HotForex Forex News

21:54 USD/JPY turns lower and breaks below 114.50 as Trump era starts

The US dollar weakened across the board during the last hours amid a recovery in US bonds. The 10-year year yield dropped back to 2.46% after reaching earlier rates above 2.50%. The yen gained momentum with falling yields. 

Greenback remained steady in the market after Trump’s inauguration and now is turning lower amid some arrests in Washington during protests. 

Numerous arrests in Washington during anti-Trump protests

USD/JPY broke below the 114.50 support area and fell to 114.27, hitting a fresh daily low. The pair was trading around 114.35, near the lows and practically unchanged from the level it had a week ago. 

USD/JPY technical levels 

To the upside resistance levels might be located at 114.85 (20-hour moving average), 115.40 (daily high), 115.60 (Jan 19 high) and 116.00 (psychological). On the flip side, support could be seen at 114.00 (psychological), 113.60 (Jan 16 low) and 112.55 (Jan low). 

USD/JPY
 


21:30 UK PM May: Hopes to lower trade barriers with the US - BBG

According to Bloomberg, UK Prime Minister Theresa May reportedly said that she hopes to lower trade barriers with the United States.


21:26 Numerous arrests in Washington during anti-Trump protests

Washington D.C police are reporting "numerous" arrest made during anti-Trump protests after inauguration ceremony. CNN is saying more than 90 people had been arrested in the capital city. Smoke bombs are being deployed by the authorities in order to defuse the crowds.

Some photos circulating in social media are showing damages in vehicles and properties. At the time of writing, DXY is trading at 100.27, down -0.35% on the day, having posted a daily high at 101.50 and low at 100.77


21:05 US dollar index flat on Trumps first day

The US dollar dropped marginally in the currency market after the inauguration of Donal Trump. Most crosses remained within previous range. The Mexican peso outperformed and extended gains versus the US dollar. 

The US Dollar index, which gauges the greenback against its main competitors, is falling 0.09%, currently slightly below 101.00. The index weakened during the American session but remained at all times above Asian session lows that lie at 100.78. Earlier it peaked at 101.43 from where it dropped toward current levels. 

No surprises emerged from President Trump speech and market volatility remained low. The new president repeated most of his campaign lines, inaugurating a new era for the US and maybe the world. In the first hours of the Trump administration, equity prices dropped modestly, the bond market remained steady and the US dollar fell marginally. 

Next week, the key economic reports will be released on Friday, with the first reading of 4Q GDP growth. Economic numbers are likely to be offset by announcements from the next administration. 

DXY

US President Trump signs first executive orders
 


20:42 Fed s Williams: In a healthy strong economy, shrinking balance sheet gradually won t be disruptive

More headlines keep crossing the wires, via Reuters, from San Francisco Fed President John Williams' speech:

  • As rates rise the profits Fed turns over to the treasury will likely decline
  • New Fed governors shed their politics when they join the fed
  • Says not worried about a student loan bubble

20:36 Gold slightly above 50-SMA at $1205; Short Gold, Long-Dollar?

Currently, Gold is trading at 1205.11, up +0.02% on the day, having posted a daily high at 1209.15 and low at 1198.68. 

Not much has changed in terms of price for the precious metal during the NA session. Moreover, Trump's inauguration speech fails to impress investors and traders as no one rushed to hedge risk or to take more of it. 

Nevertheless, it has been an important trading week for Gold bugs as they aimed to keep the metal above water; $1200 mark. Hence, as long as prices keep trading above such relevant level the case to experience further gains towards $1250-60 range is on the table. 

Donald Trump's inauguration speech - Live Coverage

Technical levels to watch

In terms of technical levels, upside barriers aligned at 1210 (horizontal resistance) and above that at 1218 (next horizontal resistance). While downside barriers are at 1200 (near 50-SMA), 1181 (near 100-SMA) and below that at 1166 (200-SMA).

gold

How to trade President Donald Trump - Panel with Boris Schlossberg, Joseph Trevisani and Harry Dent


20:25 Fed s Williams: Monetary policy takes a year or two to have its full effects

San Francisco Fed's President John Williams is on the wires, via Reuters, stating that monetary policy takes a year or two to have its full effects.

Key headlines (via Reuters):

  • Monetary policy is still giving a boost to U.S. growth
  • Says don't need to see unemployment going lower and lower, want to stabilize it
  • We need to start pulling back on the stimulus, gradually
  • Says need to raise rates before we get to goals so don't overshoot them
  • Fed doesn't talk partisan politics, and need to keep it that way

20:22 US President Trump signs first executive orders

According to Washington Post, U.S President Donald Trump signs first executive orders and paperwork that makes his presidency official. Also, he signed formal nominations and proclamation for National Day of Patriotisms, his spokesman said via Reuters.


20:14 USD/MXN: Mexican peso strengthens after Trumps speech

The Mexican peso rose across the board after President Trump inauguration speech. USD/MXN extended the decline and bottomed at 21.55, the lowest level since Wednesday. 

Currently the pair trades at 21.63, down 1.32% for the day. It is still up marginally for the week but significantly off highs. Earlier today it approached 22.00 but then bounced to the downside. 

Greenback dropped modestly after the inauguration. During his speech, Trump did not mention “the wall”, but he said that he will strengthen the borders.

US President Trump - Policy will follow two simple rules: buy American and hire American

Buy the rumor, sell the news?

Overall market volatility has remained limited, with the Peso among the biggest movers. Despite today’s recovery, USD/MXN still remains sharply higher compared to the levels it had back in December. 

A consolidation below 21.45 could open the doors from a more significant bearish correction while on the flip side, above 22.00, the rally could resume. 

USD/MXN


20:05 United States Baker Hughes US Oil Rig Count rose from previous 522to 551


20:01 US stocks steady after Trump s USA first speech

Trump's 'USA first' speech delivered pieces from previous statements that had nothing new in terms of tax cuts or effective changes that may affect important trade partners. Then, US equity indexes found no reason to experience substantial changes in their trading session. 

At the time of reporting, the Dow Jones Industrial Average added over 46-points and moved above 19,778 level, while the broader S&P 500 Index added around 5.50-points to 2,269.25. Meanwhile, tech-heavy Nasdaq Composite Index was trading up nearly 6-points to 5,546.31.

Donald Trump's inauguration speech - Live Coverage

Joseph Adinolfi, Markets reporter at Market Watch, notes, "Bond yields, which move inversely to prices, are on track to notch their first weekly rise in a month. Recent moves suggests that a spate of buying in bonds that has pushed yields lower has run out of steam, said Tom Tucci, managing director and head of Treasury trading at CIBC World Markets Corp. “Part of the run-up was a short covering bid just because there wasn’t any new information,” Tucci said. “There has been a lot of talk about what Trump will push through, but there is still no hard facts on infrastructure spending or tax cuts.”

In the currency markets, the US Dollar kept a neutral stand against its counterparties gaining close to 50-pips across the board against the Australian and New Zeland dollar. Another 30-pips in the case of the British pound and the Euro. Finally, the greenback retraces off highs against the Japanese yen close to 50-pips and shares an identical scenario against the Canadian dollar. 

How to trade President Donald Trump - Panel with Boris Schlossberg, Joseph Trevisani and Harry Dent


19:39 Updated White House s policy pages: Seeking 4% annual GDP growth

The policy pages from the White House’s website had been updated after Inauguration ceremony, highlighting the US President Trump’s administration plans to create around 25 million jobs and return to 4% GDP growth. Also, Trump’s key goals consider a strategy to withdraw from TPP and shows a commitment to renegotiate NAFTA.

No mention of labeling China as “currency manipulator” and there is highlighted a plan to lower tax rate in every bracket. "If our partners refuse a renegotiation that gives American workers a fair deal, then the President will give notice of the United States' intent to withdraw from NAFTA", White House's website notes.

US President Trump - Policy will follow two simple rules: buy American and hire American


19:33 USD/JPY unchanged after President Trump speech

Market volatility remained limited during and right after the speech from President Trump. USD/JPY is hovering around 115.00,  at the same level it has been trading during last hours. The pair spiked lower but managed to hold above 114.50 and rose back erasing losses. 

Trump gave no surprises during his speech. He repeated his campaign promises. “The time for empty talk is over, now arrived the hour of action”, said Trump. 

US President Trump: From this day forward, it will only be USA first

The bond market also remained steady. The 10-year yield held near 2.50%. Equity prices in Wall Street trimmed some gains. The Dow Jones was up 0.29% (earlier was gaining 0.50%) while the Nasdaq was gaining 0.25%. 

USD/JPY levels 

To the upside resistance levels might be located at 115.40 (daily high), 115.60 (Jan 19 high) and 116.00 (psychological). On the opposite direction, support could be seen at 114.50 (daily low), 113.60 (Jan 16 low) and 112.55 (Jan low). 

USD/JPY


 


19:21 US President Trump - Policy will follow two simple rules: buy American and hire American

Additional headlines by the new U.S President Donald Trump from his inauguration speech (via Reuters) at Washington, DC:

  • Will build new roads, highways, airports, railways and other projects across U.S.
  • Policy will follow two simple rules: buy American and hire American
  • Does not seek to impose U.S. way of life on other nations, but wants to be an example
  • Pledges to unite world against radical islam
  • There is no room for prejudice in U.S. patriotism
  • Now arrives the hour of action
  • Ready to unlock space, cure disease, unleash new technologies, harness energy

19:18 US President Trump: From this day forward, it will only be USA first

Donald Trump is now hitting the wires from Washington, DC, after taking the oath of office as the 45th President of the United States, stating in its inauguration's speech that from now on, "it will only be the United States first", adding that he will do the best to "protect our borders" from external threats.

The US President also noted that decisions on issues like trade and taxes will be made to help the United States workers.

More headlines (via Reuters):

  • Giving power from Washington, D.C, back to the people
  • For too long, politicians prospered, but jobs left and factories closed
  • Crime, gangs and drugs have stolen too many lives, cost too much potential
  • Says there is a "sad depletion" of U.S. military
  • U.S. has spent trillions of dollars overseas while U.S. infrastructure has suffered
  • Wealth of U.S. middle class has been ripped from homes, redistributed across the world
  • New vision will govern U.S., it's going to be only America first
  • Every trade, tax, immigration, foreign affairs will be made to benefit Americans
  • Says U.S. must protect against other countries taking U.S. jobs

19:12 GBP/USD spinning 100-pips from high to low, Trump s inauguration eyed

Currently, GBP/USD is trading at 1.2339, down -0.02% on the day, having posted a daily high at 1.2372 and low at 1.2261 ahead of Trump's inauguration speech that may increase volatility during NA trading session. Furthermore, the GBP/USD pair has been spinning over the last two consecutive days close to 100-pips from high to low where 1.2260-50 horizontal support zone created an unbreakable level in the near-term. 

To note, historical data indicates that the highest performance for the British pound clocked at +3.01% (Jan.17), and its lowest at -1.19% (Jan.18) during the first 4-weeks in 2017.

Meanwhile, BBC reports, "Chancellor Philip Hammond has acknowledged that Brexit uncertainty may cause firms to delay investment. Speaking at Davos, he said some firms were "quite understandably... waiting for the fog of Brexit to clear". But Mr Hammond said for many foreign firms the UK had become a "buying opportunity", partly due to the fall in the pound since the referendum. The chancellor added that the UK economy had been resilient in 2016, "confounding many sceptics"."

Trump's A-Team

Barbara Rockefeller, President at Rockefeller Treasury Services, notes that as for any effect from Trump having said the dollar is too strong (when that is the thrust of his policy proposals), Trump's nominee for TreasSec Mnuchin told the vetting committee that what Trump meant was not a long-term policy endorsement. In other words, Trump does want a strong dollar, just not this strong, this fast. Or at least that's one obvious way to interpret Mnuchin. We say policy guidance from a second uninformed jackass has no more value than it had from the first one, president or not. No one in government authority can "manage" the dollar. Mnuchin is a hedge fund guy who ripped off mortgageholders in California and has $100 million stashed offshore that he forgot to put on his disclosure form. How do you forget $100 million?

Ichimoku Cloud Analysis: GBP/USD

She further writes, "Most of Trump's cabinet choices are ethically challenged and nearly all of them are screamingly obviously unfit for the job. The education secretary doesn't believe in public schools. The environmental protection agency guy thinks it's bad to interfere with polluters. The housing guy said, more than once, he knows nothing about housing (but he's black, so that's okay). The energy secretary pick wanted to eliminate the energy department when he was running for president and didn't know "energy" encompasses nuclear. The only one you can't point to as a joke is Tillerson at State. This is a reprise of the Bush Two strategy of proving that government is always bad by literally making it bad."

Technical levels to watch

In terms of technical levels, upside barriers aligned at 1.2411 (50-DMA) and above that at 1.2562 (100-DMA). While supports are aligned at 1.2260-50 (horizontal support zone) and below that at 1.2180-60 (another horizontal support).

gbpusd

Tragedy and Comedy on Trump


19:02 EUR/USD moving toward daily highs as Trumps inauguration takes place

The US dollar weakened modestly in the market ahead of Donald Trump speech. EUR/USD moved from the 1.0630 area and climbed on top of 1.0680, still below daily highs that lie at 1.0693. 

Equity prices in Wall Street are rising. The Dow Jones is up 0.50% and the Nasdaq gains 0.45% ahead of Trump’s speech. The words of President Trump will be followed closely by market participants, volatility could rise. 

EUR/SUD continues to trade sideways, up marginally for the day. The pair still remains within a short-term uptrend with the upside limited today below 1.0700

EUR/USD levels to watch

Support levels might lie at 1.0625 (low Jan.20) followed by 1.0580 (short-term support line) and finally 1.0554 (20-day sma). On the flip side, a breakout of 1.0719 (Jan 17 high) would open the door to 1.0798 (high Dec 5) and then 1.0873 (Dec 8 high).


18:33 Donald Trump s inauguration speech - Live Coverage

Donald J. Trump, the 45th President of the United States is expected to address the nation as he takes office in the White House. Trump's inauguration takes place at the White House, Washington DC, starting at 17:00 GMT - 12:00 Midday EST.

Market participants and trader partners such as China, Canada and Mexico; await to Trump's inauguration speech to find certainty and stability.

How to trade President Donald Trump - Panel with Boris Schlossberg, Joseph Trevisani and Harry Dent


18:21 FTSE 100 -0.07% on the day; IBEX 35, CAC 40, DAX all steady

Trump's inauguration speech has all the focus in today's market sessions all over the world. Furthermore, a few news events during the European session had little to offer to spark volatility. Germany's PPI MoM-YoY printed as expected figure at 0.4% and 1.0%, both results priced in by investors. Later, UK's retail sales printed across the board negative figures where Retails Sales ex-Fuel YoY clocked -4.9% vs. 7.6% consensus and Retail Sales YoY went down the same road at -4.3%.

Today's trading session has ended on a positive tone for European indexes as the FTSE 100 trading at 7203.21, down -0.07% on the day, having posted a daily high at 7221.01 and low at 7193.73. Later the IBEX 35 trading at 9383.80, up +0.05% having posted a daily high at 9439.00 and low at 9345.20, then the DAX trading at 11612.58, up +0.14% having posted a daily high at 11636.79 and low at 11547.04, and finally the CAC 40 trading at 4851.75, up +0.22% on the day, having posted a daily high at 4869.38 and low at 4818.88.

Automobile industry and Trump

Bloomberg reports, "He has been able to claim success. Automakers have said they’ll move at least symbolic amounts of production from Mexico to the U.S. after Trump’s attacks on Ford Motor Co., General Motors Co. and Toyota Motor Corp. Defense contractors have begun negotiating costs for the country’s most expensive weapons after public scrutiny by the president-elect. Obamacare is on its way toward at least a partial repeal, even if Trump and Republicans have yet to agree on a replacement."

It continues, "As president, Trump faces a short window to deliver on the big promises that brought him to office -- construction of a border wall paid for by Mexico, an improved health-care system, an economic boom. If he fails, he’ll become the latest -- albeit most spectacular -- in a long line of "outsider" politicians to find themselves brought to heel by Washington." 

Europe's winners: BT Group, Deutsche Lufthansa, Commerzbank

Nasdaq reports, "In equities, decliners on London's FTSE 100 Index were led by postal delivery company Royal Mail, 2.6% lower, followed by pharmaceutical company AstraZeneca and supermarket operator Tesco, both 1.8% lower. Miner Anglo American was 1.6% lower. Gainers on the index were led by corrugated packaging company Smurfit Kappa Group, 2.3% higher, followed by London Stock Exchange Group, up by 1.7% and Whitbread, a hospitality company, 1.5% higher. Telecommunications company BT Group was up by 1.4%."

The report continues, "On Frankfurt's DAX, Commerzbank was up by 3.7%, followed by airline operator Deutsche Lufthansa, up by 3.1% and Deutsche Bank, 2.0% higher. ThyssenKrupp, a Germany-based diversified industrial company, was 0.9% higher. Decliners were led by Deutsche Boerse, an international financial marketplace operator, 1.3% lower, followed by Linde, a gas and engineering company, down by 1.2% and Continental, an automotive supplier, 0.7% lower. Technology company SAP was 0.5% lower."

Tragedy and Comedy on Trump


17:29 Trump inauguration speech preview: What to expect of the US dollar?

In a less than two hours, Donald Trump will deliver a historic speech: the inaugural speech. The uncertainty surrounding Trump’s behavior and its policies, create an environment were his first words as President could impact financial markets. So far, Trump’s name is being associated with uncertainty. 

US: Start of a new era in trade policy? - NAB

The US dollar accelerated the move to the upside since Trump’s election. Would it continue to rise during and after his inauguration? Much could depend on what he says and also in “how” he says it. After today, investors will have the opportunity to finally see what Trump actually does. 

Taking into account that greenback has been rising since the elections, supported by the potential fiscal policies from Trump, a reaffirmation of those policies could give support to the rally. But, a scenario of “buy the news, sell the rumor” should not be discharged. It is an unpredictable speech, with unpredictable consequences. 

USD, Trump and Mnuchin – MUFG

Analysts at ANZ noted that the inaugural speech is to be written by Stephen Miller who wrote many speeches for Trump’s Presidential campaign. “The speech is expected to focus on structural problems within the US economy and outline an agenda for Trump’s first 100 days and beyond. Trump outlined his plans for his first 100 days at his 22 October Gettysburg address. The most contentious of which are his plans on trade, including withdrawing the US from TPP and labelling China a currency manipulator.” 

Kit Juckes, Research Analyst at Societe Generale, notes that the first hundred days of the Trump Presidency are about to start and he is likely to adopt pro-growth and dollar-supportive policies, while he may repeat his resistance to a strong currency. 

US: Trump inauguration in the limelight - Natixis

What could the US dollar do? 

The US dollar index has been rising constantly since September and peaked in December around 103.00 (14-year high). So far in January, it has been making a correction. Currently, that correction has lost strength. Today’s speech could reinforce the current tone or could give the first push, toward a resumption of the bullish trend. 

