Yen Continues To Trade In Large Ranges, US Treasury Yields Increase

The U.S. economy continues to show encouraging signs of recovery despite the uncertainty surrounding the debt ceiling and budget negotiations. Overnight, U.S. Treasury yields traded at 2% for the first time since April last year as durable goods orders rose more than forecast. However, pending home sales in December fell for the first time since August. The Japanese Yen continues to trade in large ranges. After a year where many JPY traders were sub-jected to 15 point ranges, the currency has recorded comparably large daily swings in response to new Prime Min-ister Abe's “unlimited” easing stance. USDJPY is weaker today at 90.70.

Goldman Sachs has announced that it is looking to sell a $1 billion share in Industrial and Commercial Bank of China, the world's largest bank by market capitalisation as the stock's share price has rallied more than 50% from the low's of the previous year. Shares are being offered by the revered U.S. investment bank at approximately a 3% discount to the closing price last week. International banks have found it easier to make a return by investing in local Chinese banking operations rather than operating their own brands in the world's second largest economy.

U.S. share markets closed last week at their highest levels since December 2007. More than 75% of the companies that have reported quarterly earnings so far surpassed profit expectations. Caterpillar, the world's largest producer of construction and mining equipment, gained more than 1% after reporting a better profit outlook for 2013. Ap-ple shares gained 2% to recover slightly from the worst weekly performance of its shares since 2008. The last time the S&P 500 closed above 1,500 before this week was in 2007. The index is down 0.18% at 1,500.18. European stocks were mixed with the DAX losing 0.32% while the FTSE gained 0.16%.

Commodity prices gained slightly overnight with the major commodity indexes rising about 0.25%. WTI crude gained to seven week highs on the better than expected durable goods orders in the US. WTI is higher by 0.6% at $96.40. Precious metals have eased with gold losing 0.14% to $1,655 while silver dropped 1% to $30.90. Agricul-tural commodities were mostly higher, led by gains in corn and sugar. Copper is higher by 0.25%.


EUR/USD looked a little lower during the European morning as weaker than expected M3 Money Supply data and weaker uptake on European bond auctions dampened the tone. However, the bearish stance only saw the price reach small interbank buying at 1.3425 and this was enough to warn off more of a large scale decline. European markets seemed to wait for a solid lead from the New York markets and this was the case with the Asia markets as well. Better than expected US data session despite weaker than expected Pending Home sales was still enough to lift the risk sentiment. Also, helping the bullish bias of the markets was Fitch stating the USA AAA rating will stay thanks to th extension of the debt ceiling crisis. All in all Euro closes the day at 1.3449 for a slow last 24 hours. Limited data over the next 24 could see this current range continue but we will be looking for a move below 1.3400 to get the action happening once again.

Compass Direction
Short-Term Medium-Term
BEARISH NEUTRAL
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AUD/USD continued the fall during the Australian holiday session as the market still looked to bailing out longs as the drive to the current level despite the links to the normal majors not looking to have any effect. Constant buying ahead of 1.0400 stalled the decline during the Asia session and it wasn’t until the European session where the extra drive came from too break the level but to be disappointed is an understatement with 1.0385 stopping the decline. Better than expected data and economic feel from profit reporting in the USA saw risk sentiment lift a little with AUD returning into the low 1.0400 to see out the Australian holiday Monday. CB Leading Index and NAB Business Confidence are the main points for the local session and with the market still hanging around the lows of the last couple of weeks a negative result could and should lead to another test of the downside support. Our expected range 1.0350/1.0430 over the next 24 hours.

Compass Direction
Short-Term Medium-Term
NEUTRAL NEUTRAL
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