Europe Roundup: Euro slides on news of separatist win in Spain, Wall Street surges on Tax norms - Friday, December 22nd, 2017

Market Roundup

• EUR/USD -0.22%, USD/JPY 0.04%, GBP/USD -0.07%, EUR/GBP -0.15%
•  DXY 0.12%, DAX -0.3%, FTSE 0.2%, Brent -0.39%, Gold 0.11%
• German Gfk Consumer Sentiment, actual 10.8, 10.8 forecast, 10.7 previous
• France Consumer Spending MoM, actual 2.2%, 1.4% forecast, -1.9% previous
• France GDP QoQ Final Q3, actual 0.6%, 0.5% previous
• UK GDP QoQ Q3, actual 0.4%, 0.4% forecast, 0.4% previous
• UK GDP YoY Q3, actual 1.7%, 1.5% forecast, 1.5% previous
• UK Current Account Q3, actual -22.78B, -21.20B forecast, -23.82B previous
• Italy Consumer Confidence, actual 116.6, 114.0 forecast, 114.3 previous
• China's primary money rates mixed, market awaits fresh funds next week
• Oil dips from highs, but OPEC's cuts still support market
• Gold prices hover below 2-week high, set for second weekly gain

Economic Data Ahead

• (0730 ET /12:30 GMT) US Durable Goods Orders (mkt +2.0% MoM, previous -0.8% MoM)
• (0730 ET /12:30 GMT) US Durable Goods Orders ex-Trans (mkt +0.5% MoM, previous +0.9% MoM)
• (0730 ET /12:30 GMT) US Core Capital Goods Orders (mkt +0.5% MoM, previous +0.3% MoM)
• (0730 ET /12:30 GMT) US Personal Income  (mkt +0.4% MoM, previous +0.4% MoM)
• (0730 ET /12:30 GMT) US Personal Consumption Expenditures (mkt +0.5% MoM, previous +0.3% MoM)
• (0730 ET /12:30 GMT) US PCE Deflator (previous +0.1% MoM, +1.6% YoY)
• (0730 ET /12:30 GMT) US Core PCE Deflator (mkt +0.1% MoM, +1.5% YoY; previous +0.2% MoM, +1.4% YoY)
• (0830 ET /13:30 GMT) CA GDP MM Oct, actual 0.2% forecast, 0.2% previous
• (0900 ET /1400 GMT) US New Home Sales (mkt 658k SAAR, previous 685k SAAR)

Key Events Ahead

• (0900 ET /1300 GMT) Spanish PM Rajoy plans to speak in Madrid
• (1300 ET /18:00 GMT) SIFMA recommends early close

FX Beat

DXY: Major trend line resistance- 94 (trend line joining 102.97 and 101.26)

DXY is trading within the channel for the past 1-1/2 month. It has formed a bottom around 91.02 and shown a minor jump until 95.15 Nov 7th 2017. It is currently trading around 93.36.

Technically the pair has broken major support 93.40 and declined till 93.16. Any daily close below 100- day MA at 93.32 will drag the pair till 92.90 (trend line joining 91 and 92.50)92.

The huge jump on the higher side is possible only above trend line resistance at 94.05. The index should close on the daily basis above 94.05 for further jump till 95.15. Short-term trend reversal only above 95.25 (38.2% retracement) and any violation above will take the pair to 96/97.50.

EUR/USD: The pair declined almost 90 pips from the high of 1.19018 on account of political uncertainty. The pair declined till 1.18170 after Catalonia pro-independence parties claim victory in regional elections. The unofficial results gave three separatist parties a 70- seat majority in the 135 member parliament.

US initial jobless claims rose 20k to 245k in the week ended Dec 15 compared with the forecast of 234k. The final reading of US GDP came at 3.2% compared to the forecast of 3.3%.