Before the speech, the DXY was hovering around 101.00. From a technical perspective a decline under 100.60, would expose 100.00 and below here the next strong support could be seen around 99.00/10. To the upside, the index could gain bullish momentum above 101.80, but a clear break on top of 102.00 would be a signal of a potential rise toward 103.00. 

If the speech has a moderate impact, the US dollar could continue its correction tone across the board, with the DXY remaining within a bearish short-term channel. 

How to trade President Donald Trump - Panel with Boris Schlossberg, Joseph Trevisani and Harry Dent


17:24 WTI in multi-day tops near $53.50

Crude oil prices have resumed the upside today, now pushing the barrel of West Texas Intermediate to fresh daily peaks above the $53.00 mark.

WTI attention to Trump, data

Prices for the WTI are challenging multi-day tops above the $53.00 handle at the end of the week, gaining more than $2 since weekly lows around the $51.00 neighbourhood.

Crude prices have been recently bolstered by the generalized offered bias around the greenback and some progress in the oil output cut as per the agreement between OPEC and non-OPEC countries.

Furthermore, WTI has managed to leave behind the recent build in US inventories, as reported by the EIA on Thursday and ahead of the weekly report on US drilling activity by Baker Hughes, due later.

In addition, crude oil prices and the USD-bloc in general will remain in centre stage during the NA session in light of the presidential speech by Donald Trump.

WTI levels to consider

At the moment the barrel of WTI is gaining 2.55% at $53.45 and a break above $54.32 (high Jan.6) would aim for $54.51 (high Dec.12) and finally $55.24 (high Jan.3). On the other hand, the immediate support lines up at $50.91 (low Jan.18) followed by $50.71 (low Jan.10) and then $50.42 (55-day sma).


17:06 US stocks extend early gains as Trumps inauguration looms

As we approach the swearing-in ceremony of Donald Trump as 45th President of the US, major US equity indices opened higher and extended gains during early hour of trading.

At the time of reporting, the Dow Jones Industrial Average added over 80-points and moved above 19,800 level, while the broader S&P 500 Index added around 11-points to 2,275. Meanwhile, tech-heavy Nasdaq Composite Index was trading up nearly 30-points to 5,570.

After hitting series of record high levels, rally in the US equity markets has receded of late as investors want to see if the post-election rally would be justified by policy actions. Hence, Trump's inaugural speech will be closely scrutinized on clarity over his intended fiscal policies aimed towards spurring US economic growth and expected to stoke inflationary pressure.

Meanwhile, strong gains in crude oil prices was seen supporting energy stocks and supported investors’ appetite for riskier-assets – like equities. 

In currency markets, the key US Dollar Index seesawed between tepid gains and losses as traders continue to reposition themselves ahead of the key event risk. 

 


17:02 EUR/CHF back above a key SMA

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

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

17:01 Mexico Jobless Rate: 3.4% (December) vs previous 3.5%


17:01 Mexico Jobless Rate s.a climbed from previous 3.6% to 3.7% in December


17:00 Emerging Markets: Mexico lowers FDI forecast - BBH

Research Team at BHH notes the changes in the EM local currency bond space, Turkey (10-year yield -10 bp), Brazil (-10 bp), and Malaysia (-4 bp) have outperformed this week, while Poland (10-year yield +11 bp), Colombia (+8 bp), and Czech Republic (+7 bp) have underperformed.  To put this in better context, the 10-year UST yield rose 9 bp this week to 2.49%.

In the EM FX space, PEN (+1.6% vs. USD), BRL (+0.9% vs. USD), and COP (+0.5% vs. USD) have outperformed this week, while TRY (-2.5% vs. USD), MXN (-1.5% vs. USD), and PHP (-0.6% vs. USD) have underperformed.

Key Quotes

"Prime Minister Phuc said Vietnam will ease the limits on foreign ownership of banks this year.  The current limit is 30%, but the new ceiling was not specified. Phuc added that the government is willing to sell underperforming banks “entirely.”  

"Russia Deputy Prime Minister Shuvalov said the government is working on measures to limit ruble volatility, including possible FX purchases. The central bank later issued a statement saying that it “will not deviate in any way from the floating exchange rate regime.” It added that any purchases of FX would be limited to the amounts of excess revenue coming from higher-than-forecast oil prices."

"Turkey’s central bank start auctioning FX swaps to help support the lira. This comes after a series of extraordinary measures were announced last week. With foreign reserves at a multi-year low of $92 bln in December, policymakers are being forced to come up with other ways besides intervention to support the lira. An aggressive rate hike next week would be a good start."

"Brazil’s central bank resumed rolling over FX swaps. The central bank revived the program in November as the real came under pressure after the US election surprise, but then halted the auctions in mid-December as EM currencies stabilized."

"Brazilian Supreme Court Judge Zavascki was tragically killed in a plane accident. He was the senior judge presiding over the Carwash probe. President Temer will name a replacement, but most expect the proceedings will be delayed."

"Chile’s central bank started the easing cycle. It had been on hold since its last 25 bp hike back in December 2015. The 25 bp cut to 3.25% is just the first of several to be seen this year.  The bank maintained its easing bias, and so another cut at the next meeting February 14 seems likely. Full minutes of this month’s meeting will be published February 3."

"Mexico significantly lowered its FDI forecast for 2017.  It now sees $21 bln, down from $25 bln previously and $30 bln originally predicted. The official noted that many investors are waiting for clarity on the policies of the incoming Trump administration before committing to projects."  

Tragedy and Comedy on Trump


16:33 USD/JPY retreats back to 115.00 mark, Trump in focus

The USD/JPY pair struggled to build on to its recovery move and has now retreated around 40-pips from session peak.

Currently hovering around 115.00 psychological mark, the pair lacked follow through buying interest as investors continue to reposition themselves ahead of the key event risk, Donald Trump’s inauguration speech, which would set the course for the US Dollar's medium-term trajectory. 

Meanwhile, hawkish comments from Philadelphia Fed President Patrick Harker, that three rate-hikes seem appropriate in 2017 and that US inflation would hit the central bank's 2% target this year or in 2018, helped the pair to hold in positive territory for the third consecutive session.

Nevertheless, the pair seems all set to snap four consecutive weeks of losing streak and post first weekly gain in 2017, unless Trump fails to deliver on the promised fiscal policies. 

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet notes, "Bullish only above 115.60. The USD/JPY pair retreated modestly during the Asian session, but held above 114.50, the 23.6% retracement of the November/December rally, recovering the 115.00 level"

She further writes, "the 1 hour chart shows that the 100 SMA heads higher a few pips above the mentioned Fibonacci support, whilst technical indicators keep retreating from overbought readings, gaining bearish momentum, but within positive territory. In the 4 hours chart, a bearish 100 SMA caps the upside around 115.60, whilst technical indicators pull back from overbought readings, suggesting the recovery may extend only on a break above this last."

 


16:19 RUB faces uncertainties into 2017 Danske Bank

Senior Economist at Danske Bank Vladimir Miklashevsky shared his mixed views on the prospect for the Russian currency.

Key Quotes

“Given the uncertainty on Trump’s fiscal policy plans, there are clear upside and downside risks for our forecasts on the pair. Soaring reflation expectations in the US would weigh on global emerging market sentiment and weak oil would hitthe RUB, while an improving Russia-US relationship and eased sanctions would create appetite for the RUB. If the oil deal does not hold, it willweigh on the RUB through falling crude”.

“In 2016, the RUB was the best performer among 150 global currencies. Yet, if the stronger USD story continues in 2017 on Trump’s fiscal expansion promises and the Fed’s moderate tightening, it will cool down RUB’s excessive appreciation”.

 

 


16:17 USD/MXN neutral at 21.86, US 10-year yields above 2.50%

Currently, USD/MXN is trading at 21.86, down -0.40% on the day, having posted a daily high at 21.99 and low at 21.84 ahead of Trump's inauguration ceremony. 

To note, historical data indicates that USD/MXN had its highest performance clocked at +1.83% gain (Jan.10), and the lowest at -1.27% (Jan.13).

Reuters reports as what to expect in the near term 'if' Trump fires immediate tangible actions, "Mexico's peso could sink to a record low after Donald Trump assumes the U.S. presidency on Friday if he unveils any aggressive actions that could hammer the exports of Latin America's No. 2 economy, traders and analysts said. Mexico's peso has sunk more than 16 percent since Trump won the election. Trump threatened to rip up or renegotiate the NAFTA free trade deal with Mexico and Canada and impose tariffs on Mexican exports."

Soros doom and boom
Bloomberg reports, America has elected a would-be dictator as president, the European Union is disintegrating, U.K. Prime Minister Theresa May won’t last long as her nation prepares to secede from the EU, and China is poised to become an even more repressive society, the investor told Bloomberg Television’s Francine Lacqua from the World Economic Forum in Davos.

The report continues, “It is unlikely that Prime Minister May is actually going to remain in power,” Soros said. She has a divided cabinet and base and Britons are in denial about the economic impact of Brexit, he said."

Brown Brothers Harriman constructive US Dollar outlook

Marc Chandler, Global Head of Currency Strategy, notes that their outlook is based on the divergence of monetary policy, broadly understood, and the political risks emanating from Europe. Since the spring, we have anticipated that the next US administration would compliment the less accommodative monetary policy with fiscal stimulus and recognized the bullish implications of the policy mix. Our view then puts emphasis on interest rates in absolute terms and also relative to Europe and Japan.

Trump's inauguration

Chandler further writes, "US 10-year bond yields bottomed this week on Monday near 2.30% and now are pushing above 2.50% for the first time since January 3. This is lending the dollar some support. The dollar bottomed on Wednesday a little below JPY112.60 and is now trying to establish a foothold above JPY115.00. The euro peaked on Tuesday near $1.0720. Yesterday's push below $1.06, seemingly on the back of Yellen's confidence, was rejected and the euro was squeezed back to almost $1.07 today in Asia. However, activity remains choppy, and the single currency is back near $1.0630 before the North American."

USD/MXN Technical levels to watch

In terms of technical levels, upside barriers are aligned at 21.97 (horizontal resistance) and above that at 22.00 (psychological mark). While supports are aligned 21.84 (horizontal support level) and below that at 21.74 (near 100-SMA). Furthermore, prices gravitate below its 50-SMA; worth noting. 

usdmxn

On the long-term view, if Trump's Agenda fails to impress aside from the ongoing rhetoric, then the Mexican Peso has some room to appreciate and judging the next logical level to target clocks at 19.86 (short-term 61.8% Fib). However, that requires some impressive failure from Trump and his camarades.   

usdmxn

Today’s the day!


16:12 Three rate hikes seem appropriate FOMCs Harker

Philly Fed Patrick Harker (voter, hawkish) said on Friday that three modest rate hikes this year seems appropriate.

Harker expects US consumer prices to hit the Fed’s goal this year or in 2018.

He sees labour participation rate lower than he’d like.


16:02 USD/CHF range-bound below 1.0100, awaits Trumps inaugural speech

Having posted a session low at 1.0035 level, the USD/CHF pair regained traction and reversed previous session mild losses.

Currently trading around 1.0070 region, off session peak level of 1.0094, a fresh wave of greenback buying interest since European opening session helped the pair to recovery from daily lows. 

The pair, however, remained capped below 1.0100 round figure mark as investors preferred to stary on the sidelines ahead of Donald Trump’s inauguration speech.

Investors await for clarity on Trump's fiscal policies before reaffirming strong US Dollar bullish trend, which would assist the pair to resume with its prior appreciating move. 

Moreover, indication of positive start in the US equity markets has failed to benefit the Swiss Franc's safe-haven appeal and collaborating to the pair's cautious bullish bias. 

Technical level to watch

Bulls would be eyeing to reclaim 1.0100 handle above which a fresh leg of up-move is likely to lift the pair towards 1.0160-65 horizontal resistance before lifting it further beyond 1.0200 round figure mark.

On the downside, renewed weakness below 1.0040 immediate support is likely to accelerate the slide towards parity mark, which if broken decisively has the potential to drag the pair towards 100-day SMA support near 0.9965 region.

 


16:01 Belgium Consumer Confidence Index up to 0 in January from previous -5


15:55 EUR/USD remains neutral near term Scotiabank

Chief FX Strategist at Scotiabank Shaun Osborne noted the outlook on the pair remains on the neutral side in the short term.

Key Quotes

EURUSD gains overnight were easily capped just ahead of 1.07 but slippage has stalled in the low 1.06 area as North American trade picks up”.

“Technically, the short-term trend higher remains intact but it is not especially well supported by oscillator signals (neutral, at best, tracking bearish at worst) and the cap on the market around 1.07 (the initial retracement resistance of the late 2016 sell-off) suggests the bounce may be in trouble”.

“Intraday, we think losses will pick up below 1.06; above 1.07 will suggest a stronger tone for the EUR into next week or beyond”.

 


15:50 AUD/USD clings to the bullish view, targets 0.7630 UOB

FX Strategists at UOB Group see the Aussie dollar could advance towards the 0.7630 area in the next 1-3 weeks.

Key Quotes

“The sharp and swift rebound in AUD hit a high of 0.7575, holding just below the major 0.7580 resistance. Based on the current momentum, a move above 0.7580 would not be surprising but the prospect for a move towards the next major resistance at 0.7630 is not high”.

“Despite our reservation, the stop-loss for our bullish view at 0.7445 remains intact as AUD surged yesterday, reversing its entire steep decline the prior day (registering an ‘outside day’ in the process). At the time of writing, AUD has moved briefly above the major resistance at 0.7580 and the focus has shifted to 0.7630 now. We still have some reservations on the current momentum and have moved the trailing stop loss higher to 0.7490 (just below the 0.7493 low seen yesterday)”.

 


15:44 USD/CAD approaches 1.3400 on downbeat data

The Canadian Dollar has depreciated further vs. its American neighbour on Friday, lifting USD/CAD to fresh daily peaks in the 1.3380 area.

USD/CAD bid ahead of Trump

Spot met extra upside pressure after Canadian inflation figures tracked by the CPI rose at an annualized 1.5% and contracted 0.2% on a monthly basis, both readings missing expectations.

Further data saw Core prices measured by the BoC following suit, up 1.6% over the last twelve months and dropping 0.3% inter-month.

Canadian Retail Sales have also disappointed markets during November, expanding 0.2% MoM vs. forecasts for a 0.5% gain.

The pair sticks to the bullish fashion today amidst a solid recovery of the greenback ahead of Trump’s presidential inauguration and Fedspeak. On the CAD side, the currency seems to ignore the better tone in crude oil prices, with the barrel of West Texas Intermediate up more than 1% to levels below the $53.00 mark.

USD/CAD significant levels

As of writing the pair is gaining 0.41% at 1.3373 facing the next resistance at 1.3463 (high Jan.3) ahead of 1.3575 (50% Fibo of the 2016 drop) and then 1.3601 (high Dec.28). On the flip side, a breach of 1.3250 (low Jan.19) would aim for 1.3016 (low Jan.17) and then 1.3002 (low Oct.19).


15:39 Canada retail sales post 0.2% growth in November

Canadian retail sales matched expectations and recorded a tepid growth of 0.2% for November, down from 1.1% growth recorded in the previous month, Statistics Canada said on Friday. Expectations were pointing to a growth of 0.5%.

Meanwhile, core sales (excluding automobiles) came-in to show a rise of 0.1% as compared to October's 1.4% and 0.2% expected. 


15:35 Canada CPI rise 1.5% y-o-y in December

According to the data released by Statistics Canada on Friday, Canadian consumer price index (CPI) climbed 1.5% y-o-y in December. From a month earlier, consumer prices declined 0.2% in December.

The advance follows a 1.2% increase in November and 1.5% increase in October. Expectations were for a 1.7% advance in December. 

Meanwhile, core CPI (excluding automobiles) ticked higher by 02% on a monthly basis. 


15:31 Canada Consumer Price Index - Core (MoM): 0.2% (December) vs -0.4%


15:31 Canada Consumer Price Index - Core (MoM) climbed from previous -0.4% to -0.2% in December


15:31 Canada Retail Sales ex Autos (MoM) below forecasts (0.2%) in November: Actual (0.1%)


15:31 Canada Retail Sales (MoM) registered at 0.2%, below expectations (0.5%) in November


15:31 Canada Consumer Price Index (YoY) below expectations (1.7%) in December: Actual (1.5%)


15:31 Canada Bank of Canada Consumer Price Index Core (MoM) came in at -0.3% below forecasts (-0.2%) in December


15:31 Canada Consumer Price Index (MoM) below expectations (0%) in December: Actual (-0.2%)


15:31 Canada Bank of Canada Consumer Price Index Core (YoY) below expectations (1.7%) in December: Actual (1.6%)


15:06 Trump s inauguration and French primary likely to dominate the weekend markets - BBH

According to the analysts at BBH, Trump's inauguration and related stories will likely dominate the weekend press.  

Key Quotes

“Note that the French Socialists hold the first round of their primary on Sunday.  The top two will face off on January 29.  The polls suggest that former Socialist Macron, running as an independent, will likely handily beat any Socialist candidate.  However, Le Pen's base is sufficient to ensure participation in the second round of the presidential election in May.  The real issue is who will run against her.  Currently, the center-right Republican candidate Fillon is the most likely, but Macron may offer a robust challenge.  In the Socialist primary, it appears to be a contest between three former ministers, including former Prime Minister Valls, Montebourg (energy) and Hamon (education).”  


15:06 EUR/USD shows some reaction near 1.0640, Trump on sight

EUR/USD keeps the area of session lows in the 1.0640/20 band at the end of the week amidst a moderate recovery from the US Dollar.

EUR/USD focus on Trump

Choppy week for the pair so far, with gains clearly limited around the low-1.0700s and strong support emerging in the 1.0580/70 region.

The erratic performance of spot reflects the lack of a clear direction in the greenback, which remains under pressure in light of the upcoming speech by Donald Trump and despite recent auspicious results in the US docket and supportive Fedspeak.

The pair has managed to recover from the post-ECB dip to the area of 1.0580 following the unexpected dovish tone from the ECB, which has reiterated that any tapering of the current QE programme has been ruled out for the time being.

EUR/USD levels to watch

The pair is now losing 0.34% at 1.0629 facing the next support at 1.0625 (low Jan.20) followed by 1.0580 (short-term support line) and finally 1.0554 (20-day sma). On the flip side, a breakout of 1.0719 (high Jan.17) would open the door to 1.0798 (high Dec.5) and then 1.0873 (high Dec.8).


14:52 GBP/USD off session lows, still weaker below 1.2300 handle ahead of Trump

The GBP/USD pair maintained its bearish bias below 1.2300 handle, albeit has managed to bounce off around 30-pips from session low.

Currently trading around 1.2290 region, a sharp contraction in UK monthly retail sales figure attracted some fresh selling pressure around the British Pound. Adding to this, renewed greenback buying interest, amid surging US treasury bond yields, further aggravated the downslide and dragged the pair session low. 

However, the US Dollar buying interest seems to have stalled during early NA session as investors continue to readjust their positions ahead of the big even risk, Trump's inaugural speech, which would determine the US Dollar's next leg of directional move and eventually drive the major in the near-term. 

With an empty US economic docket, the pair remains at the mercy of broader greenback price dynamics and market expectations and interpretation of Trump's reflation policies.

