Daily Market Analysis | HotForex

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2016 – FINALLY, THE RETURN TO NORMALIZATION, I’LL BUY THE USD ON DIPS!

Finally, after almost 10 years, the U.S. economy is strong enough to handle higher interest rates after nearly a decade of financial crisis emergency life support by the Fed.

Key Points:

The Fed raised rates by 25 basis points yesterday;
This was followed by a statement that said more rate hikes are on the way;
Rate increases will be at a “gradual pace”;
The Fed will remain “data Dependent”.

The above key points give me enough support to buy US dollars on weakness, provided the data stream does not fall off a Cliff.

What do USD traders do from here?

The trading strategy, as we move forward the post rate hike, in my opinion, is to keep an eye on the U.S. economic data stream (Economic Calendar) and as long as the data is relatively positive, buy the USD on weakness.

Trade safe friends.

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MACRO EVENTS & NEWS

FX News Today

The USD is trading stronger across the board after the U.S. Fed’s 25 basis point rate hike, Janet Yellen said the Fed’s rate hike is a sign that the economy is on the path of sustainable improvement.

Global stock markets are trading higher, the S&P 500 closed 1.5% , while in Asia Japan’s Nikkei 225 closed up with a gain of 1.6%, at the time of writing EU markets are all trading higher.

Commodity prices are mostly weaker after the U.S. Fed opened the door for future rate hikes. WTI Crude Oil is down around 1.15%, while Gold is trading nearly 1% lower on the day at the time of writing.

The Norwegian central bank left the key deposit rate steady at 0.75%, but said rate may be reduced in the first half of next year.

Draghi is keeping the door open for additional easing, the ECB is ready to use all tools if necessary, the editorial of the European central bank’s Economic Bulletin brought few surprises and was once again a close repeat of Draghi’s central message from the last press conference. It said the “governing council will closely monitor the evolution in the outlook for price stability and, if warranted is willing and able to act by using all the instruments available within its mandate in order to maintain an appropriate degree of monetary accommodation”.

The Chinese Yuan weakens for 10 day’s in a row, this has helped support local stocks , as the weaker currency will underpin exports. The People’s Bank of China is likely to continue its effort to stabilize the Yuan against a basket of currencies and will look for a gradual depreciation against the USD, after the Fed’s move. Exports remain weak and fell for a fifth months in November as global demand remains tepid. As China remains on course for ongoing monetary accommodation, while the Fed has started the tightening cycle, the differences in policy stances will underpin further Yuan weakness.

Main Macro Events Today

• EUR German Info Business Climate: The German Ifo business climate disappointed, with the headline reading unexpectedly falling to 108.7 against expectations for a steady reading of 109.0. The breakdown showed that the dip was due to a decline in the current conditions indicator, which fell to 112.8 from 113.4. The more forward looking expectations index remained steady at 104.7, after rising in the previous three months. The diffusion index, which gives the balance of positive and negative answers, fell back to 10.4 from 10.9 as confidence in the construction industry declined in tandem with whole sale and retail confidence. Still optimists continue to outnumber pessimists in all sectors and the stable expectations reading means the number is not as negative as the headline reading suggests, especially as numbers remain at high levels.

• GBP U.K. November retail sales: reported much stronger than expected, with sales up 1.7% m/m, against analyst median forecast for a rise of 0.6% m/m. The annual rate jumped to 5.0% y/y and October data were revised higher to 4.2% y/y from 3.8% y/y reported initially. More signs that the U.K. recovery remains on track, which will keep the implicit tightening bias at the BoE in place, although the bank clearly is in no rush to follow the Fed, as wage growth and inflation remains low.

• USD U.S. Current Account: Current account data for Q3 is out Today and should show a headline decrease to -$122 bln (median -$120 bln) from $109.7 bln in Q2 and -$118.3 bln in Q1. As a percentage of GDP this would represent a -2.7% figure which compares to -2.4% in Q3 and -2.7% in Q1. The Q3 trade deficit was -$9.6 bln from a $6.6 bln surplus in Q2.

• USD U.S. Philadelphia Fed Index: December Philly Fed is out today and should have the headline rising to 3.0 (median 1.5) from 1.9 in November. The already released December Empire State Index posted an increase to -4.6 from -10.7. More broadly, analyst expect producer sentiment to trend sideways in December with the ISM-adjusted average of all measures remaining steady at 50 for a fourth month since first reaching that figure in September.

• USD U.S. Initial Jobless Claims: Claims data for the week of December 12 are out Thursday and should reveal a decline to 280k (median 273k) from 282k in the week of December 5 and 269k in the week before that. Claims are continuing to strike firm levels and analyst expect December data to extend the 270k average set by the headline in November. Accompanying this, analyst expect to see a 200k non-farm payroll headline in December that just slightly undershoots the 211k headline from November.

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MACRO EVENTS & NEWS

FX News Today

The big news in overnight trade revolves around the Bank of Japan. In a sign of some serious desperation, the BoJ has announced that it will start buying more Exchange Traded Funds (ETF’s) and extend the duration of the bonds it buys in its QQE program. The central bank also noted that it will start accepting foreign currency bonds and housing mortgage loans as collateral. The announcement sparked volatility in Japanese markets; before the BoJ announcement the Nikkei 225 was trading lower, however rallied higher on the news to end strongly up 2.7%. At the same time, the USDJPY spiked to around 100 pips to a 123.55 peak before tumbling to a 121.70 low.

European data calendar is pretty empty today; on tap we have the Eurozone current account. The EURUSD fell close to the two week lows of 1.0802, falling from session highs of 1.0913.

