Market Brief
The week starts with WTI crude sliding 2.50% after 6% rally on Friday on talks that US Steelworkers Union planning largest strike since 1980 in oil industry; natural gas, gasoline and heating oil retreated 1.0% in Asia.
In Australia, the commodity index tumbled 20.4% on year to January, while the TD securities inflation remained stable at 1.5% over the same period. The beginning of the week is data-crowded for AUD-traders. December trade balance and RBA meeting are due on Tuesday. AUD/USD consolidates losses as dovish RBA speculations keep the upside attempts limited. While the consensus is the status quo (with OCR unchanged at 2.50%), there are increasing expectations for RBA signaling lower rates as soon as tomorrow. Swap traders see 2/3 of chance for lower RBA rate at tomorrow’s meeting, if not 90% chance in March. Option barriers on AUD/USD abound at 0.7840/0.7900 for today expiry.
USD/JPY and JPY crosses were sluggish in Tokyo, Nikkei 225 stocks started the week 0.66% lower. USD/JPY failed to consolidate above the conversion line (117.66). The MACD is flat, with resistance presumed solid at daily Ichimoku top / 50-dma zone (118.64 / 118.80). On the option markets, the bets are supportive above 118.00. EUR/JPY sentiment turns neutral. The next resistance stands at 134.78 (Fibonacci 23.6% on Dec-Jan sell-off).
According to 4Q prelim data released on Friday, the US core PCE eased from 1.4% to 1.1% q/q, while the GDP grew at slower-than-expected pace of 0.1% in 4Q (vs. 0.3% q/q). The University of Michigan revised up the 1-year inflation expectation from 2.4% to 2.5%. Soft data sent US 10-year yields down to 1.6357 on Friday. EUR/USD and GBP/USD consolidate weakness verse USD. EUR/USD bias should stay negative for a daily close below 1.1362 (MACD pivot), as the uncertainties in Greece keep the EUR-bears in charge.
As the sell-off in lira accelerated on potential rate cut speculations, Turkish Central Bank said the market moves are not in line with a rate cut before the session close on Friday. The sharp answer from the President Erdogan, stating “interest rates are almost twice inflation expectations. […] All of this will be fixed, God willing” comments destroyed the CBT’s efforts to cool-off tensions in TRY markets. The CBT-government arguing increases doubts about the Central Bank’s independency and should accelerate capital outflows, despite carry-favorable conditions. We remain vigilant to volatilities before the CPI reading (due Feb 3rd).
In Brazil, the deepening budget deficit and increasing net debt triggered the BRL sell-off. USD/BRL technicals turn positive suggesting higher BRL debasing is to come. The key resistance stands at 2.76 (Dec 16th high).
Today, traders watch January PMI Manufacturing across Europe, UK, US, Canada and Skandies, Spanish January Unemployment Rate, Norwegian December Credit Indicator Growth y/y, US December Personal Income & Spending, PCE Core and Deflator m/m & y/y, US December Construction Spending m/m and US January ISM Manufacturing and Prices Paid.
Currency Tech
EUR/USD
R 2: 1.1541
R 1: 1.1460
CURRENT: 1.1316
S 1: 1.1224
S 2: 1.1098
GBP/USD
R 2: 1.5351
R 1: 1.5224
CURRENT: 1.5047
S 1: 1.4989
S 2: 1.4952
USD/JPY
R 2: 120.83
R 1: 118.87
CURRENT: 117.59
S 1: 117.25
S 2: 115.86
USD/CHF
R 2: 0.9500
R 1: 0.9368
CURRENT: 0.9305
S 1: 0.9170
S 2: 0.8936