Technical levels to watch

A follow through selling pressure below session low, leading to a subsequent break below 1.2250 support, is likely to accelerate the slide towards 1.2210 support ahead of the next horizontal support near 1.2160-55 region. On the upside, recovery above 1.2300 handle might now confront resistance near 1.2335-40 region, which if cleared now seems to assist the major to surpass session peak resistance, and 1.2400 round figure mark, towards testing 50-day SMA strong hurdle near 1.2415-20 region.

 


14:35 CAD: CPI and retail sales data in the limelight - TDS

Research Team at TDS suggests that the Canada’s December CPI inflation and November retail sales will land at 8:30 amid an empty data calendar in the US.

Key Quotes

“TD looks for headline CPI inflation to rebound to 1.7% y/y on a 0.1% m/m increase in prices (market: 1.7% y/y, 0.0% m/m) and a sizeable base-effect, however, the risks are skewed to the downside due to the weakness in measures of core inflation.”

“For retail sales, we look motor vehicles to drive the headline print after a sharp rise in auto sales. We look for a 0.5% increase in the headline series while ex-auto sales should be materially weaker and post a 0.2% decline. The market is more upbeat on core sales, where they look for a flat print, but expects a similar 0.5% gain for headline sales.” 

“US: It’s all about Washington DC and the Presidential inauguration. Trump is scheduled to take his oath of office at noon EST and will take to the podium shortly afterwards. Much like his election night address in November (and recent press conference), his tone will matter just as much as the content of his speech.”


14:32 Gold sidelined near $1,200 ahead of Trump

The ounce troy of the precious metal is alternating gains with losses at the end of the week, currently hovering over the key $1,200 mark.

Gold attention to Trump’s speech

The yellow metal is extending its rejection from recent 2-month tops around $1,215 at the end of the week, coming down to test the $1,200 neighbourhood albeit keeping its weekly gains for the fourth consecutive time.

Bullion found quite strong resistance in the proximity of $1,220 area, where sits the 50% Fibo retracement of the 2016 up move.

The renewed and quite strong selling pressure around the greenback has been sustaining the ongoing rally in the metal, as investors have practically fully unwund the Trump-led rally in the US Dollar Index (DXY), retreating from 14-year tops seen in early January.

Looking ahead, the next risk event for Gold will come from the USD side in light of the upcoming speech by Donald Trump at his presidential inauguration.

Gold key levels

As of writing Gold is gaining 0.03% at $1,201.85 and a breakout of $1,214.70 (high Jan.18) would open the door to $1,219.05 (50% Fibo of the 2016 up move) and finally $1,228.42 (100-day sma). On the other hand, the next support is located at $1,195.80 (low Jan.19) followed by $1,182.27 (61.8% Fibo of the 2016 up move) and then 1,177.87 (55-day sma).


14:30 Donald Trump to be inaugurated as the 45th president of the United States today - ANZ

Analysts at ANZ note that Donald Trump will be inaugurated as the 45th president of the United States today and his inaugural speech is to be written by Stephen Miller who wrote many speeches for Trump’s Presidential campaign.

Key Quotes

“The speech is expected to focus on structural problems within the US economy and outline an agenda for Trump’s first 100 days and beyond. Trump outlined his plans for his first 100 days at his 22 October Gettysburg address. The most contentious of which are his plans on trade, including withdrawing the US from TPP and labelling China a currency manipulator.”

“However, as FiveThirtyEight highlights this week, the hype of getting things done in a President’s first 100 days is probably overdone. FiveThirtyEight cites a study which shows that presidents’ first 100 days have become less productive over time. The study looked at presidents from William McKinley in 1897 to Bill Clinton in 1993, and found that the average number of laws passed during a president’s first 100 days period before the 81st Congress (1947-1949) was 46 compared to 16 in later Congresses. Subsequent to this, George W. Bush passed just seven in his first 100 days in 2001, and Barrack Obama eleven in 2009. Although productivity may have declined, FiveThirtyEight says the first 100 days is important for setting a President’s agenda.”

Trump’s tax cuts: The San Francisco Federal Reserve published its latest Fed Views this week. As per recent Fed speak, the note says there is considerable uncertainty about the scope of policy changes that will be implemented under the incoming administration and what impact these changes may have on the FOMC’s dual mandate of maximum employment and price stability. On tax cuts, the paper suggests a plausible estimate is that it will boost spending by 0.6% of GDP. On balance, the SF Fed says they expect the tax cuts will boost GDP by a total of about 0.4 percentage points over several years.”


14:09 CAD: December CPI and November retail sales in focus - BBH

Canada reports December CPI and November retail sales and will garner maximum investors’ attention in today’s session suggests analysts at BBH.  

Key Quotes

“Headline CPI is expected to be flat, but the base effect would lift the year-over-year rate to 1.7% from 1.2%.  Retail sales were likely lifted by auto sales, without which they would be flat.  We suspect the risk is on the downside after November's outsized 1.1% rise (1.4% excluding autos).  The US dollar is advancing against the Canadian dollar for the third consecutive session.  The greenback is snapping a three-week decline against the Loonie.  The CAD1.3380 area is an important retracement target, and surpassing it could spur a move toward CAD1.3460-CAD1.3500 initially.”  


14:02 Inflows into CAD bonds flat in November Nomura

Analysts at Nomura note that the non-residents increased their holdings of Canadian securities by C$7.2bn in November, after increasing them by C$15.8bn in October and this is the 16th consecutive month of purchases by foreigners.

Key Quotes

“The buying was concentrated in Canadian equities (C$5.5bn) with some inflows into Canadian bonds as well (C$2.9bn), which was partly offset by outflows from Canadian money market instruments (-C$1.1bn). Bond purchases were led by a pick-up in purchases in the corporate bond space (C$5.6bn), particularly private companies (C$3.7bn). These inflows were partly offset by outflows out of Canadian government bonds (-C$2.7bn), mainly concentrated within provincial government bonds (-C$3.0bn). Canadian investors on the other hand reduced their holdings of foreign securities (bonds and equities) to the aggregate tune of -C$7.9bn, primarily led by outflows from foreign bonds (-C$4.8bn).”

“On a regional basis, the buying of Canadian bonds was almost wholly led by US accounts (C$7.1bn). US accounts led purchases of Canadian bonds (C$4.8bn) and Canadian equity securities (C$3.9bn), and also led net sales of Canadian money market securities (-C$1.5bn) in November. Other major countries that usually demonstrate meaningful flow (UK, EU, and Japan) showed little interest in Canadian securities in November.”

“Overall, net purchases of Canadian bonds clearly took a hit amid heightened global volatility conditions after the US election. Nevertheless, net purchases remained positive, supported by strong purchases of USD-denominated Canadian bonds while purchases of CAD-denominated bonds stayed flat. These flows form a consistent picture alongside USDCAD price action during the month that saw the cross make new multi-month highs of around 1.36, a level only to be re-tested again by the end of December on the back of strong USD momentum after the Fed meeting. The tug-of-war between higher energy prices (positive CAD) and a widening yield differential to the US (negative CAD) remains the underlying factor determining price action currently, and we think this implies a grind higher in USDCAD beyond Q1 2017.” 


14:01 EU single market cannot be divided ECBs Villeroy

Francois Villeroy de Galhau, member of the ECB board, said on Friday that a temporary peak in German inflation is ‘acceptable’.

He added that the EU’s single market cannot be divided and that the growth in the region is firming. Inflation, however, still remains far from the ECB target.

Villeroy reiterated that tapering was not discussed at yesterday’s ECB meeting.


13:58 UK: Dismal December retail sales - BBH

Research Team at BBH notes that the UK reported dismal December retail sales as the 1.9% headline decline on the month is the largest decline in four years.  

Key Quotes

“The Bloomberg median forecast was for a 0.1% decline.  Adding insult to injury, the November series was revised to -0.1% from 0.2%.  The decline was broad based.  There are a few post hoc explanations, like rising prices and that Black Friday discounts in November took sales from December, but nothing particularly convincing.  As a whole, retail sales rose 1.2% in Q4, which regarding next week's first estimate of GDP is worth a one-tenth of one percentage point.”

“Sterling had seemed to be running out of steam near $1.2370, and the data saw it fall to almost $1.2280 before finding support.  Sterling is poised to snap a two-week fall.  Recall it had begun the week by gapping lower amid hard Brexit signals and briefly dipped below $1.20.  Sell the rumor, buy the fact, coupled with the weaker US dollar tone in general, helped sterling recover.  However, it was unable to rise through the $1.2430 area, where it had peaked ahead of the hard Brexit talk.”


13:55 USD/JPY within a 113.50/116.00 range near term UOB

Spot should keep the consolidative theme between 113.50 and 116.00 in the next 1-3 weeks, according to FX Strategists at UOB Group.

Key Quotes

“We indicated yesterday that while a move above last Friday’s 115.45 is not ruled out, a sustained move above this level is not expected. USD hit a high of 115.61 but dropped quickly from the top to hit a low of 114.65. While the positive undertone has eased off somewhat, it is too early to expect a sustained pull-back”.  

“We shifted to a neutral stance yesterday and held the view that the rebound in USD has room to to extend towards 115.45/50. USD hit a high of 115.61 yesterday but eased off quickly. The failure to move higher in a sustained manner is not surprising and from here, we continue to hold a neutral stance and expect USD to trade in a broad 113.50/116.00 range (even though the immediate bias is tilted to the upside)”.

 


13:49 Further downside lies ahead for CNY Danske Bank

Allan von Mehren, Chief Analyst at Danske Bank, believes the Chinese currency could depreciate further in the next months.

Key Quotes

“We look for CNY to weaken gradually as growth is under pressure, debt risks are rising, the Fed is resuming rate hikes and net FDI flows are no longer positive for China.. However, we do not expect a bigger devaluation as the CNY is not overvalued and China wants stability for its currency. However, against EUR, we still expect CNY to depreciate close to 10% on a 12M horizon”.

“The CNH-CNY spread moved into negative territory in early January as the CNH strengthened sharply on the back of Chinese intervention in the offshore market, which led to a big capitulation of short CNH positions. However, we expect the spread to come back gradually to around zero as the situation calms down again”.

 


13:48 US: Trump inauguration in the limelight - Natixis

Analysts at Natixis suggest that we are moments away from the inauguration of Donald John Trump as the 45th President of the United States and lists down the various proposals made by the president-elect and the House of Representatives.

Key Quotes

“Bearing in mind that nothing should be enacted in the first one hundred days of the new presidency and that there are very significant uncertainties as to the policies that will actually be implemented by the new administration, what information is available suggests that, in the short term, the key issues for the US economy will include: repeal of Obamacare care, tax reform (repatriation of profits earned abroad) and foreign policy (protectionist measures: construction of wall along border with Mexico, customs tariffs, renegotiation of trade agreements, etc.). By contrast, spending on infrastructure projects does not seem to be on the list of priorities”. 

“At this point in time, we have integrated into our baseline scenario a reduction in the tax burden of households and companies and a slight increase in infrastructure spending, not however the introduction of customs tariffs. With the economy already at full employment (hence weak fiscal multipliers), the effects on real growth should be modest, but there will be an acceleration in inflation. On our estimate, growth will reach 2.3% and inflation 2.8% this year, with our scenario likely to undergo revision as and when the proposals of the new administration start to take shape.”


13:44 GBP/USD negative below 1.2407/33 Commerzbank

According to Karen Jones, Head of FICC Technical Analysis at Commerzbank, Cable’s stance remains negative while below the 1.2407/33 band.

Key Quotes

GBP/USD the rebound off to the 61.8% Fibo at 1.1982 has so far been capped by the 55 day ma at 1.2407. This together with the 1.2433 resistance line should halt the rally. While capped here, a negative bias will remain entrenched, this resistance is reinforced by the 100 day ma at 1.2536”.

“We suspect that prices will need to go sub 1.2200/1.2165 however to alleviate immediate upside pressure. We note that the intraday Elliott count is positive and we partially covered our shorts yesterday”.

“Support at 1.1980 guards 1.1775 and then 1.1481 the recent spike low”.

 


13:39 China: First increase in GDP growth in two years - BBH

Research Team at BBH notes that China reported its first increase in GDP growth in two years as it increased to 6.8% year-over-year from 6.7% and is in the middle of the 6.5%-7.0% official range.  

Key Quotes

“Industrial production rose 6.0%, which was slightly lower than expected and down from 6.2% in November.  Retail sales rose 10.9%, a bit faster than expected and the strongest rise in 2016.  Fixed asset investment slowed to 8.1% from 8.3%.  For all of 2016, the Chinese economy reportedly expanded by 6.7%, helped by a 15.4% increase in loan growth.”

“The dollar peaked against the yuan two days after the Federal Reserve hiked interest rates in the middle of last month.  We argue that that is when the market correction began, not at the turn of the calendar.  Despite claims that China's currency is dropping like a rock, it has actually risen for the fifth consecutive week.  That is the longest rising streak for the yuan since early 2016.”


13:36 GBP: Medium term risks remain very significant at economic level - Natixis

According to Nordine Naam, Research Analyst at Natixis, UK has little room for maneuver and is in a weak position to negotiate.

Key Quotes

“When Article 50 will be activated, it could take almost 18 months only to negotiate the terms of exit from the E.U. Negotiations on the future relationship with U.E will begin only after. Furthermore, if no agreement is reached rapidly with the European Union, the risk is that the customs tariffs defined by WTO would apply. Finally, uncertainties remain over European passporting, which could weigh on the financial sector.”

“In sum, it is conceivable that sterling will extend its technical rebound in the very near term, but over the medium term risks remain very significant at economic level. Given the uncertainties at economic level, we therefore remain bearish on sterling for the medium term. The GBP/USD could eventually test 1.25, which we would see as a sell level, that is unless the US dollar extends its correction, which is an unlikely scenario over the medium term, as the solidity of US economic growth will fuel inflation, in turn the tightening of the Federal Reserve’s monetary policy.”

 


13:32 USD/CAD clears 50-DMA barrier, surges to fresh two-week high

The greenback buying interest has picked-up pace, helping the USD/CAD pair to clear 50-day SMA barrier and spike to a fresh two-week high.

Currently trading around 1.3370 region, spot reversed early weakness to sub-1.3300 level and continued gaining traction, hitting fresh session peak, amid broad based US Dollar strength ahead of Trump's inaugural speech later during the day.

Meanwhile, Wednesday's dovish comments from BoC Governor Stephen Poloz, leaving doors open for further rate-cut, continue to undermine the Canadian Dollar and also seemed to collaborate to strong bid tone surrounding the major. 

Even the prevalent strength in oil market, with WTI crude oil trading with gains in excess of 1.0%, has failed to lend any support to the commodity-linked currency - Loonie, and hinder the pair's appreciating move for the third consecutive session. 

With today's up-move, the pair has now recovered over 350-pips from the vicinity of 1.30 psychological mark, nearly three-month lows touched on Tuesday. The pair now seems all set to snap three consecutive week of losing streak and end the week on strong footing.

Technical levels to watch

A follow through momentum now seems to confront immediate resistance near 1.3400 handle above which the pair seems more likely to extend its near-term upward trajectory towards 1.3455-60 region (monthly highs) before attempting a move towards reclaiming 1.3500psychological mark. 

On the downside, 50-day SMA near 1.3350 region now becomes immediate support, which if broken might drag the pair towards 1.3315 support. Weakness below 1.3315 support could get extended but now seems to be limited at 100-day SMA support near 1.3275 region.

 


13:32 India Bank Loan Growth remains at 5.1%


13:31 India FX Reserves, USD up to $359.84B from previous $359.15B


13:28 GBP/USD extends the drop below 1.2300

The selling pressure around the Sterling is now picking up pace, prompting GBP/USD to retreat to daily lows in the proximity of 1.2280.

GBP/USD weaker post-UK data, eyes on Trump

The pair shed nearly a cent from overnight tops in the proximity of 1.2370 to the current area of 1.2280, following a pick up in the demand for the US dollar and poor results from UK Retail Sales during December.

In fact, Retail Sales have sharply reverted the November’s advance during the last month of the year, with headline sales contracting 1.9% MoM and sales excluding the Fuel component dropping 2.0% MoM.

Later in the session, all the attention will be on the speech by the US President Donald Trump at his presidential inauguration, seconded by speeches by Philly Fed Patrick Harker (voter, hawkish) and San Francisco Fed John Williams (2018 voter, centrist).

GBP/USD levels to consider

As of writing the pair is retreating 0.49% at 1.2284 and a break below 1.2250 (low Jan.18) would aim for 1.2014 (low Jan.17) and finally 1.1979 (low Jan.16). On the other hand, the immediate hurdle lines up at 1.2372 (high Jan.20) followed by 1.2415 (high Jan.17) and then 1.2437 (high Jan.6).


13:27 Trump to be sworn in today, dollar in focus - BBH

Analysts at BBH note that the 45th President of the United States will be sworn in today, and the heavy cloud of uncertainty over priorities and policies will begin being lifted.  

Key Quotes

“Much of the focus in the media has been soon-to-be President Trump's comments about the dollar being too strong, partly because of the Chinese yuan.  Mnuchin, the Treasury Secretary nominee, sought to clarify Trump's remarks, suggesting that they were not meant to be a long-term policy endorsement.  Indeed, at the ECB's press conference yesterday, Draghi reminded reporters of the G20 consensus to refrain from competitive devaluations.”

“The dollar's rise, which some trace back to mid-2014, has little to do with the strong dollar policy.  In fact, many have poked fun or ridiculed the strong dollar policy in the first place, though it has not stopped some of the same observers who now are suggesting that it is being abandoned.  On the other hand, we have argued that the strong dollar policy was meant to assure investors and the world that the US would not seek to devalue the dollar to promote trade or ease its debt burden.”

“Also, we note that many observers who argued that there has been a currency war for several years now are also playing up Trump's comments as if some threshold has been only now crossed.  We have argued that there has never been a currency war.  The pursuit of a monetary policy to stimulate or support domestic economic activity, we argued, is not a currency war, even if the currency falls as a consequence.”

“There is a risk that if the US abandons the G7 and G20 best practices of letting the markets determine exchange rates and does actually begin to talk the dollar down, other countries will follow, and a genuine currency war and trade war could be ignited.  It is far too early to draw strong conclusions about the Trump Administration's dollar policy, or nearly any policy for that matter.  That said, we recognize that many of the economic team is pro-growth and favor reducing regulation.”

“Our constructive outlook for the US dollar is based on the divergence of monetary policy, broadly understood, and the political risks emanating from Europe.  Since the spring, we have anticipated that the next US administration would complement the less accommodative monetary policy with fiscal stimulus and recognized the bullish implications of the policy mix.   Our view then puts emphasis on interest rates in absolute terms and also relative to Europe and Japan.”


13:20 Trump: Likely to adopt pro-growth and dollar-supportive policies - SocGen

Kit Juckes, Research Analyst at Societe Generale, notes that the first hundred days of the Trump Presidency are about to start and he is likely to adopt pro-growth and dollar-supportive policies, while he may repeat his resistance to a strong currency.

