Market Brief
The Yuan and Chinese equities sold-off aggressively overnight on growth concerns amid soft trade data released on Monday. The Chinese interest rate swaps advanced to highest in three months as China decided to narrow the corporate debt repurchase applications to bonds with rating above AAA and AA for corporates. Hang Seng wrote-off 2.33%, while Shanghai’s composite tumbled by 5.43%. USD/CNY rallied to 6.2079, pulling aggressively out the 200-dma (6.1792). Further Yuan decline may raise speculations for PBoC intervention.
The heavy slide in oil markets yesterday (over 4% loss) and today (-0.83%) pushed USD/CAD to 1.1501 for the first time since mid-2009. Trend and momentum indicators gain pace, suggesting the extension of gains in USD/CAD, decent option bids trail above 1.1400/50, more wait to be activated at 1.1550+. EUR/CAD tests 50-dma (1.41691). Deeper upside correction is envisaged with EUR consolidating before December 11th TLTROs.
USD/NOK extended gains to 7.1876 for the first time since beginning 2009. The next key resistance stands at 7.32 (end-2008/beginning 2009 highs), while USD/RUB test 55-offers. The Russian Central Bank sold 1.936 billion dollar worth FX with December 8th settlement. Direct FX interventions help tempering the selling pressures, yet we expect the upside pressures to push the levels higher.
EUR/USD consolidates weakness. The German trade surplus has been stable; the contraction in exports (-0.5% m/m) has been lighter than anticipated (-1.7%) yet imports dropped 3.1% m/m (vs. -1.7% exp.). As the Euro-zone’s growth engine slows, the EUR sentiment remains comfortably negative before the second round of TLTRO lending due on December 11th. A second disappointment will certainly push EUR/USD lower, increasing the probability of a full-blown QE walking into 2015. Offers are solid pre-1.2438/1.2500 (21-dma / optionality). EUR/GBP remains offered above 0.79000. More resistance is seen pre-0.80000. With stronger negative momentum, we see extension of weakness toward the October-November ascending base, 0.78250.
USD/JPY and JPY crosses traded sluggish in Tokyo, Nikkei stocks erased 0.68%. USD/JPY legged down to 119.77. Japanese Economy Minister Amari said there are positive signs on CAPEX, the oil price slide is positive for Japan import costs. Finance Minister Aso said he doesn’t believe the Japan enters recession. Comments from politicians will likely trigger price action through this week, before December 14th snap elections. We remain long gamma on JPY-crosses and expect a sustainable positive extension only after more clarity is achieved on support that Abenomics will get this week-end. EUR/JPY crosses below the conversion line (148.10), suggesting choppy upside and deeper downside correction. The next support zone stands at 146.09/146.91 (Fib 74.6% on Oct-Dec rally / 21-dma).
AUD/USD extends weakness to fresh low of 0.8224 as NAB business confidence and conditions showed further deterioration in sentiment in November. We expect the steady AUD/USD slide to continue toward our 80 cent target.
Today’s economic calendar: Swiss November Unemployment Rate, German 3Q Labor Costs q/q & y/y, German October Current Account and Trade Balance, Exports & Imports, French October Budget & trade Balance, UK October Industrial & Manufacturing Production m/m & y/y, US November NFIB Small Business Optimism, US October JOLTS Job Openings, US October Wholesale Inventories & Wholesale Trade Sales m/m and US December IBD/TIPP Economic Optimism.
| Today's Calendar | Estimates | Previous | Country / GMT |
|---|---|---|---|
| SZ Nov Unemployment Rate | 3.20% | 3.10% | CHF / 06:45 |
| SZ Nov Unemployment Rate SA | 3.20% | 3.20% | CHF / 06:45 |
| GE 3Q Labor Costs WDA YoY | - | 1.70% | EUR / 07:00 |
| GE 3Q Labor Costs SA QoQ | - | 0.70% | EUR / 07:00 |
| GE Oct Trade Balance | 18.9B | 21.9B | EUR / 07:00 |
| GE Oct Current Account Balance | 18.0B | 22.3B | EUR / 07:00 |
| GE Oct Exports SA MoM | -1.70% | 5.50% | EUR / 07:00 |
| GE Oct Imports SA MoM | -1.70% | 5.40% | EUR / 07:00 |
| FR Oct Budget Balance YTD | - | -80.5B | EUR / 07:45 |
| FR Oct Trade Balance | -4900M | -4715M | EUR / 07:45 |
| SP 3Q INE House Price Index QoQ | - | 1.70% | EUR / 08:00 |
| SP 3Q INE House Price Index YoY | - | 0.80% | EUR / 08:00 |
| SW Swedish Employment Agency Forecasts | - | - | SEK / 09:00 |
| UK Oct Industrial Production MoM | 0.20% | 0.60% | GBP / 09:30 |
| UK Oct Industrial Production YoY | 1.80% | 1.50% | GBP / 09:30 |
| UK Oct Manufacturing Production MoM | 0.20% | 0.40% | GBP / 09:30 |
| UK Oct Manufacturing Production YoY | 3.20% | 2.90% | GBP / 09:30 |
| IT Bank of Italy Report on Balance-Sheet Aggregates | - | - | EUR / 10:00 |
| US Nov NFIB Small Business Optimism | 96.5 | 96.1 | USD / 12:30 |
| UK Nov NIESR GDP Estimate | - | 0.70% | GBP / 15:00 |
| US Oct JOLTS Job Openings | 4790 | 4735 | USD / 15:00 |
| US Oct Wholesale Inventories MoM | 0.20% | 0.30% | USD / 15:00 |
| US Oct Wholesale Trade Sales MoM | 0.10% | 0.20% | USD / 15:00 |
| US Dec IBD/TIPP Economic Optimism | 47 | 46.4 | USD / 15:00 |
Currency Tech
EUR/USD
R 2: 1.2532
R 1: 1.2456
CURRENT: 1.2357
S 1: 1.2248
S 2: 1.2185
GBP/USD
R 2: 1.5826
R 1: 1.5763
CURRENT: 1.5687
S 1: 1.5542
S 2: 1.5423
USD/JPY
R 2: 121.85
R 1: 121.00
CURRENT: 119.67
S 1: 119.10
S 2: 117.24
USD/CHF
R 2: 0.9972
R 1: 0.9839
CURRENT: 0.9728
S 1: 0.9650
S 2: 0.9595