Market Roundup
- USD/JPY -0.8%, GBP/USD -0.1%, EUR/USD +0.4%
- DXY -0.3%, DAX -0.2%, Brent +0.8%, Gold +1.0%
- Dollar index slips to lowest since mid-November at 99.233
- GBP/USD helped off 7wk peak above 1.2700 by GBP/JPY sell order
- EM rally sees TRY, ZAR and MXN climb vs USD
- Gold rises to highest since Nov 17 at $1,223.62/oz
- EZ Dec Producer prices 0.7% m/m, 1.6% y/y vs prev 0.3%/0.1%. 0.4%/1.3% f/c
- UK Jan Construction PMI input prices component rises to 73.2 fm Dec 72.4
- CH Dec Retail sales -3.5% vs prev 0.8% rvsd
- Australian Dec trade surplus jumps to A$3.5bln, beats A$2.2bln f/c
- AUD boosted by record Aussie trade surplus, 0.7675 high
- Reckitt Benckiser in talks to buy Mead Johnson for $16.7 bln - Rtrs
- JP considers buying more U.S. energy as Abe prepares to meet Trump - Rtrs
Economic Data Ahead
- (0830 ET/1330 GMT) The initial claims for U.S. unemployment benefits likely dropped 9,000 to a seasonally adjusted 250,000 for the week ended Jan. 28. While the continuing jobless claims for the week ending Jan 20 is expected to have fallen to 2.065 mln from 2.100 mln. Analysts expect the non-farm productivity for Q4 to rise 1 pct after recording a rise of 3.1 pct in Q3, the unit labor cost is seen rising 1.9 pct in Q4.
- (1000 ET/1500 GMT) IBD/TIPP Economic Optimism (MoM) (Feb), previous 54.8.
- (1000 ET/1500 GMT) Energy Information Administration (EIA) reports storage change for the week ending Jan 27.
FX Beat
DXY: U.S. Dollar index declined sharply after a mild jump above 100 level. DXY finds double bottom support at 99.40 and any break below confirms major weakness. Drag till 98.85 (61.8% retracement of 103.82 and 95.89)/98.54 then likely. On the flipside, any break above 99.89 (100- day EMA) will take the index till 100.18 (5- day MA)/100.60 (trend line joining 103.82 and 102.95). Short term bullish invalidation only below 98.
EUR/USD: EUR/USD has once again broken and holds above the major pschycological level of 1.08000 in today's European session. Spot met extra buying interest following a bout of USD-selling on Thursday, advancing to the critical resistance band around 1.0820/50. On the lower side, minor support stands at 1.07650 and any break below that level will drag the pair down till 1.07300/1.07090/1.06540 (21- day MA). The immediate resistance is around 1.08208 (50% retracement of 1.12994 and 1.03402) and any break above will take the pair till 1.08735/1.09335).
GBP/USD: The pound met some downside pressure after the BoE left its monetary policy unchanged at today’s meeting. Bank of England held refi rate and the asset purchase facility at 0.25 percent and £435 billion, respectively. The central bank also maintained its corporate bond purchases at £10 billion. GBP/USD drops to lows post-BoE, near 1.2630. Major support is seen around 1.2624 (daily Tenken –Sen) and any break below targets 1.2559 (daily Kijun-Sen)/1.2500. Pair needs break above 1.27080 for further jump till 1.27750 level. Overall bearish invalidation only above 1.2780.
EUR/GBP: GBP weakness post-BoE policy meeting pushes EUR/GBP higher. The pair was rejected above 20-DMA on Tuesday's trade. Momentum studies are neutral, with a slightly bullish bias. The pair has broken above 50-DMA at 0.8521 which was stiff resistance. We see scope for test of 100-DMA at 0.8651. On the flipside, break below major trendline support at 0.8490 could see drag upto 200-DMA at 0.8417.
AUD/USD: AUD/USD hit 2-month highs at 0.7677 after Aussie spiked on mammoth December trade surplus data. Australia's trade surplus rose to AUD3.5bn from an upwardly revised AUD2.0bn in November, the largest trade surplus recorded since the series started in 1971. The pair’s minor resistance is around 0.7680 and break above will take the pair till 0.7745/0.77783 (Nov 8th high). Technical studies support upside.