Key Quotes

“Actions usually speak louder than words, but at the start of the presidency, policy intentions may speak loudest of all. We see 5-10% appreciation ahead.”

“FX market confidence levels are low; trading patterns, whether in GBP/USD or USD/JPY and EUR/USD (let alone anything more exotic), can best be described as ‘jerky’. But the Trump presidency is about to start, and if his programme is pro-growth, it will likely be pro-dollar for now, which would lead to a further 5-10% rise during his first 100 days.”


13:00 AUD/USD tumbles to lows near 0.7520 in pre-Trump trade

Having spiked to over two-month high, the AUD/USD pair witnessed a sharp reversal and tumbled around 70-pips from session peak. 

Currently trading around 0.7525 region, a fresh leg of up-surge in the US treasury bond yields lifted the US Dollar across the board and is weighing heavily on higher-yielding currencies - like the Aussie. Investors seemed to lighten their positions and preferred to lock-in some profits following the pair's sharp recovery move since the beginning of this year.

Adding to this, weaker sentiment surrounding commodity space, especially Copper, is also denting demand for commodity-linked currencies and collaborating the pair's sharp reversal from the highest level since Nov. 11.

Moreover, repositioning and short-dollar unwinding trade also seems to have kicked-in ahead of the key event risk, Trump's inaugural speech, further aggravated the selling pressure around the major. Investors' attention will remained glued to comments on Trump's promised fiscal stimulus policies and possible remarks on the strength in the US Dollar, which would provide fresh impetus for the pair's next leg of directional move. 

Technical levels to watch

A follow through retracement is likely to find support at the very important 200-day SMA, which if broken is likely to accelerate the slide towards 0.7475 horizontal level before the pair eventually drops to 0.7450 support. On the upside, 0.7565 region now becomes immediate strong resistance and only a decisive move above this hurdle would pave way for continuation of the pair's near-term upward trajectory, initially towards 0.7600 handle and eventually towards its next major resistance near 0.7650 level

 

 


12:55 UK retail sales swing sharply negative - ING

James Knightley, Senior Economist at ING, notes that we received volatile figures for retail sales, but the UK still saw strong consumer spending in 2016 but this momentum is likely to fade somewhat in 2017.

Key Quotes

“UK retail sales excluding auto fuel fell 2%MoM in December, much worse than the 0.4% drop the consensus was expecting. There were also some modest downward revisions. Nonetheless, this still leaves the annual rate of growth at +4.9%.”

“The breakdown shows food stores fell 0.5%MoM while non-food stores saw sales drop 2.6%, led by a 3.7% drop in clothing and footwear and a 7.3% decline in household goods. These two components are particularly volatile, not helped by the growing significance of Black Friday and Cyber Monday events in the UK in recent years. This has played havoc with statisticians’ seasonal adjustment factors for their calculations, contributing the big swings in the numbers. All in all though, the report indicates consumer spending performed fairly well in 4Q16 with next week’s GDP report expected to show the economy grew by 0.5% in the last three months of the year.”

“We suspect that retail sales growth will soften in 2017. Consumer confidence is weakening and employment growth has stalled while real household disposable incomes are being eroded by higher prices. At the same time retailers themselves are going to see profit margins squeezed by higher import costs resulting from sterling’s weakness (this will continue due to currency hedges gradually falling off) and increases in the National Living Wage.”


12:43 EUR/USD still seen at 1.04 in 1-month Danske Bank

Senior Analyst at Danske Bank Sverre Holbek still expects the pair to grind lower to the 1.04 area in a month’s view.

Key Quotes

“The FX market interpreted the comments from ECB President Mario Draghi at yesterday’s press conference as dovish, which sent EUR/USD below 1.06. In general, this is in line with our short-term view on EUR/USD, where we look for EUR/USD to go 1.04 in 1M and 1.05 in 3M”.

“We note that it is not a one way street lower for EUR/USD in the near term though”.

“The change in US cash balance policy will result in a USD cash deluge from the treasury account in Q1. The increase in USD supply will ease upward pressure on the USD and, hence, downside potential for EUR/USD”.

 


12:32 US Dollar in highs near 101.30 ahead of Trump

The US Dollar Index (DXY) – which gauges the buck vs. its main rivals – has regained buying interest as is now flirting with daily highs in the 101.30/35 band.

US Dollar all the attention on Trump

The index keeps the erratic performance so far this week, bouncing off multi-week lows in the 100.20 area and retaking the critical 101.00 handle and above as market participants remain cautious on the upcoming speech by US president Donald Trump.

Solid US results as of late, supportive Fedspeak – particularly from Chair J.Yellen - and the dovish tone from the European Central Bank on Thursday have been supporting the greenback this week, albeit the bullish attempts lacked of sustainability.

Later in the session, Trump’s inauguration and speech will take centre stage, seconded by speeches by Philly Fed Patrick Harker (voter, hawkish) and San Francisco Fed John Williams (2018 voter, centrist).

US Dollar relevant levels

The index is gaining 0.26% at 101.36 facing the immediate resistance at 101.72 (high Jan.16) ahead of 102.01 (20-day sma) and then 102.96 (high Jan.11). On the flip side, a breakdown of 100.23 (low Jan.17) would open the door to 99.87 (low Dec.5) and finally 99.49 (low Dec.8).


12:24 Germanys Schaeuble: Brexit unlikely to have negative economic impact on EZ in 2017

The German Finance Minister, Schaeuble, is on the wires now, speaking on the German growth prospects and on Brexit at the World Economic Forum (WEF) in Davos.

Key Headlines via Reuters:

EZ is doing a bit better & Germany is doing well

There is a lot of political uncertainty, geopolitical risks have increased

German growth driven by internal demand -some resilience in German economy

Brexit unlikely to have negative economic impact on EZ in 2017

If there is a backlash to free trade, Germany will feel it


12:17 EUR/USD drops below 5-DMA as T-yields rebound ahead of Trump

Having failed once again just below 1.07 handle, the EUR/USD pair came under fresh selling pressure over the last hours, now sending the rate closer towards 10-DMA located at 1.0630.

EUR/USD: Rejected near 1.0700

Currently, the spot now drops -0.18% to fresh session lows of 1.0642, losing sight of 1.07 handle. Renewed expectations of higher inflation in Trump’s presidency, refueled demand for the US treasury yields, which provided the much-needed boost to the greenback at the expense of the common currency.

Markets are once again pricing-in pro-fiscal stimulus talks from the US President-elect Trump at his inauguration speech, as he takes office as the 45th US President later on Friday. However, if Trump fails to touch upon his campaign promises, "The US dollar’s correction lower could extend further if more protectionist trade policies garner the most attention in the near-term. The market will also be wary for any further potential comments regarding the strength of the US dollar,” analysts at MUFG noted.

EUR/USD Technical Levels

In terms of technicals, the pair finds the immediate resistance 1.0719 (multi-week high). A break beyond the last, doors will open for a test of 1.0746 (Nov 17 high) and from there to 1.0764 (100-DMA). On the flip side, the immediate support is placed at 1.0630 (10-DMA) below which 1.0600 (zero figure) and 1.0571 (20-DMA) could be tested.

 


11:41 EUR/GBP testing highs after disappointing UK retail sales

The EUR/GBP cross caught fresh bids and jumped to fresh session peak near 0.8660-65 band after disappointing UK retail sales data.

Data release just a short while ago showed UK retail sales contracted sharply by 1.9% on monthly basis, taking the yearly growth to 4.9%. Consensus estimates were anticipating a tepid monthly growth of 0.2% and 7.8% on yearly basis. 

Highly disappointing UK retail sales data did attract some selling pressure around the British Pound, albeit was negated by an offered tone surrounding the shared currency, thus, restricting any follow through up-move in the EUR/GBP cross. 

Technical levels to watch

On a sustained break below 0.8625 immediate support the cross seems to head back towards 0.8610-0.8600 support area below which a fresh leg of weakness is likely to extended the slide further towards 0.8555-50 zone, en-route 50-day SMA support near 0.8530 region.

Meanwhile, 0.8660-65 region might continue to act as immediate resistance, which if cleared decisively has the potential to lift the cross beyond 0.8700 handle towards testing its next hurdle near 0.8720-25 region ahead of 0.8750-55 region.

 


11:37 UK retail sales show bigger-than expected drop in Dec

The office for National Statistics (ONS) published the UK’s retail trade report for the month of December, which showed that the UK consumer spending witnessed bigger-than expected drop on monthly basis, re-entering into negative territory.

The UK’s retail volumes came in at -1.9% in Dec m/m, while the annualized retail spending dipped to 4.3%. Markets had estimated a -0.1% fall on a monthly basis; while a +7.2% reading was expected on yearly basis.

 Retail sales data excluding volatile items such as fuel also dropped -2.0%m/m, while slipped 4.9% y/y.

ONS reports, “The largest contribution to the month-on-month fall came from non-food stores.”


11:35 GBP/USD keeps 1.2300 post-data

The British Pound lost some momentum vs. the buck on Friday, with GBP/USD keeping the trade in the 1.2330 area for the time being.

GBP/USD firm post-data

The pair reverted the daily upside after UK’s Retail Sales surprised markets to the downside, contracting at a monthly 1.9% while Sales excluding the Fuel component also dropped 2.0% inter-month.

The data contrast with higher-than-expected inflation figures during the last month of 2016 and auspicious labour market results seen on Tuesday and Wednesday, respectively.

In spite of the disappointing results, GBP remains well underpinned by the persistent selling mood around the buck, broad-based solid UK fundamentals and alleviated concerns over a ‘hard Brexit’.

In the US data space, Trump’s inauguration will grab all the attention later in the day, with Philly Fed Patrick Harker (voter, hawkish) and San Francisco Fed John Williams (2018 voter, centrist) also due to speak.

GBP/USD levels to consider

As of writing the pair is retreating 0.28% at 1.2311 facing the next hurdle at 1.2415 (high Jan.17) ahead of 1.2437 (high Jan.6) and finally 1.2537 (100-day sma). On the downside, a break below 1.2250 (low Jan.18) would aim for 1.2014 (low Jan.17) and finally 1.1979 (low Jan.16).

 

 


11:32 United Kingdom Retail Sales ex-Fuel (MoM) registered at -2%, below expectations (-0.3%) in December


11:32 United Kingdom Retail Sales ex-Fuel (YoY) came in at 4.9%, below expectations (7.6%) in December


11:32 Greece Current Account (YoY) fell from previous -0.198B to -1.191B in November


11:32 United Kingdom Retail Sales (YoY) came in at 4.3% below forecasts (7.2%) in December


11:32 United Kingdom Retail Sales (MoM) came in at -1.9%, below expectations (-0.1%) in December


11:26 Oil: Weak daily volatility should prevent the Brent from rallying markedly - Natixis

Micaella Feldstein, Research Analyst at Natixis, suggests that the weak daily volatility should prevent the Brent from rallying markedly in the coming days, all the more so as the weekly indicators have turned around.

Key Quotes

“Consequently, the resistance at 57.20 (daily Bollinger upper band) still sounds us toppish and we rather see a pullback to 53.80-54 (daily Bollinger lower band).”

“Caution will be in order as a break below this area would unleash strong downside potential to 51.10 (weekly Bollinger moving average) key threshold ahead of 49.80-50 (9-month moving average) and 47.75 (monthly Bollinger moving average).”

“The resistances are at 57.20, at 58.80-59, at 60 and at 61.50.”


11:24 USD/JPY recovers to 115.00 handle but lacking follow through momentum

The USD/JPY pair bounced off session low near 114.50 region and is now attempting a move back above 115.00 psychological mark.

A fresh bout of US Dollar buying interest seems to have emerged during European trading session as investors seemed reluctant to carry large bets ahead of the big event risk, Trump's inaugural speech, which helped the major to trade in positive territory for the third consecutive session, at least for the time being. 

Meanwhile, a mild positive opening in the European equity market also seems to be weighing on the Japanese Yen's safe-haven appeal and collaborating to the pair's recovery from session low. 

Further up-move, however, might be limited as investors would prefer to wait and see, if Trump delivers on his promised stimulus measures, before determining the pair's next leg of directional move.

Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet notes, "A daily close below 113.75 would open the doors for a re-test of 112.57 levels. On the higher side, a convincing break above the previous day’s high of 116.04 would add credence to Wednesday’s bullish engulfing candle and thus open up upside towards 117.50 levels."

 


11:24 UKs Hammond: Sterling fall feeding through into UK inflation

More comments hitting the wires from the UK finance minister Hammond, via Reuters, as he continues to speak at a panel discussion at the WEF – Davos.

Key Points:

British people are feeling effect of weaker sterling (STG)

STG fall feeding through into UK inflation


11:22 US: Heightened policy uncertainty contributing to volatile USD MUFG

The US dollar has returned to a softer footing in the Asian trading session further highlighting the choppy nature of price action ahead of today’s inauguration for President elect Donald Trump notes Lee Hardman, Currency Analyst at MUFG.

Key Quotes

“The main developments yesterday for the US dollar were comments from both Fed Chair Yellen and Steven Mnuchin who is Donald Trump’s nominee for Treasury Secretary.”

“Fed Chair Yellen’s comments to the Stanford Institute for Economic Policy Research were interpreted less hawkishly given that she stated that “I consider it prudent to adjust the stance of monetary policy gradually over time”. At the same time she argued that the Fed had not fallen behind the curve by highlighting that wages had risen “only modestly: and the manufacturing sector was operating well below capacity. She also highlighted that another factor arguing for a gradual approach to raising rates were the developments in the Fed’s balance sheet.”

“In a footnote to her speech, she noted that the yield on the 10-year US Treasury bond could increase by about 15 basis points this year as the average maturity of their bond holdings shortens and as an eventual reduction in their balance sheet is approaching. It would be roughly equivalent on average to what has historically accompanied two 25 basis point rate hikes. The implication being that developments in their balance sheet could tighten monetary conditions thereby dampening the need for rate hikes. However, on a more hawkish note she argued against allowing the economy to “run markedly and persistently hot” which would be “risky and unwise”.”

“Comments from Steve Mnuchin during his confirmation hearing to become the next Treasury Secretary have captured some market attention as well. He reasserted US support for a strong US dollar policy which remained important over the long-term as it reflects America’s attractiveness as an investment destination. He also stated that he would not be commenting about short-term movements in the currency market as Treasury Secretary. When asked about President elect Trump’s recent observation that the US dollar was too strong, he interpreted them as having not been meant as a “long-term comment” but rather reflected some potential concerns about the effects of a strong US dollar.”

“Steve Mnuchin’s comments should help to ease concerns that the Trump administration will officially adopt a weak US dollar policy, although the market will remain wary that verbal intervention could still be used to dampen US dollar strength. We are sceptical that verbal intervention will prove effective at reversing US dollar strength.”


11:15 UKs Hammond: US administration change introduces even greater uncertainty for EU

The UK finance minister Hammond is still out there on the wires, talking on varied issues such as immigration, trade relation, Trump’s presidency, UK economy etc.

Key Headlines via Reuters:

Open question whether migration for EU nationals will be easier compared to those from outside EU after Brexit, up for negotiation

UK economy effectively at full employment, will continue to need migrants

US administration change introduces even greater uncertainty for EU

Key issue is relations between Europe & Russia


11:15 USD/CHF initial resistance lies around 1.0150 Commerzbank

Bullish attempts in USD/CHF should find the initial hurdle around the mid-1.0100s, according to Karen Jones, Head of FICC Technical Analysis at Commerzbank.

Key Quotes

USD/CHF continues to hold over the 1.0020 mid December low. Rallies will find initial resistance at 1.0150/47, this is the location of the near term resistance line. The market will need to overcome this downtrend in order to alleviate downside pressure and signal a recovery to the 1.0248 11th January high and the 1.0328 2015 and 1.0344 December 2016 highs”.

“Below .9996 we are unable to rule out slippage to the .9956 May 2016 high and .9947 50% retracement. There is potential for a slide to the 200 day ma at .9863 (however this is not our favoured scenario).The Elliott wave count on the daily is suggesting that the move to .9996 was the end of an ‘abc’ correction lower”.

 


11:12 The Fed strikes back, but on the other hand - Nomura

Bilal Hafeez, Research Analyst at Nomura, notes that the recent Fed Chair Janet Yellen’s speech in San Francisco reminded markets that we are in the midst of a Fed tightening cycle.

Key Quotes

“However, there was nothing to indicate that the Fed was likely to do more than the two or so hikes the median Fed dots imply or that we expect for 2017. But larger events loom, namely Donald Trump’s inauguration as US President. This may mark the beginning of the implementation of a series of protectionist measures that could see the dollar fall.” 

“Leaving aside any Trump effect, it is also worth bearing in mind that although the Fed has only hiked twice, it has effectively been tightening policy since 2013, when it began its taper programme. This means that we have had a three-year tightening phase, albeit a very stop-start one. Over this period, USD/JPY has risen 10% and the trade-weighted dollar has risen 24%. This is much larger than the previous two major tightening phases.”

“The last one from June 2004 to June 2006 saw USD/JPY rise 6%, but the tradeweighted dollar fell 6%. The major one before that from February 1994 to February 1995 saw USD/JPY fall 8% and the trade-weighted dollar decline 6%.”

“Moreover, within the current tightening phase, there has been a pattern where the dollar has tended to rally into tightening action and stall or weaken thereafter. Some of this is caused by bond yields, and hence Fed expectations have been scaled back after the Fed’s action. Last year equity markets also corrected lower after the December 2015 hike which helped the yen. Then there is the issue of real yields, which have tended to rise into Fed tightening actions and fall afterwards. This could be particularly relevant in the current part of the Fed’s tightening efforts as inflationary pressures have been gathering. So if bond yields rise, but for the wrong reason (ie inflation and so real yields may not necessarily be rising), then bond yield support for the dollar may not be forthcoming. We therefore remain comfortable with our bearish dollar view (especially against the yen).”  


11:08 WTI extends the rebound on upbeat fundamentals

Oil futures on NYMEX are seen higher for the second straight session this Friday, extending its rebound further beyond $ 52 barrier.

Oil eyes rigs data, Trump

Currently WTI advances +0.58% to $ 52.40, now eyeing a test $ 53 mark. Oil prices trade with moderate gains so far this session, as sentiment remains supported amid renewed hopes of tighter oil market in 2017 on OPEC output cut deal compliance.

Further, latest Chinese data showed upbeat Q4 GDP, which also added to the upside oil, while reports of record Chinese demand, evidenced by Crude throughput hitting the highest level in history for the year at 10.79 million bpd, strengthened the ongoing bullish momentum.

However, it remains to be seen if the black gold can extend gains further, as yesterday’s bearish EIA crude inventory report may put a lid on the prices. Crude inventories rose 2.3 million barrels in the week to Jan. 13, compared with expectations for an increase of 342,000 barrels.

Next on tap for the commodity remains the US rigs count data ahead of Trumps inauguration, which is likely to have significant impact on the USD-sensitive oil.

WTI technical levels

A break above $ 53 (round figure) could yield a test of Jan 17 high of $ 53.52. While a breach of support at $ 51.56 (50-DMA) would expose the psychological level of $ 51.


