Parliament - March 31 of 2017 is the deadline that the PM had set for invoking Article 50 by notifying the European Council of Britain's intention to leave the EU.

The article in the Telegraph ecnded with a slice of May's optimisim when she recent said, “I want us to be a truly Global Britain – the best friend and neighbour to our European partners, but a country that reaches beyond the borders of Europe too. A country that gets out into the world to build relationships with old friends and new allies alike.”


01:01 USD/SGD MACD opens the gates for further depreciation

A bearish MACD line cross below its median on a daily chart suggests that momentum is to the downside at the moment.

Traders following this technical signal will now more confident that serious inroads to the USD/SGD downside can be achieved. Potential and long-term sellers should find comfort in the fact that this signal hasn't occurred for more than three weeks on the daily charts.

00:56 AUD/USD: looking to break 0.75 as a key resistance

Currently, AUD/USD is trading at 0.7470, down -0.06% on the day, having posted a daily high at 0.7481 and low at 0.7468.

Market wrap: risk aversion increasing, watching sterling - Westpac

AUD/USD was up to meet the 200 dma at the 0.75 handle, but has been unable to breach the psychological level with any conviction. This level is a historic resistance level and a move higher on a daily closing basis would bring the 2016 summer time commencing channel that lasted until November with a range between 0.7420 and 0.7780.

Analysts at Westpac explained that the Aussie continues to gain support from rising Chinese bulk prices and the general correction in USD with scope for a test of 0.7530/40. Should risk aversion build, the 0.7430-50 should provide support.

US dollar ends higher, consolidating around 101.50

AUD/USD 1-3 month:

The analysts at Westpac are bearish longer term looking for a move below 0.7200. "The US dollar has had an impressive rise since the US election and has potential to rise further during the months ahead. The Fed's assertive tightening projections plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar. Against that coal and iron ore are likely to sustain a good portion of their dramatic rises, and economic data should improve in Q4 and Q1, but these forces are subservient to the US dollar's trend. There's also the issue of Australia's AAA rating, seen at risk."

AUD/USD levels

Current price is 0.7471, with resistance ahead at 0.7475 (Daily Open), 0.7477 (Hourly 20 EMA), 0.7481 (Daily High), 0.7486 (Daily Classic PP) and 0.7500 (Monthly High). Next support to the downside can be found at 0.7468 (Daily Low), 0.7463 (Daily Classic S1), 0.7458 (Yesterday's Low), 0.7453 (Hourly 100 SMA) and 0.7436 (Weekly Classic PP).

 


00:20 Market re-cap: U.S. was closed, focus on Europe and ECB - ANZ

Analysts at ANZ explained that US markets were closed for Martin Luther King Day, leaving activity naturally subdued.

Key Quotes:

"Elsewhere, European bourses were offered as there are some expectations that Thursday’s central bank meeting may be a bit more balanced with some looking for hints at when the ECB may start to taper QE. There has also been chatter in the market about peripheral bond yields (particularly Portuguese yields) going higher as the ECB approaches holding limits on Portuguese bonds. With Euro area core inflation at 0.9% y/y and an unemployment rate of 9.8% – which indicates a significant negative output gap – we think that it is far too early for any talk of tightening. But in any case, markets are fatigued with QE and have seen what happens when it has ended elsewhere. Oil was mildly higher (WTI at ~$52.60/bbl) and gold was firmer (at ~$1202 oz.), but the overall CRB index was a tad softer, down ~0.2% at 6.30am NZT."


00:15 USD/CAD creeping higher with eyes for 1.32 handle

Currently, USD/CAD is trading at 1.3180, down -0.05% on the day, having posted a daily high at 1.3189 and low at 1.3172.

We had a US holiday today and much of the tone was risk -off, favouring the greenback to some degree after yesterdays crash in the pound again on the open of early Asia in thin trade.