Technically, the pair is facing strong resistance at 1.19612 (Nov 27th 2017 high) and any minor bullishness can be seen only above that level. Any convincing break above 1.19612 will take the pair to next level until 1.2000/1.2090.

On the lower side, major support is around 1.1800 and any break below will drag the pair to next level until 1.1745/1.1700. The minor support is around 1.1835.

USD/JPY: USD/JPY is consolidating after breaking trend line resistance 113.50. The pair jumped till 113.63 yesterday and is currently trading around 113.32.

Japanese yen was trading weak after BOJ maintained accommodative policy and kept its interest rates unchanged at -0.1% and 10 Year JGB target at 0%. The central bank will continue to buy and the annual amount of JPY 80T JGBs. BOJ said in a statement that “Japan’s economy is expanding moderately and likelihood of inflation reaching 2% target is very low.  

Technically, near-term major resistance is around 113.48 (trend line joining 114.73 and 113.75) and any close above will take the pair to next level until 114/114.73/115.

On the lower side, near-term support is around 112.74 (4H Kijun-Sen) and any break below will drag the pair to next level until 112/111.40.

GBP/USD: Cable is trading very flat for the past one week. The pair was consolidating in the narrow range between 1.3420 and 1.33021 for the past 10 trading session. The pair doesn’t react much after slightly better than expected UK GDP. It is currently trading around 1.33863.

UK GDP YOY came at 1.7% compared to the forecast of 1.5%. The main reason for the slight improvement in the growth was due to increase in consumer spending.

On the lower side, near-term support is around 1.3300 and any break below will drag the pair to next level until 1.3225/1.3175. Short term bullish invalidation only below 1.30280.

The near-term resistance is around 1.3420 (trend line joining 1.35204 and 1.34654) and any break above will take the pair to next level until 1.3470/1.3520. Bullish continuation only above 1.3550.

USD/CHF: USD/CHF was trading flat and shown a minor recovery from the low of 0.98286. The pair is consolidating below 78.6% retracement at 0.9975. The pair was trading low due to the slight weakness in US dollar index.   The pair hits high of 0.98998 yesterday and is currently trading around 0.98939.

Market awaits major economic data such as US core durable goods orders, consumer spending, and core PCE to be released today for further direction.

On the higher side, near-term resistance is around 0.99220 (trend line joining 0.9977 and 0.99345) and any break above will take the pair to next level till 0.9977 (Dec 8th 2017 high)/1.000. It should break above 1.0040 for short-term bullishness.

The near-term support is around 0.9835 and any violation below that level will drag the pair to next level till 0.9810 (200 – day EMA)/0.9770/0.9735.

AUD/USD: Aussie has broken major resistance at 0.7690 and jumped till 0.77185 at the time of writing.  The pair closed above 200- day EMA yesterday and this shows minor bullishness and jumps till 0.7780 likely. It is currently trading around 0.777176 0.23% higher. On the lower side, the pair’s near-term support is around 0.7500 and any convincing break below will drag the pair till 0.7435/0.7380. The near-term support is around 0.76788.

The pair’s near-term resistance is around 0.7740 (38.2% fibo) and any convincing break above targets 0.7780/0.7880.

Equities Recap

EURO STOXX index down 0.1 pct, Europe's STOXX 600 down 0.1 pct, Britain's FTSE 100 down 0.2 pct, Germany's DAX down 0.3 pct, France's CAC 40 down 0.3 pct, Spain's Ibex down 1.6 pct.

European markets began trading lower on Friday, as fresh political turmoil in Spain dampened market sentiment and as trading volumes were expected to remain thin ahead of the Christmas holiday.

European markets opened lower on Friday, as fresh political turmoil in Spain dampened market sentiment and as trading volumes were expected to remain thin ahead of the Christmas holiday.

While Wall Street is celebrating Christmas on lower corporate tax norms, Dow Jones up by 0.09%, trading at 24,801, S&P500 up by 0.09% 2690.25. The two chambers of the U.S. Congress approved a $1.5-trillion tax bill this week that would slash corporate tax rates to 21 percent from 35 percent.