11:08 EUR/USD rangebound between 1.0500 and 1.0715 UOB

In view of FX Strategists at UOB Group, EUR/USD remains on a neutral outlook and is poised to trade between 1.0500 and 1.0715 in the near term.

Key Quotes

“In line with expectation, EUR dipped but the down-move was checked by the strong 1.0590 support (overnight low of 1.0587). The subsequent sharp rebound appears to have scope to extend higher but at this stage, any further up-move is expected to struggle to move beyond the strong 1.0700/05 resistance”.

“EUR dipped to low of 1.0587 yesterday but rebounded quickly. While the undertone has improved somewhat and a move above the 1.0715/20 high seen earlier this week would not be surprising, the current lackluster momentum suggests that a sustained up-move is unlikely (next resistance at 1.0765). In other words, we continue to expect range trading for now, likely between 1.0500 and 1.0715 even though the risk appears to be tilted to the upside”.

 


11:07 ECB reiterates support for maintaining loose policy MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the euro has rebounded overnight reversing modest weakness following yesterday’s ECB policy meeting.

Key Quotes

“The outcome from yesterday’s meeting was broadly in line with our expectations having a relatively neutral impact on the market. President Draghi retained a very cautious stance despite the recent improvement in both economic growth and inflation in the euro-zone. It is not surprising as the ECB only just extended QE to the end of this year at their December meeting.”

“The ECB remains concerned by still weak core inflation which hasn’t picked up yet. It is prepared to look through higher headline inflation driven by the rebound in energy prices so long as there is little evidence of second round effects. President Draghi highlighted that nominal wage growth remains subdued which supports maintaining loose monetary policy for longer. It should help to keep the euro weak in the near-term.”


11:01 NZD/USD takes a sharp U-turn, plunges below 0.7200 handle

Having touched a fresh five-week high, the NZD/USD pair witnessed a sharp reversal and is now extending its slide further below 0.7200 handle.

Currently trading around 0.7165 region, testing session low, the pair once again failed to sustain its strength above 0.7200 handle and ran through fresh offers amid resurgent greenback buying interest. In fact the key US Dollar Index has now recovered early lost ground and moved back above 101.00 mark. 

Meanwhile, a sharp spike in the US treasury bond yields also seems to be driving flows away from higher-yielding currencies - like the Kiwi, and collaborating to the ongoing slide from the highest level since mid-December. 

Moreover, possibilities of some long unwinding ahead of Donald Trump’s inauguration, later during the day, further aggravated the profit-taking slide. Investors on Friday will remain focused on Trump’s inaugural speech for clarity over his promised fiscal stimulus policies, which would a key determinant of the pair's near-term trajectory.

Technical levels to watch

Immediate downside support is pegged at 100-day SMA near 0.7150 region, which if broken is likely to accelerate the slide to 0.7120 intermediate support before the pair eventually drops to the very important 200-day SMA support near 0.7100-0.7090 region.

On the upside, 0.7190-0.7200 area now becomes immediate resistance, which if cleared now seems to pave way for continuation of the pair's near-term upward trajectory towards December highs resistance near 0.7235-40 region, en-route 0.7300 round figure mark.

 


10:43 EUR/USD surrenders gains, back near 1.0670

The upside bias around the single currency remains intact so far, despite EUR/USD has faded the initial spike to session tops near the 1.0700 handle.

EUR/USD focus on Trump

The pair is clinching its fifth consecutive week with gains so far, always with the renewed weakness around the greenback as the exclusive driver behind the up move.

USD has almost fully faded the Trump-led rally since mid-November - which lifted the US Dollar Index to levels seen over a decade ago near the 104.00 barrier and relegated spot to fresh 14-year lows near 1.0340 on January 3 – allowing EUR/USD to regain traction and visit the 1.0700 neighbourhood in recent sessions.

On its meeting yesterday, the ECB delivered an unexpected dovish message, talking down the recent pick up in consumer prices in the region and ruling out any modification of the current purchases of bonds. Once again, President Draghi reiterated that tapering was not discussed.

The subsequent knee-jerk in the pair found decent support around 1.0580, prompting buyers to return to the markets and push EUR/USD around a cent higher to today’s peaks near 1.0700 the figure.

Later in the session, USD will take centre stage in light of Trump’s inauguration. Furthermore, Philly Fed Patrick Harker (voter, hawkish) and San Francisco Fed John Williams (2018 voter, centrist) are also due to speak.

EUR/USD levels to watch

The pair is now up 0.02% at 1.0667 and a breakout of 1.0719 (high Jan.17) would open the door to 1.0798 (high Dec.5) and then 1.0873 (high Dec.8). On the flip side, the immediate support aligns at 1.0622 (low Jan.19) followed by 1.0580 (short-term support line) and finally 1.0554 (20-day sma).


10:39 ECBs Coeure: Too early to discuss tapering

ECB executive board member Benoit Coeure crossed the wires earlier today, speaking on the central bank’s monetary policy programme in an interview with CNBC.

Key Points:

QE will not last forever but too early to discuss tapering 

Too early to adjust the programme

There is a risk that Eurogroup ministers will not act together to address any problem in the Eurozone

EZ is more resilient than 3 years ago though

Priority is reform

Main concern of Brexit is financial stability

Europe needs to be united regardless of Trump


10:34 UKs Hammond: Brexit To Need A suite of FTAs

The UK Finance Minister Hammond was on the wires last hour, speaking on a panel discussion at the World Economic Forum (WEF) in Davos, Livesquawk reports.

Key Headlines:

Brexit to need a ‘suite of FTA’s’

Brexit border changes ‘may take years’

 


10:21 GBP/USD drifts into negative territory ahead of UK retail sales

The GBP/USD pair ran through some offers at higher level and reversed daily gains to session peak near 1.2370 region.

Currently trading around 1.2330 region, testing session lows, the greenback reversed early weakness, with the key US Dollar Index moving back to 101.0 mark, seems to be the only factor contributing to some selling pressure around the major. 

Earlier on Friday, generally bearish bias surrounding the buck, in absence of any fresh hawkish signals from the Fed Chair Janet Yellen, helped the pair to build on Thursday's up-move. 

Moving forward, UK retail sales might provide some fresh trading impetus during European trading session. However, investors’ attention would remain on Trump's inauguration speech, later during the day, which would provide clarity over his fiscal policies and help investors determine the greenback's next leg of directional move. 

Technical levels to watch

A follow through selling pressure below 1.2300 handle is likely to drag the pair back towards 1.2250 support below which the pair is likely to turn vulnerable to head back towards 1.2200 round figure mark. On the upside, momentum above 1.2350 level, leading to a subsequent strength above session peak resistance near 1.2370 area, now seems to lift the pair back beyond 1.2400 handle towards retesting 50-day SMA strong hurdle near 1.2415-20 region.

 


10:02 Hungary Gross Wages (YoY) increased to 8.2% in November from previous 5.4%


09:55 ECB stays the course - Rabobank

Research Team at Rabobank notes that the ECB stays the course as expected, pointing at absence of “convincing trend in underlying inflation” while Draghi mentions four criteria against which it will judge future inflation developments.

Key Quotes

“The ECB policy statement and press conference provided little new information regarding the monetary policy stance. The market reaction to the press conference was pretty much non-existent either.”

“The only tangible news was the publication of further details regarding purchases of assets with yields below the deposit facility rate (DFR). Here it has been decided that purchases under the DFR will only be made under the PSPP. Moreover, priority will be given to purchases at yields above the DFR. In other words, Eurosystem national central banks are expected to show some restraint in such purchases, although this clearly does not rule out tokenistic purchases near-term, as our colleagues from the Rates Strategy team have put forward.”

“In his comment on the Governing Council decision and assessment of the policy stance, Mr. Draghi pointed at stronger survey data, the expectation of slightly stronger growth in 2016Q4 and a firming expansion thereafter. The ECB President also mentioned signs of a “somewhat stronger global recovery.“ The Council remains pleased with, its past decisions, the impact of its measures and does not foresee any difficulties in the implementation of its APP. All hunky dory, full stop.”

“That said, the ECB still sees “no signs of a convincing upward trend in underlying inflation”, despite recent upside surprises in headline inflation, the implication of this being that a “substantial degree of policy accommodation is needed to ensure a return to sustained inflation rates without undue delay.”

Four conditions

As expected, the ECB president argued that the ECB will look through transitory developments in inflation and instead will focus in the “coming months” on judging “whether higher headline inflation translates into higher underlying inflation […]”. To that end, Draghi provided a bit more clarity on how it would judge this process:

1. The “medium term horizon is the relevant horizon.”; this tallies with our view that the 2019 staff projection for inflation is a key figure to watch in the future

2. Second, there has to be a durable improvement in inflation, so it “cannot be transient.”

3. Third, the inflation has to be of a “self-sustained” nature, meaning that inflationary pressure must remain even when monetary policy support will be removed. This tallies with our own view that we should not only see an improvement in core inflation, but also an improvement in underlying wage developments (although the ECB president steered clear from making a strong call for higher wage growth as he warned that productivity growth matters as well.)

4. Fourth, Mr. Draghi underscored that the inflation objective is defined for the Eurozone as a whole. The ECB won’t consider this condition to be fulfilled if inflation has met its target in a single member state or a group of member states rather than in the Eurozone as a whole. In response to a question, the ECB president also noted that he does not foresee “unmanageable” divergence of inflation rates in the euro area. Our interpretation here is that the ECB would thus accept the possibility of inflation overshooting in some member states (which of course is almost unavoidable if there is a certain distribution around the mean).”  

“Altogether press conference lived up to our expectations and we see no reason to change our view that, in the upcoming months, the ECB is likely to stand squarely behind the decisions taken last December.”


09:49 Asia FX: Continue to face uncertainty and volatility - Nomura

Research Team at Nomura expects Asia FX to continue to face headwinds beyond Trump including from US Fed hikes, potential ECB/BoJ tapering, political shocks (possibly from Europe), deleveraging risk in foreign currency loans and China’s macroeconomic challenges/RMB depreciation.

Key Quotes

“On RMB, despite all the recent measures that we believe were taken to undermine RMB depreciation expectations, we do not believe these measures can sustain RMB stability over the medium-term. While the risk to being short CNH has risen due to the use of CNH liquidity tightening by authorities against short CNH positioning, this policy is likely effective only in the short-term, and supporting this policy stance for a prolonged period of time could eventually raise concerns over FX policy sustainability and increase fears of a one-off devaluation.”

“Overall, we maintain our cautious stance on Asia FX and our view of Northeast Asia (and SGD) underperforming South/Southeast Asia.”


09:46 ECB Review: Too Early to Recalibrate the asset purchase programme - Natixis

Analysts at Natixis note that as expected, the ECB took the backseat at yesterday’s meeting and according to Mario Draghi, it is too early to draw consequences of changes in US fiscal policy and of a hard Brexit.

Key Quotes

“While the ECB welcomed general improvement of economic and financial conditions, as well as evidence of successful achievements of its APP, the upturn in inflation is too much unsustainable for monetary policy accommodation to be reduced. All things considered, and keeping in mind that political uncertainties surrounding the Eurozone will culminate at Spring with the French presidential and general elections, we still believe that the governing council will refrain from announcing a further “recalibration”, i.e. a reduction in the APP before H2-2017.” 

The ECB held its fire on rates and Asset Purchase Programme at yesterday’s meeting. This outcome was widely expected after the December decision to extend the APP programme to December 2017 and to trim the pace of monthly purchases from 80 to EUR 60bn after March 2017. The ECB did not react by policy action or a change in stance to the positive surprise in December inflation figure and “looked through”. Particularly, its APP programme keeps an upside bias (in terms of size and duration) in case of a deterioration of the environment. No symmetrical bias towards further recalibration was introduced in case of improvement in the inflation outlook, as some observers are demanding to the ECB.” 

“While the ECB welcomed mounting evidence of successful achievements since its APP was launched in October 2014, especially as regards economic sentiment and credit developments, it is still convinced that it cannot rest on its laurels. Doubts remain by how much these improvements rely on ECB action or are by-products of positive global developments; the upturn in inflation is rapid but not lasting; and while core countries would support several rate hikes, the periphery countries are not all out of wood, with Italy remaining fragile. Moreover, we believe that the political uncertainties surrounding the Eurozone and culminating at Spring with the French presidential and general elections are another reason for the governing council to refrain from announcing a reduction in the APP before H2-2017.”


09:46 Gold steady above $1200 handle amid pre-Trump nervousness

Gold extended Thursday’s recovery move from weekly lows and build on to its strength back above $1200 psychological mark.

Currently trading around $1206 region, off session peak level of $1209, nervousness ahead of Trump’s inaugural speech and uncertainty over the economic impact of his fiscal policies is seen benefiting the precious metal’s safe-haven appeal. 

Moreover, Thursday’s less hawkish Fed Chair Janet Yellen drove the US treasury bond yields lower and is undermining demand for the US Dollar, eventually boosting demand for dollar-denominated commodities – like gold. 

From technical perspective, the metal held and staged a rebound from its immediate support marked by 23.6% Fibonacci retracement level of its latest leg of recovery move from 10-1/2 month lows ($1123) to nearly two-month high ($1219) touched on Tuesday. The ongoing price-action points to the metal's well-established near-term bullish trend and hence, reinforces prospects of further near-term up-move from current levels.

The expectations, however, would be invalidated if Trump comes out with aggressive fiscal stimulus measures, which might trigger sharp surge in bond yields and attract fresh selling pressure around the non-yielding yellow metal. 

Technical levels to watch

A follow through buying interest above $1210 immediate resistance seems to lift the commodity back towards multi-week highs resistance near $1218-19 area above which the near-term recovery trend is likely to get extended towards $1230 resistance area ahead of 100-day SMA hurdle near $1238 region.

On the flip side, renewed weakness below $1200 mark might continue to find support near $1295 level (yesterday’s low), which if broken now seems to trigger a fresh leg of corrective slide back towards 50-day SMA support near $1180 region, with some intermediate support near $1190 level.
 

 


09:41 BOJ to maintain its cautious stance - Nomura

Yujiro Goto, Research Analyst at Nomura notes that Nikkei reports that the BOJ is considering upgrading its economic forecast at its next meeting (unconfirmed).

Key Quotes

“The BOJ’s latest FY17 growth forecast is at +1.3%, but the article says the forecast will be upgraded to around +1.5%. The consensus growth forecast has been upgraded recently and an upgrade of the BOJ’s growth forecast would not be a big surprise for the market.”

“At the same time, the article says that within the BOJ some are cautious about upgrading the inflation forecast (unconfirmed). On 5 January, Reuters reported that the BOJ is considering the possibility of upgrading its inflation forecast (unconfirmed) to incorporate the impact of JPY weakness, oil price stability and the improving global economy. Since then JPY weakness momentum has slowed, which may make the BOJ more cautious about sending an overly optimistic message to the market. In fact, Governor Kuroda said yesterday that prices are still moving very slowly and it is too early to think about changing the BOJ’s easing position.”

“Momentum in wage hikes into the spring wage negotiations remains weak, and the Bank is likely to remain cautious about the inflation outlook. The Bank is expected to maintain its dovish stance, although external headwinds have gradually turned to tailwinds. We think the risk of premature tightening to taper ETF purchases is low. The recovery in global inflation could make the ECB’s stance more optimistic as political risks decline, and central banks’ policy stance is likely to be gradually more positive for EUR/JPY from H2 2017 onwards.”


09:36 USD/CAD stays around 1.3300 ahead of CPI

The greenback has lost upside momentum vs. its Canadian peer on Friday, sending USD/CAD to the 1.3300 neighbourhood for the time being.

USD/CAD attention to data, Trump

Spot has deflated from yesterday’s tops in the mid-1.3300s as the buying interest around the Dollar seems to have subsided somewhat ahead of Trump’s inauguration later in the day.

The pair is thus retreating for the first time after two consecutive pullbacks, gaining around 3 cents since weekly lows in the 1.3000 area, while it is now looking to find some stabilization around the 1.3300 zone (Fibo retracement of the 2016 drop).

CAD met some downside pressure as well following a decline in crude oil prices, with the barrel of West Texas Intermediate hovering over the $52.00 mark amidst rising skepticism over the effectiveness of the recent deal between OPEC and non-OPEC countries.

Later in the NA session, Canadian inflation figures tracked by the CPI and Retail Sales are due, along with the speech by Donald Trump, Philly Fed Patrick Harker (voter, hawkish) and San Francisco Fed John Williams (2018 voter, centrist).

USD/CAD significant levels

As of writing the pair is losing 0.20% at 1.3293 and a breach of 1.3250 (low Jan.19) would aim for 1.3016 (low Jan.17) and then 1.3002 (low Oct.19). On the upside, the next hurdle is located at 1.3354 (high Jan.19) followed by 1.3356 (55-day sma) and finally 1.3463 (high Jan.3).

 

 


09:36 EURUSD: Cant rule out some decline to 1.0613 - Natixis

According to Micaella Feldstein, Research Analyst at Natixis, as the daily stochastic is overbought for EUR/USD, she can’t rule out some decline to 1.0613 (9-day moving average) even to the support at 1.0537 (daily Bollinger moving average).

Key Quotes

“These dips should enable the cross to take a breather: the emergence of an upside channel on the daily chart and the turnaround of the weekly indicators indeed plead for further upside potential. We’ll keep a lookout at the resistance at 1.0712/19 (daily Bollinger upper band) whose break would open the door to 1.0830 (weekly Bollinger moving average) ahead of 1.0914 (declining trendline) even 1.1006 (monthly Bollinger moving average). The supports stand at 1.0613, at 1.0537, at 1.0488, at 1.0365 and at 1.0260.”


09:25 UK retail sales preview: What to expect of GBP/USD?

The GBP/USD pair failed several attempts to reach towards 1.24 handle, but in vain, sentiment around the GBP remains dampened amid expectations of no growth in the retail sales volumes for the month of December.  The report will be published later this session at 0930GMT.

Retail sales to remain flat in December

The retail sales data is expected to remain unchanged at 0.2% m/m in December, while on annualized basis, retail sales are expected to jump to 7.3%. In November, retail sales rose 5.9% over the month.

A better-than expected retail sales report could help the GBP bulls to conquer 1.24 handle, refueling the recovery mode in the cable from 1.2250 levels. While a failure to meet estimates would knock-off the pair to 5-DMA support at 1.2285.

Analyst at TDS note, “With anecdotal reports that the majority of retailers experienced strong holiday sales, and consumers pulling forward durable goods purchases before the exchange-rate pass-through boost to prices, we look for Dec retail sales to hold up well.  We look for +0.4% m/m compared with the –0.1% that markets are looking for.”

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 10 and 70 pips in deviations up to 3.5 to -1.5, although in some cases, if notable enough, a deviation can fuel movements of upto 100 pips.

GBP/USD Technical Levels

Haresh Menghani, Analyst at FXStreet explains, “A decisive strength above 1.2350 region, leading to a subsequent move above session peak 1.2370 level, should lift the pair back above 1.2400 handle towards testing 50-day SMA important resistance near 1.2415-20 region. A convincing break through 50-day SMA hurdle is likely to trigger a fresh bout of short-covering and accelerate the up-move towards 1.2475-80 resistance, en-route 1.2500 psychological mark.”