Market wrap: risk aversion increasing, watching sterling - Westpac

We look to Wednesday’s Bank of Canada policy decision for domestic events for CAD, that will be accompanied with a statement, and MPR forecast update. "We remain CAD bears on the basis of relative central bank policy and look to CAD weakness into and through Wednesday’s BoC...OIS are still pricing roughly 5bpts of tightening over the next 12 months, leaving CAD vulnerable to weakness in the event of a moderation," explained analysts at Scotiabank, adding, "We hold a bearish CAD forecast looking to 0.71 for end-Q2."

US dollar ends higher, consolidating around 101.50

USD/CAD levels

USD/CAD has been climbing higher and away from the support of the 200 day MA support at 1.3146. "We  anticipate gains through 1.3180 toward the mid-1.32s," offered analysts at Scotiabank.

Spot is presently trading at 1.3180, and next resistance can be seen at 1.3187 (Daily Open), 1.3189 (Daily High), 1.3190 (Yesterday's High), 1.3194 (Daily Classic R2) and 1.3212 (Hourly 200 SMA). Support below can be found at 1.3172 (Daily Low), 1.3165 (Hourly 100 SMA), 1.3162 (Daily Classic R1), 1.3153 (Hourly 20 EMA) and 1.3151 (Weekly Classic PP).

 

 


00:05 NZD/USD retakes 0.7100 amid US dollar strength, GDT next

Currently, NZDUSD is trading at 0.7105, down -0.36% on the day, having posted a daily high at 0.7148 and low at 0.7076.

The New Zealand dollar started a new year with a decent recovery all the way from 0.6883 (Jan. low) amid neutral to bearish expectations from different analysts and technical indicators. However, It's not over until It's over, a perfect quote to explain how markets tend to change and adjust on a weekly basis (or in a matter of seconds) as prices printed a new high at 0.7145, not too far from 0.7237 (Dec. 2016 high). 

Expected mild improvement in dairy prices; more NZD upside ahead?

The Cattle Site reports ahead of this week's GDT auction, "Whole milk powder prices look likely to improve a little after dropping 7.7 percent at the previous sale in what was later seen as a rebalancing between the main products on offer. In the big picture, analysts said the likelihood of continued declines in world production would remain supportive for prices this year."

New Zealand's robust residential market; Healthy economy?

NZherald reports on the state and current real estate indicators, "The Nationwide property has hit the $1 trillion mark for the first time. In comparison NZ listed stocks are worth a combined $114 billion, Auckland investors increased last year after being initially being affected by the loan-to-value ratio restrictions from late 2015, accounting for 43 percent of sales, The QV House Price Index shows annual growth in Hamilton peaked at 31.5 per cent in July 2016, while Tauranga's peak was a month later at 28.5 per cent. Net migration, low-interest rates, and low supply continue to contribute to rising house prices across the country."

NZD/USD Levels to consider

In terms of technical levels, upside barriers are lined up at 0.7237 (Dec. 2016 high), 0.7400 (Nov. 2016 high) and 0.7484 (2016 multi-week high). While supports are aligned at 68.83 (Jan. low) and 0.6861 (Dec. low) and below that at 0.6674 (June 2016 low).

nzdusd

To summarize if dollar weakness were to continue (that's a big 'if') and Global Dairy Trade adjusts slightly to the upside with a positive reading, then a retest of previous 2016 highs are a doable impossible. Furthermore, on the long-term perspective, the Kiwi has two potential horizontal values that traders and investors most note: at 0.7002 (short-term 61.8% Fib) towards 0.7488 (short-term Fib extension) this value trapped 482-pips from high to low. Then, from 0.8841 (Aug. 2011 high) backward to 0.3900 (Oct. 2000 low) the long-term Fib projection delivers another relative value to consider at 0.6952 (long-term 61.8% Fib) towards 0.6370 (long-term 50.0% Fib) if prices close and open below that 61.8%, it can push prices lower in the next 6-months. 

nzdusd

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