Commodities Recap:

Energy: Crude oil dips from highs, but OPEC's cuts still support market 

• OPEC-led production cuts still support market
• Traders start closing positions ahead of Christmas, New Year
• Forties pipeline system to re-open in early January -Ineos
• Climbing US output to weigh on oil markets in 2018/2019

Oil prices on Friday dipped away from some of their highest levels since 2015, weighed down by rising U.S. output and the expected January re-opening of the Forties pipeline in the North Sea.

U.S. West Texas Intermediate (WTI) crude futures were at $58.16 a barrel at 0755 GMT, down 20 cents, or 0.3 percent, from their last settlement.

Brent crude futures, the international benchmark for oil prices, were at $64.81 a barrel, down 19 cents, or 0.1 percent.

Precious metals:

Bullion prices: Gold prices hover below 2-week high, set for second weekly gain 

• Spot gold up nearly 1 percent for the week
• Palladium hits highest since Feb 2001
• Silver, platinum, and palladium on track for 2nd weekly gain

Gold prices held steady below a two-week high in thin pre-holiday trade on Friday amid firmer equities and a sturdy dollar, remaining on track to log a second consecutive week of gains. U.S. gold futures were unchanged at $1,270.40 an ounce.

In other precious metals, Palladium was up 0.2 percent at $1,039.50 an ounce, trading at its highest level since February 2001.

Silver rose 0.5 percent to $16.17 an ounce, and platinum was 0.4-percent lower at $911.50 an ounce.

Treasuries Recap

The U.S. Treasuries remained flat as investors gear up to celebrate the upcoming Christmas holidays and a silent week ahead till full trading volumes resume post the New Year celebrations. The yield on the benchmark 10-year Treasuries hovered around 2.48 percent, the super-long 30-year bond yields nearly rose nearly 1-1/2 basis points to 2.84 percent while the yield on the short-term 2-year traded nearly flat at 1.88 percent.

The UK gilts rose even as the country’s third-quarter gross domestic product (GDP) beat market expectations, coming in at 1.7 percent YoY, vs consensus estimates of 1.5 percent YoY, albeit down from 1.9 percent YoY in the second quarter. The yield on the benchmark 10-year gilts, fell 1 basis point to 1.25 percent, the super-long 30-year bond yields also slipped 1 basis point to 1.83 percent and the yield on the short-term 2-year traded flat at 0.46 percent.

The German bunds traded narrowly mixed Friday as investors remain side-lined in any major trading activity ahead of the long Christmas weekend. The German 10-year bond yields, which move inversely to its price, slipped 1/2 basis point to 0.41 percent, the yield on 30-year note hovered around 1.22 percent and the yield on short-term 2-year also traded nearly 1 basis point higher at -0.65 percent.

New Zealand government bonds closed flat on the last trading day of the week as trading volumes remained muted ahead of the long Christmas weekend. At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, was flat at 2.77 percent, the yield on 20-year also closed neutral at 3.31 percent and the yield on short-term 2-year too ended steady at 1.91 percent.

Japanese government bonds (JGBs) gained on Friday after the country’s cabinet announced to issue less 30- to 40-year bonds in fiscal year 2018/19 as demand for super-long debt instruments is expected to decline among institutional investors. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 1 basis point to 0.054 percent, the yield on new long-term 40-year also fell 1/2 basis point to 0.970 percent and the yield on short-term 2-year dipped 1/2 basis point at -0.147 percent.

Australian government bonds slipped on Thursday as the U.S. Treasury yields rose to 9-month highs on optimism over U.S. tax cut, which would help boost growth and other economic data. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 2 basis points to 2.667 percent, the yield on the long-term 30-year note surged over 3 basis points to 3.397 percent and the yield on short-term 2-year climbed 1-1/2 basis points to 1.981 percent.