“On the flip side, 1.2310-1.2300 region (nearing 23.6% Fibonacci retracement level) now seems to protect immediate downside, which if broken seems to drag the pair back towards 1.2250 region.” 

 


09:22 UK: Time to pep up on Brexit - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, notes that most commentators, in particular, those in much of the British media, continue to look at Brexit as a glass half-empty and there continues to be much handwringing and a proclivity to criticize PM May and her plans for Brexit.

Key Quotes

“There is no doubt there is considerable uncertainty at this early stage of a multiyear process, and the possibility to see much downside. However, the market is yet to really consider that outside of the shackles of EU membership the UK may be able to prosper.”

“As May pointed out during her speech on Tuesday, the UK has not clearly benefited as a trading partner in Europe.  Perhaps it has less to lose from broadening its focus from intrinsically EU focused trade and investment to viewing the EU as just part of its global market.  She noted that, since joining the EU, trade as a percentage of GDP has broadly stagnated in the UK.”

“Leaving the EU will presumably diminish UK trade with the block, but we do not know by how much.  EU leaders have frequently observed that Britain should not expect to get out of the EU without paying some price.  They want existing members to see benefits of membership.  But equally, they stand to lose if they treat the UK with contempt. EU exports to the UK have growth more significantly than UK exports to the EU, resulting in a widening UK trade deficit with the EU.  Germany is the UK’s top import partner; the USA is the UK’s top export destination.”

“The harder EU deals with the UK, the more likely the UK will move more of its trading volume to the rest of the world.  In any case, we might expect trade with the rest of the world to increase as a result of Brexit and serve as an offset to lower trade volume with the EU.”

“The UK has historically enjoyed a position as a global financial center; if the UK works hard to maintain strong global trading relationships and achieves a reasonable basis on which to be able to conduct business with European entities, the UK financial sector may not be too badly undermined.”


09:17 EUR/USD: All eyes on Trumps initial policy focus - MUFG

In view of the analysts at MUFG, the EUR/USD rate should continue to be driven by the US dollar leg in the week ahead.

Key Quotes

“The US dollar has been correcting modestly lower early this year lifting the EUR/USD rate back towards resistance from its 55-day moving average at just above the 1.0600-level. It now appears broadly in line with short-term fundamental drivers according to our valuation model. The main focus in the week ahead will be President elect Trump’s inauguration and the initial implementation of policies in the week ahead.”

“The US dollar’s correction lower could extend further if more protectionist trade policies garner the most attention in the near-term. The market will also be wary for any further potential comments regarding the strength of the US dollar. In contrast, the US dollar could regain upward momentum if tax reform, infrastructure investment, and deregulation policies garner more attention.”


09:14 Draghi drives home the advantage - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, notes that the ECB left unchanged its policy levers; continuing with its NIRP ad QE purchases that are slated at 80bn per month until March and 60bn until December.

Key Quotes

“It acknowledged the pick-up in headline inflation, but said “underlying inflation pressures remain subdued.” The statement also said, “The Governing Council will continue to look through changes in HICP inflation if judged to be transient and to have no implication for the medium-term outlook for price stability.”

“The ECB has not always considered a rise in headline inflation driven primarily by higher energy prices as transitory.  Several times in its current NIRP/QE policy easing cycle, the ECB spoke of the negative long-term impact lower energy prices appeared to have on inflation expectations, suggesting lower energy prices were a factor contributing to policy easing.  As such, the ECB is taking a relatively dovish position by its standards.”

“The statement also continues to say that the ECB could ease further if required.  It does not say that policy easing could be wound back earlier if conditions improve.  Draghi continued to call this a “high-quality problem.”  This continues to suggest that the ECB sees the bigger risk as a slower recovery in inflation towards its target, and perhaps is willing to risk inflation running above target at some point in the future.”

“The market was not looking for any policy changes or shift in the key parts of the statement at this policy meeting.  Nevertheless, economic growth and inflation have picked up or look more promising in recent months, and the risk, if anything, was that the ECB might sound less dovish.  In contrast, the ECB appears more interested at this stage of driving home the advantage of its policy easing, maintaining its vigor and helping raise inflation expectations, and lower real interest rates.”


09:09 AUD/USD fades upbeat Chinese GDP-led spike to fresh 2-month peak

The AUD/USD pair faded upbeat Chinese GDP-led bullish spike and has now reversed majority of daily gains to fresh 9-week high.

Today's better-than-expected Chinese data Q4 growth number and retail sales data negated slightly disappointment readings from industrial production and fixed assets investment. This coupled with a mild retracement in the US treasury bond yields provided an additional boost to higher-yielding currencies - like the Aussie, and helped the pair to build on Thursday's strong rebound move from the very important 200-day SMA, lifting it to the highest level since Nov. 11.

The pair, however, lost its upside momentum as traders seemed to lock-in some profits ahead of the big event risk, Donald Trump's inaugural speech later during the day. The pair was last seen trading nearly unchanged from yesterday's closing, around 0.7560-65 band, but still seems all set to post fourth consecutive weekly gains. 

Technical levels to watch

A follow through retracement below session low support near 0.7550 level, the pair is likely to extend the corrective slide towards back towards 0.7500 psychological mark, en-route 0.7470-65 horizontal support.

On the flip side, bullish momentum back above 0.7580 level now seems to lift the pair towards 0.7600 handle above which the up-move is likely to accelerate towards 0.7650 horizontal resistance.

 


09:09 Yen likely to remain volatile in the week ahead - MUFG

Research Team at MUFG notes that so far in January, exporters have been covering their real demand, pushing USD/JPY lower and Japanese investors have also been making seasonal cash repatriations, supporting the JPY.

Key Quotes

“These factors could weigh on USD/JPY topside. Fed Chair Yellen further revealed her hawkishness this week. Market expectations for more rate hikes could support the lower bound for USD/JPY. The new US president’s inauguration speech Friday may shake USD/JPY, but we do not expect any further details about his fiscal policy plans.”


09:07 Forex Today: China Q4 GDP upbeat, UK retail sales, Trump eyed

Broad based US dollar weakness remained the underlying theme in Asia on Friday, after markets sold of the US treasury yields alongside dollar in response to a less hawkish speech by Fed Chair Yellen delivered in early Asia. However, the USD selling was short-lived as sentiment improved somewhat on the release of better-than expected Chinese Q4 GDP data, which outpaced expectations of financial expansion.

Looking ahead, we have the UK retail sales report due to be reported in the European session, while from North America, a set of Canadian data, viz., retail sales and CPI is on the cards, besides, Fed official Harker’s speech. However, the main risk event for the financial markets for coming months is expected to be Trump’s inauguration speech scheduled later around 11.30ET.

Main topics in Asia

Fed's Yellen: 'Prudent' to adjust stance of monetary policy gradually

Janet Yellen, chair of the Board of Governors of the Federal Reserve, speaking at the Stanford Institute for Economic Policy Research, notes that it is 'prudent' to adjust the stance of monetary policy gradually

S&P affirms New Zealand's rating, outlook remains stable

The US-based ratings agency, Standard and Poor’s (S&P), published its latest report on Friday, affirming New Zealand’s AA+ sovereign rating.

China's Q4 GDP beats expectations on fiscal expansion

China's YoY GDP figures for the forth quarter of 2016 came at +6.8% vs +6.7% exp and 6.7% previous, with the QoQ reading for Q3 coming at +1.7% vs +1.7% exp and +1.8% last. 

PBOC temporarily cuts RRR at 5 big banks by 1ppt for Lunar NY - RTRS

Reuters reports latest announcement from the Chinese central bank (PBOC), citing the bank temporarily allowed lowering RRR at 5 big banks by 1ppt for Lunar New Year.

Key focus for the day ahead

GBP/USD firmer around 1.2360 ahead of data

The greenback has resumed its weekly downside at the end of the week, helping GBP/USD to climb further north of the 1.2300 barrier.

EUR/USD reverses to 1.0670 ahead of Trump’s inauguration

The US dollar reverses a part of Fed Yellen’s comments induced sell-off, exerting downward pressure on EUR/USD, as we head into a data-light EUR calendar.

US: Start of a new era in trade policy? - NAB

Research Team at NAB notes that the trade was one of the key themes of Mr Trump’s campaign and as his inauguration as President nears, attention focuses on what trade policies the Trump administration will pursue.


09:06 UK: Dec retail sales likely to register 0.4% m/m growth - TDS

Analysts at TDS suggest that the retail sales data will be the major economic release from the UK today which will garner maximum investors’ attention.

Key Quotes

“With anecdotal reports that the majority of retailers experienced strong holiday sales, and consumers pulling forward durable goods purchases before the exchange-rate pass-through boost to prices, we look for Dec retail sales to hold up well.  We look for +0.4% m/m compared with the –0.1% that markets are looking for.”


09:04 GBP/USD a test of 1.2480 remains on the cards UOB

In view of FX Strategists at UOB Group, the current upside momentum could push Cable to the 1.2480 area.

Key Quotes

“GBP traded mostly sideways yesterday but the strong daily closing suggests that the undertone has improved. That said, any up-move from here is expected to face stiff resistance near 1.2375 and a move above the 1.2415 high seen earlier this week seems unlikely”.

“There is not much to add as we continue to hold on to the view that the current GBP strength has room to extend higher towards 1.2480. This level is a strong resistance and a clear break above would indicate that GBP could move much higher in the coming days/weeks. All in, GBP is expected to stay underpinned as long as 1.2250 is intact”.

 


09:02 Germany Producer Price Index (YoY) meets expectations (1%) in December


09:02 Trump to be sworn in today as the 45th President of the United States Danske Bank

Research Team at Danske Bank notes that the President-elect Donald Trump will be sworn in today as the 45th President of the United States.

Key Quotes

“The world will be watching the ceremony, which starts at 17:30 CET, and the inauguration speech in particular. It will be interesting to see whether Mr Trump provides more information on his actual economic policy, as the press conference last week was sparse on concrete information. While this is by no means a given, we may soon get an updated 100-day plan.”


09:01 Germany Producer Price Index (MoM) in line with forecasts (0.4%) in December


08:59 EUR/USD correction higher complete? Commerzbank

Karen Jones, Head of FICC Technical Analysis at Commerzbank, noted technicals could be pointing to the end of the recent correction higher.

Key Quotes

EUR/USD is holding at the 1.07 area. The Elliott wave count is suggesting that an ‘a-b-c’ correction higher terminated at 1.0719 recently and we look for the 1.0587 near term support line to be eroded - failure here is needed to add weight to the idea that the correction higher is complete and would cast attention back to the 1.0372/40 recent lows”.

“Should the market go above 1.0720, we remain unable to rule out a move to 1.0820 50% retracement and 1.0875 the December high”.

 


08:54 China GDP: 6.8% roundly ignored - TDS

Analysts at TDS note that defying consensus expectations for more of the same, Chinese GDP growth edged up from 6.7% to 6.8% (TD 6.8%, mkt 6.7%) while the overwhelming consensus at 33/44 looked for 6.7%.

Key Quotes

“A firmer print would normally put a floor under risk, but all eyes are on Trump’s inauguration later tonight as well as monitoring the drip -feed of headlines from Fed Chair Yellen. The AUD tested $US0.7588 earlier, but directly related to USD positioning not upbeat China data.”

“The government’s GDP target for 2016 was “about 6½ - 7%” and today’s data suite ends the year firmly within target. President Xi Jinping in Davos this week preferred to focus on the bigger picture, hinting that a potentially closed U.S. economy paves the way for a more open China. On growth, he noted that the economy was operating under a "new normal" regime via household consumption, and claimed that the economy was likely to have grown by 6.7% in 2016. We await the next CCP meeting for this year’s growth target. Perhaps 6½%?”

“The rapid CNY depreciation of 2016 has recently reversed and we see a pause around 6.85 -6.70 just now, then we expect further adjustment towards our year -end target of 7.18.”


08:47 GBP/USD firmer around 1.2360 ahead of data

The greenback has resumed its weekly downside at the end of the week, helping GBP/USD to climb further north of the 1.2300 barrier.

GBP/USD attention to UK data

The pair is advancing for the second consecutive session today, extending the bounce off Wednesday’s lows in the mid-1.2200s against a backdrop of a generalized selling bias surrounding the buck.

In the meantime, Brexit concerns appear somewhat alleviated after the speech by PM Theresa May earlier in the week, lending extra support to GBP and prompting investors to shift their focus on the upcoming ruling by the UK Parliament later in the month.

Looking ahead, UK’s Retail Sales are expected to have expanded at a monthly 0.2% in December, although all the attention will be on Trump’s inauguration and subsequent speech in the European afternoon.

Further events include the speeches by Philly Fed Patrick Harker (voter, hawkish) and San Francisco Fed John Williams (2018 voter, centrist).

GBP/USD levels to consider

As of writing the pair is gaining 0.07% at 1.2354 facing the next hurdle at 1.2415 (high Jan.17) ahead of 1.2437 (high Jan.6) and finally 1.2537 (100-day sma). On the downside, a break below 1.2250 (low Jan.18) would aim for 1.2014 (low Jan.17) and finally 1.1979 (low Jan.16).


08:43 USD/JPY struggling below 115.00 mark as investors await for Trump inauguration

The Japanese Yen outperformed its American counterpart, with the USD/JPY pair trading with bearish bias below 115.00 psychological mark. 

Currently trading around 114.70-75 region, the greenback remained broadly on the back foot as investors refrained from placing any major bets ahead of the key event risk, Donald Trump’s inaugural speech later during the day. 

During early Asian session, the major gained some traction and touched a session peak level of 115.15 but once again lost the upside momentum as there was a little less hawkish signal from the Fed Chair Janet Yellen’s speech in wake of uncertainty over the impact of fiscal policies by the incoming Trump administration.

Of late the key US Dollar Index has been struggling for fresh impetus and hence, today’s Trump inauguration would be looked upon for a fresh leg of directional move for the greenback.

Technical levels to watch

Immediate downside support is pegged at 114.50 level, which is closely followed by 50-day SMA support near 114.25 region. A convincing break back below 50-day SMA is likely to accelerate the slide immediately towards 113.65-60 intermediate support ahead of 113.00 round figure mark.

On the upside, momentum back above 115.00 mark is likely to confront resistance near 115.60 region above which the pair seems all set to head towards reclaiming 116.00 handle. 

 

 


08:35 PBOC temporarily raises RRR at 5 big banks by 1ppt for Lunar NY - RTRS

Reuters reports latest announcement from the Chinese central bank (PBOC), citing the bank PBOC temporarily raise RRR at 5 big banks by 1ppt for Lunar New Year.

The PBOC will restore RRR after holiday.


08:34 China: Comparatively strong finish to 2016, Trump trade uncertainty adds downside risk - NAB

Gerard Burg, Senior Economist at NAB, notes that China’s official national accounts data recorded a modest pickup in growth in Q4, with the economy expanding by 6.8% yoy (up from 6.7% recorded in each of the first three quarters).

Key Quotes

“For the full year, growth was the slowest since 1990, but remains in line with a soft landing, as the growth model gradually shifts towards domestic consumption.”

“NAB’s forecasts for Chinese economic growth are unchanged – at 6.5% in 2017 and 6.25% in 2018. That said, we continue to note risks to these forecasts – most recently the uncertainty regarding US trade policy under the Trump administration, the high levels of corporate sector debt and risks of price bubbles in real estate markets (despite recent cooling in price growth).”

“China’s industrial production growth was marginally softer in December – at 6.0% yoy (compared with 6.2% yoy in November) – essentially remaining around recent trend levels. Recent trends in PMI surveys point to improved conditions for manufacturers since the midpoint of 2015.”

“China’s fixed asset investment slowed considerably in December, despite real estate and manufacturing recording stronger growth. Construction activity is yet to show clear signs of slowing – with a fresh surge in construction starts in December – despite weakening house price and sales trends.”

“China’s trade surplus narrowed again in December, with import values recording a stronger month-on-month increase than exports. Commodity prices have surged in recent months – contributing to the rising trend in import values – with coal and iron ore prices remaining elevated. Export values fell in year-on-year terms, however the sizeable discrepancy between Hong Kong and Chinese trade data (due to unauthorised capital outflows disguised as trade activity in late 2015) makes underlying trends in trade flows extremely difficult to ascertain.”

“Growth in retail sales edged slightly higher in December, but stronger retail price inflation has kept real sales below 10% yoy.”

“China’s credit expanded strongly in 2016 – with new aggregate financing totalling RMB 17.7 trillion (an increase of almost 15% from 2015). This was the largest expansion on record (exceeding the previous peak in 2013). Managing the growth of China’s already considerable debt pile – comparable to higher debt advanced economy levels – remains a key challenge for Chinese authorities in 2017 and beyond.”


08:28 EUR/USD reverses to 1.0670 ahead of Trumps inauguration

The US dollar reverses a part of Fed Yellen’s comments induced sell-off, exerting downward pressure on EUR/USD, as we head into a data-light EUR calendar.

EUR/USD: Trump’s inauguration speech eyed

Currently, the spot now gains +0.12% to trade at 1.0678, testing daily lows struck at 1.0671 last hour. The EUR/USD pair faced rejection just shy of 1.07 handle, and retreated from there amid a minor broad based recovery in the US dollar, as the US treasury yields trim losses.

The major rallied in early Asia to test 1.0700 levels after the greenback dropped across the board on Fed Chair Yellen’s less hawkish take on the monetary policy stance. With the ECB decision now behind, the US President-elect Trump’s inauguration will take the center-stage, with all ears to any hints on his campaign promises of more fiscal spending and tax reforms.

Another disappointment from Trump today, will trigger a massive selling spiral in the greenback, taking EUR/USD back to December highs near 1.08 handle.

EUR/USD Technical Levels

In terms of technicals, the pair finds the immediate resistance 1.0719 (multi-week high). A break beyond the last, doors will open for a test of 1.0746 (Nov 17 high) and from there to 1.0764 (100-DMA). On the flip side, the immediate support is placed at 1.0657 (5-DMA) below which 1.0631 (10-DMA) and 1.0600 (zero figure) could be tested.


07:51 NZD/USD off 5-week tops, back below 0.7200

The New Zealand dollar is seen trimming gains against its American counterpart in the early European morning this Friday, pushing the NZD/USD pair to extend the retreat below 0.72 handle.

Currently, the NZD/USD pair trades +0.0.08% higher at 0.7198, having posted fresh 5-week highs at 0.7225 earlier today. The NZD/USD pair is seen doing away with its bid tone as the greenback takes on the recovery above 101 handle versus its six main rivals.

While the Kiwi looks past upbeat Chinese Q4 GDP data, which revived hopes of a steady economic recovery in China, New Zealand’s biggest trading partner. The major now remains at the mercy of the USD dynamics, as Trump takes office as the US 45th President later today.

NZD/USD Levels to consider

To the upside, the next resistance is located at 0.7225 (5-week high), above which it could extend gains to 0.7250 (psychological levels) and from there to 0.7300 (zero figure). To the downside immediate support might be located at 0.7166 (5-DMA) and from there to at 0.7123 (10-DMA), below which 0.7106 (100-DMA) would be tested.

