The US Dollar continued its third day of declines with the Yen and the Swiss Franc continuing to gain ground. Earlier in the day, the weak China CPI data managed to boost the Kiwi and Australian dollar high on stimulus hopes.
Both the Euro single currency and the British Sterling managed to gain ground against a broadly weaker Greenback. The Euro almost managed to rise close to the 1.25 handle before easing off the highs. With the TLTRO auctions due for today, markets will be looking to the Euro for its reaction. The Reserve Bank of New Zealand left interest rates unchanged overnight. RBNZ Governor Wheeler sent very mixed signals in the monetary policy but overall the Kiwi managed to gain higher on the comments.
Earlier in the day, Australia’s labor market data was released with the employment change beating estimates. But with the unemployment rate remaining in line with expectations and a tick lower than previous month but reaching a 12 year high, the Aussie’s reaction was less muted.
Today’s economic data will see the all important TLTRO2 auctions with an uptake expected to be around 140- 150bn Euros while the US session will see the release of the monthly retail sales data. The Swiss National Bank will be holding its press conference and monetary policy review but it is expected to be a non-event considering that the ECB has put off action until next year.
Fundamentals Recap – December 10, 2014
- Australia Westpac consumer sentiment -5.7%
- Japan BSI manufacturing index 8.1 vs. 13.1
- Japan PPI y/y 2.7% vs. 2.7% estimates
- Australia home loans m/m 0.3% vs. 0.1% estimates
- China CPI y/y 1.4% vs. 1.6%; PPI y/y -2.7% vs. -2.3%
- Japan consumer confidence 37.7 vs. 39.6
- RBNZ Official cash rate unchanged at 3.5%
Fundamentals – December 11, 2014
- Japan Core machinery orders m/m -6.4% vs. -2.1% forecasts
- Australia employment change 42.7k vs. 15.2k forecasts; unemployment rate 6.3% as expected
- German final CPI m/m to remain flat at 0%; French CPI m/m to rise 0.2%
- SNB monetary policy statement & press conference
- Eurozone TLTRO expected to be higher at 148bn
- US Core retail sales m/m to be soft at 0.1%; retail sales m/m to rise 0.4%
- Weekly unemployment claims to be at 299k
EUR/USD Daily Pivots
R3 - 1.2562
R2 - 1.2505
R1 - 1.2476
Pivot - 1.2418
S1 - 1.2389
S2 - 1.2332
S3 - 1.2303
EUR/USD almost reached the 1.25 levels and saw a reversal near 1.2494 levels. The current declines could be likely capped near the daily pivot level and major resistance levels of 1.2418 zone after which we could expect a rally targeting 1.25. We will need to see a clear break above 1.25 to see price head back to the familiar support/resistance level of 1.252.
USD/JPY Daily Pivots
R3 - 121.456
R2 - 120.686
R1 - 119.253
Pivot - 118.483
S1 - 117.05
S2 - 116.28
S3 - 114.847
USD/JPY eventually declined to the support level of 117.572 levels as noted in our yesterday’s analysis. With this major support being tested, we could see an initial rally back to the broken support at 118.97 levels. A break above this level is needed to see any further rallies in the USD.JPY. Alternatively, if the broken support holds for resistance, we could see a drop back to 117.572 followed by 116.782 levels.
GBP/USD Daily Pivots
R3 - 1.5812
R2 - 1.5765
R1 - 1.574
Pivot - 1.5693
S1 - 1.5668
S2 - 1.5622
S3 - 1.5597
GBP/USD managed to break out of the ranging zone but the upside gains hit the falling trendline resistance level forming a sharp long legged doji candlestick pattern. For the moment, a dip towards the daily pivot level at 1.5693 is quite possible. If GBP/USD fails to rise above the ranging zone we could possibly see further declines in the Cable in the coming weeks. To the upside, major resistance at 1.5814 needs to be cleared for any further gains to fall in place.