Market Brief
The USD is broadly in demand as the Fed releases December 16-17th meeting minutes later today. The Fed had dropped the “considerable time” rhetoric on December meeting, yet both the timing and the pace of the normalization remain a mystery. The US 10-Year yields plunged shortly below 1.90% in New York yesterday as traders are concerned that the Fed may delay the first FF hike, or the normalization may occur slower than broad expectations. Traders will look for more clarity into Fed dots. We are however not sure to get any more precision in minutes.
Overseas, the Japanese 10-Year yields have also dropped to record lows (0.265%) while the JPY crosses were better bid. USD/JPY advanced to 119.17 (slightly below the 21-dma 119.30 and Ichimoku conversion line 119.40). Trend and momentum indicators remain marginally negative, with option bets skewed downwards at 120.00. EUR/JPY legs down to 140.57. The break below Fibonacci 50% on Oct-Dec retracement places the next support target at 200-dma (140.32).
EUR/USD continues its slide before the eurozone’s preliminary December CPI read. The EZ has probably stepped in deflation (exp. -0.1% y/y), again due to significant fall in oil prices. If this is the case, the speculations for the ECB announcing a full blown QE as soon as January 22nd meeting should continue weighing on EUR/USD. However the high probability of QE already broadly priced in, the shock on the forex should be manageable. The statistical rational behind this expectation is the softening of 40-day correlation between EUR/USD and core/periphery yield spread (Spanish/German 10-year) to 38%, from above 50% from October to December 2014.
Released yesterday, the Canadian raw materials price index decelerated by 5.8% on month to November, faster than 4.7% expected (and -4.3% m/m last); the crude energy being the major component responsible for the drop. The WTI extends weakness to $47. Canada’s November trade balance is due today, and will likely print a deficit due to loss on energy exports. USD/CAD advances to 1.1847 as BoC doves dominate at the current macro setting.
Else, AUD/USD bounced lower after hitting Nov’14-Jan’15 downtrend top & 21-dma (0.8158). Depending on market reaction to Fed minutes, AUD/USD is capable of stepping into a short-term bullish consolidation zone (above 0.8158). Given our AUD-bearish view, we remain seller on upside attempts.
In New Zealand, the ANZ commodity price index dropped another 4.4% on month to December, a 10th consecutive fall for total slide of 17.2% on year. Fonterra GDT price recovered 3.6%, with volumes off however. NZD/USD trades ranged within the slight descending channel building since October.
The economic calendar of the day: German November Retail Sales m/m & y/y, Swiss December Foreign Currency Reserves, German December Construction PMI, German, French and eurozone December Retail PMI, German December Unemployment Rate, Italian December (Prelim) CPI m/m & y/y, eurozone December Unemployment Rate, eurozone December CPI Estimate y/y and (Prelim) Core CPI, US January 2nd MBA Mortgage Applications, US December ADP Employment change, Canadian November International Merchandise Trade, US November Trade Balance, Canadian December PMI.
| Today's Calendar | Estimates | Previous | Country / GMT |
|---|---|---|---|
| GE Nov Retail Sales MoM | 0.20% | 1.90% | EUR / 07:00 |
| GE Nov Retail Sales YoY | 0.60% | 1.70% | EUR / 07:00 |
| SW Dec PMI Services | - | 56.9 | SEK / 07:30 |
| SZ Dec Foreign Currency Reserves | 472.0B | 462.4B | CHF / 08:00 |
| GE Dec Markit Germany Construction PMI | - | 53.5 | EUR / 08:30 |
| GE Dec Unemployment Change (000's) | -5K | -14K | EUR / 08:55 |
| GE Dec Unemployment Rate | 6.60% | 6.60% | EUR / 08:55 |
| UK Dec New Car Registrations YoY | - | 8.00% | GBP / 09:00 |
| IT Nov P Unemployment Rate | 13.30% | 13.20% | EUR / 09:00 |
| GE Dec Markit Germany Retail PMI | - | 52.8 | EUR / 09:10 |
| EC Dec Markit Eurozone Retail PMI | - | 48.9 | EUR / 09:10 |
| FR Dec Markit France Retail PMI | - | 47.9 | EUR / 09:10 |
| EC Nov Unemployment Rate | 11.50% | 11.50% | EUR / 10:00 |
| EC Dec CPI Estimate YoY | -0.10% | 0.30% | EUR / 10:00 |
| IT Dec P CPI NIC incl. tobacco MoM | -0.20% | -0.20% | EUR / 10:00 |
| IT Dec P CPI NIC incl. tobacco YoY | -0.10% | 0.20% | EUR / 10:00 |
| EC Dec A CPI Core YoY | 0.70% | 0.70% | EUR / 10:00 |
| IT Dec P CPI EU Harmonized MoM | 0.00% | -0.30% | EUR / 10:00 |
| IT Dec P CPI EU Harmonized YoY | -0.10% | 0.30% | EUR / 10:00 |
| US Jan 2nd MBA Mortgage Applications | - | - | USD / 12:00 |
| US Dec ADP Employment Change | 225K | 208K | USD / 13:15 |
| CA Nov Int'l Merchandise Trade | -0.20B | 0.10B | CAD / 13:30 |
| US Nov Trade Balance | -$42.0B | -$43.4B | USD / 13:30 |
| CA Dec Ivey Purchasing Managers Index SA | 53 | 56.9 | CAD / 15:00 |
| US Fed Releases Minutes from Its Dec. 16-17 FOMC Meeting | - | - | USD / 19:00 |
Currency Tech
EUR/USD
R 2: 1.2110
R 1: 1.2000
CURRENT: 1.1884
S 1: 1.1800
S 2: 1.1640
GBP/USD
R 2: 1.5485
R 1: 1.5320
CURRENT: 1.5149
S 1: 1.5102
S 2: 1.5000
USD/JPY
R 2: 121.85
R 1: 120.83
CURRENT: 119.15
S 1: 118.85
S 2: 117.44
USD/CHF
R 2: 1.0435
R 1: 1.0278
CURRENT: 1.0105
S 1: 0.9990
S 2: 0.9831