 


07:35 US: Start of a new era in trade policy? - NAB

Research Team at NAB notes that the trade was one of the key themes of Mr Trump’s campaign and as his inauguration as President nears, attention focuses on what trade policies the Trump administration will pursue.

Key Quotes

“Mr Trump’s call for radical reform in US trade policy to lift domestic employment and wages reflects his strong criticism of what past policies have delivered. He has advocated imposing higher tariffs on countries that trade unfairly (with particular criticism of China), re-writing or scrapping the North American free trade agreement (NAFTA), taking a more aggressive line in bringing cases to the World Trade Organisation (WTO) and avoiding big new multi-country trade deals like the Trans-Pacific Partnership.”

 “The difficulty that Mr Trump faces is that sweeping trade measures would best achieve his ambitious jobs agenda, but those are precisely the reforms most likely to lead to WTO cases and trade wars.”

“A trade war could also appreciate the US dollar via a ‘flight to safety’ in financial markets, working against the improved trade balance that the protectionist policy was intended to achieve. In summary, we see a significant move towards protectionism that still proves unable to generate enough jobs to re-build the US industrial sector and which is generally not positive for Australia.”

“The economic impact of using potential measures already on the US statute book ranges from fairly minor to presenting quite a shock to established economic patterns.”


07:30 NZ: Labour market confidence at an eight-year high - Westpac

Satish Ranchhod, Senior Economist at Westpac, suggests that the New Zealanders have become increasingly optimistic about the state of the labour market, with the Westpac McDermott Miller Employment Confidence Index rising to 112.7 in December.

Key Quotes

“That comes on the back of a solid increase last quarter, and takes employment confidence to its highest level in eight years. This has been underpinned by increases in the number of job openings as economic activity has strengthened.”

“Increases in employment confidence have been broad based, with large gains in the regions. The only area where there has been a noticeable decline in employment confidence is Canterbury.”

“Despite the improved confidence around job availability, workers remain doubtful that earnings growth will pick up over the coming year.”


07:21 Japans EcoMin Ishihara: We still expect BOJ to meet its 2% price target

Japanese finance minister Aso as well as economy minster Ishihara, are both on the wires now, courtesy Reuters, giving their respective speeches on the Japanese economy and BOJ monetary policy.

Key Headlines:

From Japan finance minister Aso:

We'll achieve FY2020/21 budget-balancing goal by strengthening efforts on fiscal spending, revenue reforms

Govt will guide debt management policy appropriately based on close communication with market

We'll mobilize all policy tools to accelerate Abenomics

Japan economy minister Ishihara:

We still expect BOJ to meet its 2 pct price target, taking into account economy and price trends

Japan's economy is in moderate recovery due to big improvement in job market and wages

Must continue to monitor financial markets and uncertainty in overseas economies


07:20 US: Housing starts continue to swing in December Natixis

Analysts at Natixis note that US housing starts continued to experience unusual volatility in December with a bigger than expected rebound (+11.3% MoM to 1226K units annualized) solely driven by a 57% increase in multifamily starts and revisions of past months data.

Key Quotes

“Nevertheless, the trend remains moderately upward and we expect the recovery in the housing sector to continue in 2017 even though rates are heading higher.”

“Housing starts rebounded more than expected in December with a double digit monthly increase (+11.3%) to reach 1226K units annualized, higher than expectations (consensus: 1188K / Natixis: 1160K). Starts were revised upward in November but slightly lower in October. The rebound was solely driven by volatile multifamily family units (+57.3%) while single family units declined once again (-4.0%). Housing permits (a leading indicator) stabilized at 1210K as the rise in single family permits was offset by a decline in multifamily permits.”

“All in all, report surprised on the upside but one should keep in mind that housing starts have been more volatile than usual with double digit swings (while the standard deviation is close to 8% MoM). Looking through this volatility the trend remains slightly positive, with for the moment little impact from rising rates. We therefore expect the construction sector to keep improving this year.”


07:16 Japanese investment in AUD assets surged in November amid rising yields - Nomura

Research Team at Nomura notes that according to the official data, net purchases by Japanese investors increased sharply in November for AUD assets.

Key Quotes

“The spike was led by purchases of government bonds, although interest in Kangaroo (SSA and corporate) bonds remained solid. Interest in AUD bonds was particularly notable in the context of sales of USD bonds in November, and sales of foreign bonds (in aggregate) in December, due, we believe, to increased market volatility and US policy uncertainty.”

“Looking ahead, we note positive retail and lifer interest in AUD bonds, although we suspect USD bonds should resume their “number 1” ranking (in terms of purchases by Japanese investors) if FX and bond markets calm and US policy uncertainty fades.”


07:13 Japans Hamada: Should intervene in FX market if USD plunges 7-8 yen per day

Adviser to the Japanese PM Abe, Koichi Hamada, told Reuters that if the USD drops 7-8 yen on a daily basis, then Japanese authorities need to intervene.

Key Headlines:

Some danger Trump could base decisions on 'wrong economics' if he doesn't heed good advice

Japan need not cooperate with Trump on economic policies just to please him

Japan does not need to stick to fiscal 2020 target for primary budget surplus

Government should postpone further sales tax increase if Japan's economy stays in deflation

Japan should intervene in FX mkt if dollar plunges 7-8 yen per day


06:52 USD/CNY better offered on USD selling ahead of Trump

The Chinese currency manages to keep an edge over its American dollar on the final trading day of the week, as the corporate demand for greenback remains on the back foot ahead of Trump’s inauguration at the Capitol Hill.

Also, adding to the offered tone in USD/CNY, Fed Chair Yellen’s comments signaled a less hawkish stance on the monetary policy stance going forward, which weighed heavily on the US dollar across the board. While upbeat China’s Q4 GDP data also collaborated to minor-strength seen behind the Chinese Yuan.

Meanwhile, the PBOC set the first USD/CNY reference rate today at 6.8693 versus Thursday’s 6.8568, i.e., 125 basis points or 0.18% weaker.

The USD/CNY pair peeks into negative territory near 6.8700 levels in late-Asia, reversing a downward spike to 6.8611.

 


06:39 US: Robust economic data all around - ANZ

Analysts at ANZ note that the US January Philly Fed index rose to 23.6 vs a downwardly revised 19.3 in December as new orders spiked (26.0 vs 14.9), and price data reaffirmed intensifying inflation pressures.

Key Quotes

“Indeed, prices paid rose to 32.5 (28.1) and prices received jumped to 26.8 (8.0). Employment rose to 12.8 (3.6). On the jobs front, initial claims fell to 234k in the week ended Jan 14. That covers the survey week for non-farm payrolls and provides an early smoke signal that the January employment report could be firm. With Trump taking office and forward-looking US data on the up, the US bond juggernaut looks set to continue heading higher.”


06:35 Canada: Bounce back in manufacturing sales in November RBC Economics

Nathan Janzen, Senior Economist at RBC Economics, notes that the Canadian manufacturing sales bounced back in November as the nominal sales rose 1.5%, largely reflecting higher volume sales, following a 0.6% October drop.

Key Quotes

“In volume terms, sales rose 1.2% in November following a 1.6% drop in October.  Year-over-year, volume sales were also up 1.2% in November, matching the October increase.”

“Much of the increase in nominal sales (about half) was accounted for by a large 9.1% jump in the primary metal component that more than retraced an 8% decline over the prior two months.  As expected, the value off petroleum and coal sales bounced back 3.7% reflecting the end of maintenance shutdowns that reportedly weighed on  sale volumes in October.  The main source of offset was a pullback in the transportation sector (-2.3%) that in turn reflected in large part a 7.4% drop in the often-volatile aerospace component although motor vehicle sales also declined by 0.6%.”

Our Take:

  • The rebound in November is consistent with our view that, looking through monthly volatility, the underlying trend in the sector remains modestly positive reflecting a continued easing in the drag from the oil & gas sector and a modest pickup in U.S. demand.   In terms of overall GDP implications, the details of report suggest that November manufacturing output likely retraced about half of an outsized 2% decline in October which, alongside a pickup in November exports, suggests that overall GDP may have retraced much of the 0.3% October decline.
  • We continue to expect economic output rose 1.5% (at an annualized rate) in Q4 which also remains consistent with the Bank of Canada’s updated call in yesterday’s updated Monetary Policy Report.” 

06:32 China powered through a volatile start to the year with strength BBG

Analysts at Bloomberg express their afterthoughts, following the release of the Chinese macro dataflow earlier on the day.

Key Highlights:

China powered through a volatile start to the year with strength that surpassed expectations

Propelled by robust consumption

Manufacturing rebounding

Deflation tamed

The central bank is turning to neutral policy to address a debt binge that inflated asset bubbles during a two-year easing cycle


06:24 USD/CAD flirts with 1.3300 ahead of Trump, Canadian data

A phase of bearish consolidation in the US dollar against its major rivals, keeps USD/CAD under pressure near 1.33 handle in the late-Asian trades.

USD/CAD supported at 1.2285

Currently, the USD/CAD pair trades -0.15% lower at 1.3298, extending recovery from daily lows of 1.2285. The spot closely tracks the USD price-action and now attempts recovery above 1.33 handle amid stabilizing oil prices and USD index.

Looking ahead, we have a busy economic calendar for the major to wrap up an eventful week, with the Canadian CPI and retail sales data to kick-off the NA session, followed by FOMC member Harker’s speech and Trump’s inauguration speech. These events are expected to stir huge volatility and could determine fresh direction for the spot.

USD/CAD Technical Levels                                                                                                         

To the upside, the next resistances are seen near 1.3322/27 (100 & 50-DMA) and 1.3366 (daily R1) and from there to 1.3400 (zero figure). To the downside, immediate support might be located at 1.3268 (20-DMA) and below that at 1.3221 (5-DMA) and at 1.3204 (daily S2).


06:20 NZ: Economy to outperform again in 2017 - HSBC

According to the analysts at HSBC, the NZ economy is firing on all cylinders, with construction and tourism continuing to pick up and the dairy sector recovering and is likely to outperform again in 2017.

Key Quotes

“We have been optimistic about New Zealand’s economy for quite some time now, and we remain so. Growing ties to Asia, underlying flexibility and a positive reform agenda have all worked in New Zealand’s favour.”

Firing on all cylinders, again

  • Construction activity is set to continue to grow, driven by housing and infrastructure, although capacity constraints are starting to appear
  • The tourism sector continues to boom, driven by rising visitor numbers, particularly from Australia, China and the US
  • Dairy prices have rebounded and should boost rural incomes, although production volumes will most likely continue to be cut”

Managing a housing boom

  • Auckland house prices have more than doubled in the past five years and prices are rising strongly in most other regions
  • Tighter macro-prudential settings have reduced higher risk lending, but household debt has still risen rapidly and reached record levels
  • Housing affordability is expected to be a key issue in this year’s election, which is due to be held before 18 November”

Inflation to edge higher and rates may follow

  • Inflation has been below the RBNZ’s ‘near 2%’ medium-term target for five years, despite strong economic growth
  • We expect that CPI inflation is now past its trough and should lift as the impact of lower petrol prices diminishes
  • There are signs that domestic price pressures are gradually building, which is expected to pave the way for higher interest rates in 2018”

06:03 GBP/JPY hovers at 50-DMA, eyes UK retail sales data

The GBP/JPY pair is taking a breather following a four-day winning streak. The cross was last seen trading dead flat around the 50-DMA level of 141.76. 

Focus on UK retail sales

UK retail sales are seen rising 7.3% y/y in December from November’s print of 5.9%. An upbeat would only add credence to the argument that the British economy is holding up well despite the heightened odds of Brexit. 

The JPY side of the story could play a spoil sport as far as rallying on strong UK data is concerned. This is because; the uncertainty ahead of Trump inauguration is likely to keep the Japanese Yen on the front foot. 

GBP/JPY Technical Levels

A break above 142.13 (previous day’s high) would signal continuation of the four-day winning streak and open doors for 143.32 (23.6% of Trump rally). On the lower side, break below the downward sloping 200-DMA of 141.10 would expose support at 140.15 (38.2% of Trump rally). 

 


 


05:56 BOJs Nakaso: Japan s financial system remains stable

Bank of Japan (BOJ) deputy governor Nakaso is now on the wires, via Reuters, speaking at a meeting held by the International Bankers Association of Japan in Tokyo.

Key Headlines:

Japan's financial system remains stable

Responsibility of central banks to ensure that its monetary policy action not destabilize international financial system

It is important to monitor, analyze carefully the dollar funding environment of non-US banks as an area of potential vulnerability of the global economy


05:48 EUR/JPY struggles to extend two-day winning streak

EUR/JPY is having a tough time in the Asian session to extend the two-day winning streak on account of the caution ahead of Trump inauguration. 

Stuck at weekly 5-MA

The cross failed for the second time in 24 hours to hold above the weekly 5-MA level of 122.61. 

There is an uneasy feeling in the markets now that the markets have already priced-in the good things that could happen under Trump Presidency. However, the risks associated with the Trump Presidency are yet to be priced-in. 

Consequently, the safe haven assets- Yen, Gold and Treasuries are in demand in Asia. 

EUR/JPY Technical Levels

The cross was last seen trading around 122.50 levels. Acceptance above 122.61 (weekly 5-MA) would open doors for a potential break above 123.00 (zero figure) and rally towards 123.72 (previous week’s high). On the other hand, a breakdown of support at 122.29 (4-hour 200-MA) could yield a sell-off to 121.75 (4-hour 50-MA) and 121.59 (Dec 29 low). 

 


05:44 GBP/USD: 1.2400 closer on Yellen-led USD weakness

The GBP/USD pair is on a break higher from 1.2330 region, with the bulls now targeting 1.24 handle amid fresh USD selling, in wake of Fed Yellen’s latest comments.

GBP/USD looks to test 50-DMA at 1.2396

GBP/USD broke higher from a brief consolidation phase seen in early Asia and now accelerates the upside, as the greenback loses ground across the board following Fed Chair Yellen sounded less hawkish in her recent remarks, noting that it is 'prudent' to adjust the stance of monetary policy gradually.

Moreover, upbeat China Q4 GDP data combined with higher commodities’ prices added to the bullish move in the higher-yielding/ risk currency GBP. However, it remains to be seen how markets react to the Trump inauguration, with ‘Sell the fact’ likely to emerge the key theme going forward.

In the meantime, the major will get highly influenced by the UK retail sales data due to be published in the European session ahead.

GBP/USD Levels to consider            

In terms of technical levels, upside barriers are lined up at 1.2396 (50-DMA), 1.2415 (100-DMA) and 1.2437 (10-day high). While supports are aligned at 1.2312 (daily pivot) and 1.2286 (5-DMA) and below that at 1.2255 (20-DMA).


05:28 EUR/USD rebounds from 5-DMA, Eyes 1.07 handle

EUR/USD found takers around 5-DMA level of 1.0657 following Yellen speech earlier today and is now marching towards 1.07 handle.

Yellen offers support

Yellen stressed the necessity to be gradual with rate hikes and reiterated that the Fed is not behind the curve. She stressed the uncertainty surrounding the fiscal policy. Overall, the comments were slightly dovish.

Thus, the offered tone around the US dollar gathered pace. The focus now is on the Trump inauguration ceremony.

EUR/USD Technical Levels

The pair rebounded from the previous day’s low of 1.0590 (50-DMA yesterday) and closed above the 5-DMA despite Draghi maintaining the dovish tone.

The spot was last seen trading closer to 1.0690. A break above 1.0707 (38.2% fib retracement) would open doors for 1.0768 (Dec 7 high) and 1.08 (zero figure) levels. On the other hand, a breakdown of support at 1.0658 (5-DMA) could yield a re-test of 1.0625 (10-DMA) and 1.0590 (50-DMA).

 


05:13 Reports of multiple shots fired in Melbourne, Australia

Reuters carries reports of multiple shots fired during police operation in Melbourne CBD.

Key Details:

Police chase in Bourke Street in the middle of Melbourne's CBD

Shots have been fired

Reports of 12 pedestrians injured

Parts of Bourke Street Mall have been cordoned off by police in both directions


05:01 OPECs Barkindo: Vienna oil output cut deal to stabilize global economy

In an interview with Sputnik late-Thursday, the OPEC Secretary-General Mohammed Barkindo noted that the OPEC deal will bring stability to global oil markets.

Key Quotes:

"The coming together for the first time in history of 24 producing countries on December 10 in Vienna has, in our opinion, created a global platform of producers with the sole objective of insuring stability in the oil markets in the short, medium and long term”

“Therefore, there is a great opportunity for all the stakeholders, including the oil and gas industry, to solidify this platform and insure that it continues to perform the stabilization role in the best interests of the industry as well as the global economy"


04:57 China electricity output rose 4.5% y/y in 2016

China electricity output, often viewed by experts as a more reliable indicator of growth, rose 4.5% year-on-year in 2016.

China 2016 full year GDP came-in at 6.7% earlier today. It is the lowest growth rate in 25 years.

The electricity output rose 6.9% year-on-year in December.


04:50 Saudi crude oil exports, output jump in November

According to data published by the Joint Organizations Data Initiative (JODI) on Thursday, Saudi Arabia’s crude oil exports jumped to 8.258 million bpd in November 2016 from 7.636 million bpd in October.

The data complied also showed a rise in the Saudi Arabian oil production levels from 10.625 million bpd seen in October with 10.720 million bpd booked in November.

According to secondary sources, as cited by oilprice.com, Saudi Arabia pumped 10.474 million bpd in December, a figure much closer to the figure the Saudis themselves had reported for December. 


04:42 Gold climbs on dollar weakness, What s next?

Gold extended the rebound from 10-DMA seen in the North American session to hit an Asian session high of $1207.75/Oz levels. The metal strengthened on the back of dollar weakness following Yellen's speech. 

Will it sustain above 38.2% fib retracement?

It will be interesting to see if the metal holds above $1204.76 (38.2% fib retracement of Trump sell-off) following Trump’s inauguration. 

Moreover, the markets are yet to price-in the risks associated with Trump Presidency. Meanwhile, the unwinding of the ‘Trump trade’ could also gather pace on ‘sell the fact’ trade post Trump inauguration. 

In either case, the yellow metal could strengthen - safe haven demand or ‘buy the fact’ trade. Thus, the metal is more likely than not to extend gains above $1204.76 levels. 

The metal could head lower only if markets continue to ignore the risks associated with the Trump Presidency. 

Gold Technical Levels

A break above $1208.61 (Jan 16 high) would open the doors to $1218.90 (Jan 17 high) and then to $1230.07 (50% fib retracement). On the lower side, breakdown of support at $1200 (zero figure) could yield a sell-off to $1195.70 (previous day’s low). A violation there would expose $1176.45 (50-DMA).

 


04:39 USD/JPY bounces-off lows near 114.50 post China data

The selling pressure behind the USD/JPY pair intensified following the release of a string of Chinese macro updates, knocking-off the rate towards the mid-point of 114 handle, before recovering some ground last minutes.

