Markets Staying In Holiday Consolidations, Fed Hawks Spoke

Markets are engaging in quiet holiday trading so far this week. Commodity currencies attempted to recovery but so far, the Canadian dollar and Australia dollar are both held below near term resistance level. The greenback continues to stay in a tight range against European majors and the Japanese yen. Technically, note that the EUR/USD is holding above 1.3621 minor support for the moment. The GBP/USD is also staying above 1.6216. Thus, near term outlook in both pair remains mildly bullish. Yen crosses are also holding above near term support levels with outlook staying mildly bullish.

Richmond Fed Lacker said yesterday that the timing for Fed's tapering was right and was "kind of a slam dunk". He noted "you have to consider the door open to us pausing if the data comes in weaker than thought or accelerating if the data comes in stronger," and not to "over-react with a little swing". Meanwhile, he also expressed his expectation that Fed fund rate would "lift off" in early 2015 and could hit 2% level by the end of that year.

Another Fed hawk Dallas Fed Fisher said he argued for USD 20b step in tapering rather than the FOMC's decision of USD 10b. He was confidence that market could have digested that amount of tapering too. But, he also acknowledged that "getting this thing started was very, very important". And it's also "important for Ben Bernanke to lead that in his ... penultimate meeting," regarding the economy, Fisher noted that Q4's and Q1's data may not be as robust as those in Q3. But "we're on an upward trajectory and that's what's important."

In Japan, the BoJ monthly report painted a brighter outlook for Q1. The report noted that "As for the output for January-March, (industrial production) is expected to increase broadly on the basis of moderate recovery at home and overseas." Also, Private consumption and housing investment, albeit with some fluctuations, are expected to remain resilient as a trend, supported mainly by improvement in the employment and income situation."

On the data front, UK BBA mortgage approvals will be featured in European session. US will release durable goods orders, house price index and new home sales.