Forex News and Events
China’s exports expand for the first time in eight months
After a long period of uninterrupted contraction, Chinese exports printed in positive territory - the first time since March this year when it increased 11.5%y/y - rising a modest 1%y/y (versus -5% expected) in November, while the previous month’s reading was revised to the downside from -7.3% to -7.5%. In yuan terms, the measure climbed 5.9%, highlighting the effects of the strong depreciation of the renminbi in November (roughly 2% against the US dollar). Imports also surprised to the upside and surged 6.7%y/y in dollar terms (versus -1.9% median forecast), narrowing the trade surplus to $44.61.
This pickup in exports and imports proves that China’s dragon still has some fire in its belly, even after a complicated year, which has been challenging for exports oriented economies. It is therefore an encouraging sign as we head into 2017 and the Trump presidency. We think the outlook for Chinese exports looks positive for 2017 as the weak yuan will be a breath of fresh air to the economy and help the government to continue its normalisation process. However, in order for this ideal scenario to play out, we would need to see stable a US/China relationship as a decrease in US imports from China would significantly hurt the world’s second largest economy. So far, President-elect Trump has already softened on some of his campaign promises, we think there is still a chance that he will ease his strong stance against China, even though we believe he will not completely give up.
Draghi to announce ECB plans for 2017
Over the last few months, the ECB has been in wait-and-see mode. Today, we will finally learn whether its asset purchase program will be extended beyond March 2017 and how the bonds scarcity issue will be addressed. For the time being, there are currently two main restrictions regarding the types of bonds that the European Central Bank may buy under its QE programme. Firstly, the rates must not be below the depo-floor of -0.4% and the institution cannot own more than 33% of a country’s debt.
In our view, an extension of the program at the current pace of €80 billion looks extremely likely. However, there is also the strong possibility that we will see a reduction in the pace of QE as the issue of scarcity may be a never-ending issue in the medium run which will become increasingly drastic as we approach 2018. We firmly believe that the ECB will do whatever it takes to paint everything in a dovish light.
Currency-wise, we believe that the upside risk on the single currency remains somewhat limited and that we may see a further test of the area between 1.08 and 1.09 if the ECB prolongs its wait-and-see approach. Nevertheless, markets look optimistic regarding the US outlook for the end of this year and the EURUSD pair is clearly oriented downwards.
USD/CAD - Wide-Open For Further Weakness. 
The Risk Today
EUR/USD is pushing higher ahead of the ECB meeting today. Hourly resistance is given at 1.0796 (05/12/2016 high). Support can be found at 1.0506 (05/12/2016 low). Bearish pressures seem to increase around 1.0800. Expected to show further weakness around that level. In the longer term, the death cross indicates a further bearish bias despite the pair has increased since last December. Key resistance holds at 1.1714 (24/08/2015 high). Strong support given at 1.0458 (16/03/2015 low) is on target.
GBP/USD is bouncing back from hourly resistance at 1.2771 (05/10/2016 high). Hourly support is given at 1.2302 (18/11/2016 low). Expected to show renewed pressures towards resistance at 1.2771. The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.
USD/JPY is trading sideways. The pair has failed to reach resistance given at 114.83 (16/02/2016 high). Significant support is given around 111.36 (28/11/2016 low). Stronger support lies at 108.56 (17/11/2016 low). Expected to see renewed short-term bullish pressures. We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).
USD/CHF is pushing lower. Key support is given at the parity. Hourly resistance lies at 1.0205 (30/11/2016 high). The road is wide-open for continued weakness. In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.