The spot was last seen exchanging hands at 114.75, down 0.10% on the day, and making minor-recovery attempts from session lows struck at 114.56 some minutes ago. The major faces double whammy and remains offered so far this session, as less hawkish Yellen’s speech dragged the shorter-duration treasury yields lower, which in-turn weighted on the USD versus its main competitors.

Yellen noted that the Fed remains prudent to adjust monetary policy stance, while adding that the central is not behind the curve.

While on the other hand, markets remain unimpressed by the Chinese data dump, despite the Q4 GDP numbers having outpaced expectations as also expectations on fiscal expansion.

However, the latest leg up in the major can be mainly attributed a minor-recovery witnessed in both the USD index and Asian stocks, driving the USD/JPY pair back to test 115 handle.

Later today, Trump’s inauguration speech remains the key determinant, which will shape up next direction in the major for the balance of this month.

USD/JPY Technical levels to watch 

The major finds immediate resistance at 115 (round number). A break above the last, the major could test 115.55 (50-DMA) and 115.70 (20-DMA) beyond the last. While to the downside, the immediate support is seen at 114.56 (daily low) next at 114.28 (daily S1) and below that at 114 (zero figure).

 


04:13 AUD/JPY fades spike to 87.05 after China GDP

The AUD/JPY cross extended gains to hit a fresh session high of 87.05 levels after China’s fourth quarter GDP hit the growth target on credit stimulus.

China’s economy grew 6.8% in Q4, while the full year growth rate in 2016 was 6.7%; lowest in 26 years.

Industrial production plays spoil sport

The industrial production printed at 6% m/m, which was slightly lower than the expected figure of 6.1%. Meanwhile, retail sales came-in at 10.9% m/m, bettering the estimate of 10.7%.

The weak industrial production figure and the slowdown in the full year growth rate ensured the pair quickly erased gains and fell back to 86.93 levels.

The increased demand for the Japanese Yen ahead of the Trump inauguration event is working against the AUD/JPY bulls.

AUD/JPY Technical Levels

A break below 86.67 (monthly pivot R1) levels would open doors for a sell-off to 86.29 (Jan 13 high). A violation there could yield a drop to 86.10 (5-DMA). On the other hand, a breach of resistance at 87.15 (Dec 16 high) would expose 87.54 (Dec 15 high) above which the psychological hurdle of 88.00 could be put to test.

 


04:11 AUD/USD remains capped below 0.7600 on China data dump

The bulls appear little impressed by a slew of mixed Chinese economic releases, keeping AUD/USD in familiar range near fresh 10-week tops.

AUD/USD yearns for a test of 0.7600

Currently, the AUD/USD pair rises +0.29% to 7583, having met fresh sellers just below 0.76 barrier. The Aussie stalled its bullish move post the Chinese data dump, as markets digest mixed dataflow, with the Chinese GDP and retail sales bettering expectations, while the industrial production data disappointed markets slightly.

China Q4 GDP (YoY) came in at 6.8% vs. 6.70% expected and 6.70% last, while retail volumes arrived at 10.9% y/y vs 10.7% expected and 10.8% previous. Industrial production stood at 6.0% vs 6.1% expected and 6.2% last.

However, the AUD/USD pair remains supported amid less hawkish comments from the Fed Chair Yellen, which knocked-off the greenback across the board. Next of note for the major remains the Trump’s inauguration speech due around 11.30ET, which will have major impact on the USD moves, and hence, eventually on the spot.

AUD/USD Levels to watch   

The pair finds the immediate resistance at 0.7600 (round figure) above which gains could be extended to the next hurdle located 0.7630 (daily R2) and 0.7650 (psychological levels). On the flip side, the immediate support located at 0.7540 (5-DMA). Selling pressure is likely to intensify below the last, dragging the Aussie to 0.7508 (200-DMA) and below that 0.7482 (100-DMA).

 


04:08 China s Q4 GDP beats expectations on fiscal expansion

China's YoY GDP figures for the forth quarter of 2016 came at +6.8% vs +6.7% exp and 6.7% previous, with the QoQ reading for Q3 coming at +1.7% vs +1.7% exp and +1.8% last. 

With regards to retail sales YoY, the number was in +10.9% vs 10.7% exp and 10.8% last, with industrial output YoY at 6% and 6.1% exp and 6.2% last. Meanwhile, urban investment YoY stood at +8.1% vs 8.3% expected and 8.3% last. 

While infrastructure investment, financed by fiscal expansion, has been a major contributor to recent growth, private sector investment remains one of the sticking points limiting further growth in China.

However, as long as macro economic policies in China remain aggressively expansionary, as has been the case in the last 12 months, it continues to support strong growth in the country.

Worth noting, in the mid to long term, the policies China has embarked upon  continue tocarry an increasingly high risk of a sudden slump in the country's growth trajectory, as the debt to GDP ratio expands at an unsustainable rate. 

 


04:02 China Gross Domestic Product (QoQ) in line with expectations (1.7%) in 4Q


04:02 China Urban investment (YTD) (YoY) registered at 8.1%, below expectations (8.3%) in December


04:02 China Gross Domestic Product (YoY) came in at 6.8%, above expectations (6.7%) in 4Q


04:02 China Retail Sales (YoY) above expectations (10.7%) in December: Actual (10.9%)


04:02 China Industrial Production (YoY) came in at 6%, below expectations (6.1%) in December


03:56 Feds Yellen: Heading toward unsustainable deficits, growth in debt-to-GDP ratio

More comments flowing in from the Fed Chief Yellen, via Reuters, as she responds to the Q&A session.

Key Points:

Impact on monetary policy decision-making of 'big data' remains limited

Want to find ways to use big data, but often its not designed to meet the Fed's needs

Heading toward unsustainable deficits, growth in debt-to-GDP ratio due to medicare spending

Support Fed's dual mandate because Americans care about state of job market

In recent times there has been no conflict between Fed's inflation, employment goals


03:47 Japans Aso: Undesirable for FX to fluctuate rapidly

Japanese finance minister Taro Aso was on the wires earlier today, via Reuters, commenting on the fx rates fluctuations.

Key Headlines:

Won't worry about every FX movement

Undesirable for currencies to fluctuate rapidly

Will stick with plan to achieve primary budget balance in FY2020/21

Will communicate with new US administration for stability of currencies


03:41 Dollar Index drops to 101.00 after Yellen speech

The Dollar index dropped to a low of 101.00 after Fed’s Yellen called gradual rate hikes prudent and said the central bank is not behind the curve.

Yellen added further that the fiscal policy may affect the bank’s outlook, rate hike path, however, uncertainties remain.

Once again the central bank chief has refrained from outright hawkish talk. Thus, the greenback is losing altitude, although the pace of decline is slow, given the caution ahead of Trump inauguration.

It will be interesting to see if the markets ‘sell the fact’ (Trump inauguration) or continue to cheer the prospects of higher growth/inflation under Trump Presidency.

Dollar Index Technical Levels

A break below 101.00 levels would open doors for a sell-off to 100.72 (Jan 12 low). A violation there could yield a drop to 100.26 (Jan 17 low). On the other hand, a breach of resistance at 101.23 (session high) would expose 101.67 (50-DMA) above which the psychological hurdle of 102.00 could be put to test.


03:39 S&P affirms New Zealand s rating, outlook remains stable

The US-based ratings agency, Standard and Poor’s (S&P), published its latest report on Friday, affirming New Zealand’s AA+ sovereign rating.

Key Points:

Outlook reflects expectations that New Zealand will maintain or improve fiscal performance over medium term

NZ has monetary and fiscal flexibility, a resilient economy

NZ has institutions conducive to swift and decisive policy actions

Offsetting these strengths are its high external debt

AA foreign currency rating

AA+ local currency long-term sovereign credit rating


03:19 PBOC sets USD/CNY at 6.8693 vs 6.8568

PBOC sets USD/CNY at 6.8693 vs 6.8568


03:14 Yellen - Risk to allow US economy to run persistently hot

Fed's Yellen, while speaking at the Stanford Institue for Economic PolicyResearch, said it is unwise and quite risky to allow US economy to run persistently 'hot. 

key quotes

'prudent' to adjust stance of monetary policy gradually

Labor utlization close to estimated long-run level

Fed is not behind the curve


03:04 Fed s Yellen: Prudent to adjust stance of monetary policy gradually

Janet Yellen,  chair of the Board of Governors of the Federal Reserve, speaking at the Stanford Institute for Economic Policy Research, notes that it is 'prudent' to adjust the stance of monetary policy gradually

Key Quotes

Inflation increasing to 2% over the next 2 years 

Unwise, risky, to allow US economy to run persistently 'hot'

Determining how best to adjust rates to foster strong job growth, low inflation won't be easy

 

 


02:47 Economic wrap - Westpac

Analysts at Westpac offered an Economic Wrap.

Key Quotes:

"Philadelphia Fed’s January Business Survey was the key US release in a light data day (little of note in EU other than ECB). It posted strong gains (23.6, vs expected 15.3 from previous 19.7) but it was the detail that was key. Improvements were broad based, in line with Wednesday’s Beige Book, and “prices received increased 19 to the highest reading since July 2008. US Dec Housing Starts (1226k, exp 1188k) are seasonally volatile around year-end, but showed a larger than expected rebound from Nov.’s fall.

Economic Event Risks Today

Australia: Nov HIA home Sales (no NZ data)

China’s Q4 GDP, Dec Ind. Prod., Retail Sales and Fixed Asset Investment

China GDP to continue growing at robust pace in Q4, in line with that of recent quarters at 6.7%. Fixed asset investment, production and retail sales for December also due.

UK Dec Retail sales and Canadian Dec CPI and Nov Retail Sales are released on Friday."


02:35 USD/JPY: choppy open in consolidation awaiting Trump s inauguration speech

Currently, USD/JPY is trading at 114.97, up 0.15% on the day, having posted a daily high at 115.12 and low at 114.78.

USD/JPY is consolidating the 2017 reversal from the 112.50 while markets are awaiting Trump's inauguration and speech. Meanwhile, the dollar has been in recovery overnight and US yields have found some support on stronger US data along with the Philly Fed's business survey that affirmed the broad strength in yesterday's Fed's Beige Book.

Interest rates:

Analysts at Westpac noted that the US data added to the already rising profile for US yield: 10yr rose +5bps to 2.47%. Thus, the Central bank theme that has come back into play remains so and is benefiting the dollar going forward as we await Trump to bump up the US economy and ultimately drive capital into the US given, and as Harry Dent mentioned in the below panel, the US economy is the best house in a bad neighbourhood."

USD/JPY levels

Current price is 114.97, with resistance ahead at 115.12 (Daily High), 115.30 (Weekly Classic PP), 115.34 (Daily 20 SMA), 115.58 (Daily Classic R2) and 115.63 (Yesterday's High). Next support to the downside can be found at 114.94 (Daily Classic R1), 114.84 (Hourly 20 EMA), 114.80 (Daily Open), 114.80 (Weekly High) and 114.78 (Daily Low).

What is the Trump trade?

 


02:21 USD/CNY fix model: Projection at 6.8695 - Nomura

Nomura's model projects the fix to be 127 pips higher than the previous fix (6.8695 from 6.8568) and 65 pips lower than the previous official spot USD/CNY close of 6.8760. The basket implied change is 78 pips lower than the previous official spot USD/CNY close (6.8682 from 6.8760), Nomura adds.


02:03 Market snapshot, dollar bid, ECB dovish - ANZ

Analysts at ANZ noted that the USD rallied overnight, helped by higher US yields and dovish guidance from the ECB, although volatility picked up a bit during Mnuchin’s Senate confirmation hearing.

Key Quotes:

"Acknowledging that headline inflation will rise further in coming months, ECB President Draghi stressed that policy is set with a medium term orientation and that there is no evidence yet of a pick-up in core inflation (0.9% y/y). Draghi said that the ECB needs to see a self-sustaining, durable rise in inflation that converges on target before they would consider adjusting to a tighter policy. That is not the case at present and tapering was not discussed at the meeting. US bond yields continued to push higher with the yield on the 10-yr Treasury note rising to 2.47%, fuelled by the lift in the Philly Fed Index.

One of Trump’s most frequent comments during the election campaign was “on day one in office”. The market is anticipating more detail on fiscal policy, trade policy and regulatory change and the Trump trade has re-awakened a bit over the past 24/48 hours. Oil was firmer rising ~1.0% to around $51.40, although off its highs as the EIA reported a 2.35m barrel rise in stocks last week. Stock markets were under mild downward pressure, and gold slipped a touch."


02:02 Australia HIA New Home Sales (MoM) rose from previous -8.5%to 6.1% in December


01:42 Four conditions from the ECB - Rabobank

Analysts at Rabobank exlained that as expected, the ECB president argued that the ECB will look through transitory developments in inflation and instead will focus in the “coming months” on judging “whether higher headline inflation translates into higher underlying inflation [...]”.

Key Quotes:

To that end, Draghi provided a bit more clarity on how it would judge this process:

The “medium term horizon is the relevant horizon.”; this tallies with our view that the 2019 staff projection for inflation is a key figure to watch in the future

Second, there has to be a durable improvement in inflation, so it “cannot be transient.”

Third, the inflation has to be of a “self-sustained” nature, meaning that inflationary pressure must remain even when monetary policy support will be removed. This tallies with our own

view that we should not only see an improvement in core inflation, but also an improvement in underlying wage developments (although the ECB president steered clear from making a strong call for higher wage growth as he warned that productivity growth matters as well.) 

Fourth, Mr. Draghi underscored that the inflation objective is defined for the Eurozone as a whole. The ECB won’t consider this condition to be fulfilled if inflation has met its target in a single member state or a group of member states rather than in the Eurozone as a whole. In response to a question, the ECB president also noted that he does not foresee “unmanageable” divergence of inflation rates in the euro area. Our interpretation here is that the ECB would thus accept the possibility of inflation overshooting in some member states (which of course is almost unavoidable if there is a certain distribution around the mean).

Altogether today’s press conference lived up to our expectations and we see no reason to change our view that, in the upcoming months, the ECB is likely to stand squarely behind the decisions taken last December."


01:24 AUD/NZD: antipodean outlook - Westpac

Analysts at Westpac offered an outlook for the antipodean cross and rates.

Key Quotes:

"AUD/NZD 1 day: (1.0520) Consolidation around 1.05 may well be forming a base for a retest of 1.0565-70 and a potential push towards 1.0650-60 is to be building

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. (16 Dec)

AU swap yields 1 day: The 3yr and 10yr should open around 2.17% and 2.98%, driven by US rise.

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 2.45%, the 10yr at 3.47%, also following US.

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."


01:07 AUD/JPY risk limited near 100-SMA; risk-on towards 90.00

As the NA session ends, AUD/JPY traded at 86.82, up +0.95% on the day, having posted a daily high at 87.07 and low at 85.94. The currency cross continues a 2-day winning streak as investors and traders await Trump's inauguration ceremony to cheer out-of-the-box initiatives or reduce risk exposure which should put down any hopes for near-term risk takers.

To note, historical data indicates that the highest performance during January clocked at +0.95 gain (yesterday's performance). On the other hand, the lowest has been -0.91% loss (Jan.5)

RBA against the wall; Fed surprises in 2017?

David Rogers, Market editor at The Australian, notes that while the Australian dollar bounced from US71.60c to US75.69c in recent weeks as the US dollar retreated amid a pullback in bond yields, it dipped to US74.94c on Thursday as surprisingly hawkish comments from Fed chief Janet Yellen put renewed upward pressure on US bond yields.

He further writes, "While the Reserve Bank of Australia has limited room for further interest rate cuts, it will be in no hurry to hike amid stubbornly low inflation, a fragile jobs market, and out-of-cycle mortgage rate hikes. At the same time, the Federal Reserve could easily respond to Donald Trump’s fiscal plans by hiking US interest rates by more than the market currently expects. That’s the key takeaway from Fed chief Janet Yellen’s speech on The Goals of Monetary Policy and How We Pursue Them."

Technical levels to watch

In terms of technical levels, upside barriers in the medium-term are aligned at 88.30-50 (horizontal resistance zone) and above that at 89.92 (200-SMA). While supports are aligned at 84.90 (low Jan.15), and below that at 83.70 (low Dec.25).

audjpy

On the long-term view, there is evidence to estimate a fragile Australian economy; not heading to recession. Furthermore, China exponential growth is in the past which poses additional risks that limit the upside potential for this currency cross. To the upside, the first tough handle to crack would be 88.04 (long-term 61.8% Fib), later 88.93 (short-term 50.0% Fib) and finally, 92.82 (short-term 61.8% Fib). If market participants were to adjust risk exposure, then the most logical downside target is located around 81.84 (long-term 50.0% Fib).

audjpy

All eyes on Trump; Crucial address to determine USD direction


01:00 AUD/USD consolidated awaiting Trump s inauguration

Currently, AUD/USD is trading at 0.7558, down -0.02% on the day, having posted a daily high at 0.7566 and low at 0.7556.

AUD/USD has been consolidating on the 0.75 handle with some two-way business ahead of Trump's inauguration tonight  while the USD rebounds have been dominating over the continuing support from recent bulk in commodity gains, as explained by analysts at Westpac, adding, "Solid support is likely in the 0.7430-50 area."  

AUD/USD 1-3 month: 

The analysts at Westpac explained that they are bearish in the medium term looking for AUD/USd to move below 0.7200. "The US dollar’s impressive post-election rally may have paused, but still has potential to rise further during the months ahead. The Fed’s assertive tightening bias 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 for Q4 and Q1 should improve, but these forces are subservient to the US dollar’s trend. Australia’s AAA rating will remain an issue into the May budget."

AUD/USD levels

Current price is 0.7558, with resistance ahead at 0.7559 (Daily Open), 0.7563 (Monthly High), 0.7563 (Weekly High), 0.7563 (YTD High) and 0.7566 (Daily High). Next support to the downside can be found at 0.7556 (Daily Low), 0.7554 (Daily Classic R1), 0.7545 (Hourly 20 EMA), 0.7529 (Daily Classic PP) and 0.7520 (Hourly 100 SMA). 

We have Trump as next risk, but how to trade it?

 


00:14 Markey wrap: markets are awaiting Trumps inauguration and speech - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"Global Market Sentiment: Markets are awaiting Trump’s inauguration and speech. USD and US yields display solid support after Philly Fed’s business survey affirmed the broad strength in yesterday’s Fed’s Beige Book. Draghi stated that ECB will look through near term inflation pick-ups whilst UK’s May made another positive speech in Davos, stressing UK’s desire to be a global trading partner and offering conciliatory comments to EU. Stocks drifted slightly lower on the day.

Currencies: EUR/USD (1.0630) lost its pre-ECB bid (hit 1.0675) on Draghi’s comments whilst GBP/USD (1.2310) firmed on May’s speech. JPY remained the weakest major currency with USD/JPY (115.25) bid through the EU trading day. AUD/USD (0.7545) and NZD/USD (0.7170) remained firm but off recent highs.

Interest rates: US data added to the already rising profile for US yield: 10yr rose +5bps to 2.47%. Spreads to EU widened as 10yr bunds (37bps) backed away from testing 40bps after ECB accommodation was underscored."


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