Market Brief
After an encouraging start to the day, US equity markets quickly turned negative on lingering risk-off sentiment. The S&P 500 fell 2.50%, the Dow Jones 30 was down 2.21%, while the NASDAQ plummeted 3.41%. In Canada, the S&P/TSX Composite was down 1.64% as the crude oil rout resumed with West Texas Intermediate hitting $29.93 in the late European session yesterday, a fresh 13-year low. The Brent crude tested $29.73 earlier this morning as the Brent/WTI spread reached -0.70 cents.
In Asia, regional equity markets were trading in negative territory with the exception of mainland China; both the Shanghai and Shenzhen were blinking green, up 1.97% and 3.81% respectively. The People’s Bank of China set the USD/CNY fix at 6.5616, down 0.14% compared to yesterday. Elsewhere, in Hong Kong the Hang Seng was down 0.32%, while in South Korea the Kospi edged down 0.85%. Finally, the Thai BGK fell 0.93%, in Indonesia the JCI dropped 0.50%, while in India the BSE Sensex 30 edged down 0.14%.
In Japan, shares took a bigger hit as machinery orders took their biggest drop in 18 months, down -14.4%m/m versus -7.3% expected and +10.7% in October. Even though the numbers are quite volatile, a double-digit contraction does not occur that often, suggesting that the private sector’s confidence has been undermined by weak global growth prospect and the lack of any evidence of a Japanese economic pick-up. USD/JPY jumped 0.75% to 118.18 after the release of the news, slightly above the previous support that lies at 118.07. On the downside, the closest support can be found at 116.18 while the next one lies at 115.57. The bias remains to the downside.
In the FX market, the US dollar outperformed all G10 currencies. The Swiss franc fell 0.30% against the greenback, erasing previous losses, and returned to around 1.0090. During the Asian session, the pair found a strong support at 1.0057 (Fib. 50% on November-December debasement). On the upside, a resistance can be found at 1.0121 (Fib. 61.8% and high from early January).
Overall, commodity currencies went through a tough Asian session as Crude Oil printed multi-year lows. However, the Aussie experienced a second wind this morning as encouraging data emanated from the job market. Unemployment rates surprised expectations and remained stable at 5.8%, while economists were expecting an increase of 0.1% to 5.9%. Employment change contracted by only 1,000 jobs, while the market anticipated a contraction of 10,000. The previous month’s increase was revised higher to 74.9k from 71.4k. AUD/USD is currently trading at 0.6960 after testing the $0.6937 support (low from September 29th) several times. The bias remains on the downside with the next key level standing at $0.6896 (low from September 11th).
Today traders will be watching the CPI report from Sweden; industrial production from Italy; the BoE rate decision; gold and forex reserves from Russia; import prices, initial jobless claims and Bullard’s speech from the US.
Currency Tech
EUR/USD
R 2: 1.1387
R 1: 1.1095
CURRENT: 1.0877
S 1: 1.0458
S 2: 1.0000
GBP/USD
R 2: 1.5529
R 1: 1.5242
CURRENT: 1.4410
S 1: 1.4231
S 2: 1.3657
USD/JPY
R 2: 125.86
R 1: 123.76
CURRENT: 117.90
S 1: 115.57
S 2: 105.23
USD/CHF
R 2: 1.0676
R 1: 1.0328
CURRENT: 1.0075
S 1: 0.9786
S 2: 0.9476