USD/JPY: USD/JPY down 0.25 percent on the day, trading at 112.38 at the time of writing. The pair has declined sharply after showing a jump till 113.95. Major resistance is around 113.85 (10 – day MA) and any break above will take the pair till 115/115.56 (daily Kijun-Sen) On the lower side minor support is around 112 and any break below 112 will drag the pair till 111.28 (100- day EMA). Data wise in the US, the usual report on the labour market is due along with Q4’s Non-farm Productivity and the Economic Optimism index measured by IBD/TIPP.
Equities Recap
European shares turned flat after early losses helped by tech stocks, Generali euphoria, Stoxx 600 technology hit highest level since April 2002, up 1.8 pct. Britain's FTSE 100 turned positive, rose 0.2 pct, Germany's DAX was down 0.3 pct, Spain's IBEX dropped 0.1 pct and France's CAC 40 edged lower 0.2 pct in early deals.
Tokyo's Nikkei ended down 1.22 pct at 18,914.58, HK’s Hang Seng Index closed down 0.6 pct at 23,184.52 points, Seoul shares finished the day down 0.46 pct.
Commodities Recap
Oil prices climbed as evidence that OPEC and other big exporters were cutting production outweighed a sharp rise in U.S. crude and gasoline stockpiles. Brent crude LCOc1 rose 50 cents at $57.30 a barrel by 1115 GMT after settling up $1.22 in the previous session. U.S. light crude gained 30 cents to $54.18 after climbing by $1.07 on Wednesday.
Gold touched its highest since mid-November after the U.S. Fed gave no clear hint on the possibility of a March rate hike, prompting another drop in the dollar. Spot gold rose to its highest at $1,223.62 an ounce and was up 1.1 percent at $1,222.56 by 1035 GMT. U.S. gold futures for April delivery were up $16.80 at $1,225.10.
Treasuries Recap
U.S.: Treasuries saw modest upward pressure, ahead of labour market report, scheduled to be released later today, as well as on Friday. The yield on the benchmark 10-year Treasury fell 1-1/2 basis points to 2.46 percent, the super-long 30-year bond yield also slid 1 basis point to 3.07 percent while the yield on short-term 2-year note traded flat at 1.20 percent.
UK: The UK gilts rebounded after British parliamentarians decided to trigger Article 50 of the Lisbon Treaty in the first round of voting held Wednesday, it will take a span of 2 years for the country to separate from the 27-member European Union. Also, investors are awaiting the Bank of England’s (BoE) monetary policy decision, scheduled to be held later in the day. The yield on the benchmark 10-year gilts, fell 1-1/2 basis points to 1.44 percent, the super-long 30-year bond yields also slid 1 basis point to 2.07 percent and the yield on short-term 2-year moved 1/2 basis point lower to 0.14 percent.
German: The German government bunds bounced ahead of the European Central Bank (ECB) President Mario Draghi’s speech scheduled for later in the day. Also, investors are looking forward to the release of December retail sales data due on Friday. The yield on the benchmark 10-year bond, fell 3 basis points to 0.46 percent, the long-term 30-year bond yields also fell 1/2 basis point to 1.20 percent and the yield on short-term 2-year bond plunged 2-1/2 basis s to -0.73 percent.
JGBs: The Japanese government bonds traded nearly flat following modest buying demand by the investors at the 10-year auction, held on Wednesday. Also, investors remain keen to focus on the Bank of Japan’s (BoJ) December monetary policy meeting minutes, scheduled to be released on February 3. The benchmark 10-year bond yield, hovered around 0.09 percent, while the long-term 30-year bond yields rose nearly 1 basis point to 0.84 percent and the yield on the short-term 2-year note traded around -0.22 percent.
NZ: The New Zealand government bonds closed narrowly mixed as investors remained sideline in any big deal ahead of the Reserve Bank of New Zealand’s (RBNZ) first monetary policy decision of 2017. The yield on the benchmark 10-year bond, fell 1 basis point to 3.40 percent at the time of closing, the yield on 7-year note also dipped nearly 1 basis point to 3.03 percent and the yield on short-term 2-year note ended flat at 2.33 percent.
AUS: The Australian bonds plunged, as trade surplus hit record-high in December, also coming in better than what markets had initially anticipated. Also, investors are now looking forward to the Reserve Bank of Australia’s first monetary policy of 2017, scheduled to be held on February 7 for further direction in the debt market. The yield on the benchmark 10-year Treasury note, surged 4 basis points to 2.78 percent, the yield on 15-year note also jumped 4 basis points to 3.24 percent and the yield on short-term 2-year rose 2 basis points to 1.82 percent.