The excitement of the Fed rate hike has been absorbed, and the USD is now trading modestly lower against most other currencies, however, remains stronger for the week.

U.S. equities closed the session near lows after the earlier drop with the price of crude oil.

Later today watch for some price action around the CAD upon the release of the Canadian Core CPI.

Main Macro Events Today

• JPY Monetary Policy Statement: The Bank of Japan kept its Monetary Base on hold; however a new program was announced which will see the BoJ purchasing additional ETF’s.

• CAD Canada Wholesale: Analyst expect wholesale shipments, due today, to rise 0.5% in October (median after the 0.1% dip in September. This report is typically overlooked, but an as expected bounce would be supportive of a rebound in October GDP. Analyst expect GDP to rise 0.2% in October after the 0.5% plunge in September.

• Canada CPI: CPI, due today, is expected to expand at a 1.4% y/y pace in November (median +1.5%), accelerating from the 1.0% rates in September and August. CPI is seen flat on a month comparable basis in November (median +0.1%) after rising 0.1% in October. Gas prices fell 1.5% in November compared to October, which is expected to weigh on month comparable CPI. The BoC’s core CPI index is seen falling 0.1% m/m in November after the 0.2% and 0.3% gains seen in August, September and October. Annual core CPI growth is expected to expand at a 2.2% y/y rate in November (median +2.3%) following the 2.1% growth clips in August, September and October. The expected core CPI figure would, of course, leave the measure above the BoC’s 2.0% midpoint. However, Governor Poloz has maintained that run-up is transitory and not reflective of a tightening in supply conditions. Hence, the November report will not threaten the Bank’s dovishly constructive tone or the view that ongoing accommodative policy is required to bring the economy back to full capacity growth.

• USD FOMC Member Lacker Speaks.

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ECONOMIC WEEK AHEAD

Main Macro Events This Week

This is a shortened trade week since Friday is a Bank Holiday for the major Central banks with U.S. and European markets closed on Friday.

• Europe: The European economic calendar will remain light as we head into the end of the year and with the lack of E.U. data we would expect for the EURUSD pair to trade within a range in the wake of the risk events from the U.S. Fed and the ECB are now out of the way. German markets will already be closing down for Christmas Eve on Thursday and all markets will be closed for Christmas Day Friday. The calendar is quiet, with only German and Eurozone consumer confidence numbers of note (Monday, Tuesday, respectively), which are expected to remain for the most part stable. The final reading of French Q3 GDP (Wednesday). French consumer spending also on (Wednesday) is expected to rebound from the marked dip in October and rise 0.6% m/m in November.

• United States: The U.S. will still have several more economic data releases until the end of the year, starting with the Chicago Fed National Activity index (Monday), this will be followed by the third update on Q3 GDP (Tuesday) forecast to be revised down to 1.8% from 2.1% originally and 3.9% in Q2. FHFA home prices may tick up to 227.0 in October from 226.5, while existing home sales may run 0.7% higher to a 5.40 mln unit pace in November. The Richmond Fed index is set to rise to -1 in December vs -3 previously. The MBA mortgage application report is due (Wednesday) and could be impacted by the advent of the Fed decision midweek. Durable goods orders are expected to retreat 1.5% in November (median -0.7%) after a 3.0% gain in October, while personal income and spending may rise 0.3% in November. Final Michigan sentiment should be nudged up to 92.0 in December from 91.8 initially and new home sales are forecast to rise 2.0% in November to a 505k unit pace from 495k. Initial jobless claims may tick up 1k (Thursday) to a 272k level.

• Canada: A holiday shortened week will be highlighted by October GDP (Wednesday) , Retail sales also (Wednesday) are expected to show an 0.8% m/m gain in October following the 0.5% drop in September while the ex-autos aggregate is seen rising 0.5% after a 0.5% decline. Average weekly earnings (Tuesday) are seen rising 0.3% m/m in October after the 1.0% surge in September. Bank of Canada’s Governor Poloz will deliver a presentation on the global economy and Canadian monetary policy at the Canada’s Finance Ministers meeting in Ottawa on Sunday and Monday (Dec 20 and 21). The next top tier event from the bank is a speech from Governor Poloz on January 7th.

• United Kingdom: The markets are anticipating that the UK’s version of rate liftoff will be around six months after the U.S., with a hike seen in the middle of 2016. This week the U.K. has on tab the; CBI distributive sales survey for December (Monday) where analyst expect a solid rebound to a +20 reading in headline realized sales (median +21), up from +7 in November. Growth in real household incomes, despite recent abatement in nominal growth, has been underpinning consumption. Analyst anticipate the December reading of the Gfk consumer confidence survey (Tuesday) to come in unchanged at +1 (median same). Monthly government borrowing data are also due (also Tuesday), as is the final release of Q3 GDP (Wednesday), which analyst expect to remain unchanged at 0.5% q/q and 2.3% y/y. Q3 current account data (also due Wednesday) is expected to reveal a deficit of GBP 21.5 bln, mostly reflecting the UK’s trade deficit and net negative investment returns.

• Switzerland: The Swiss calendar is light, featuring trade data (Tuesday) the December KOF leading indicator (Wednesday), both of which should highlight that the Swiss economy continues to manage well in the face of Eurozone uncertainties and a strong franc.

• Japan: October all-industry index (Monday), which is expected to rebound 0.5% m/m from the -0.2% outcome in September. Activity slows until the end of the week with the minutes to the November 18, 19th BoJ meeting (Thursday). Friday’s slate is heavy. November national CPI is seen steady at 0.3% y/y on an overall basis, and accelerating to 0.1% y/y clip from the prior -0.1% on a core basis. December headline Tokyo CPI is expected to slow to unchanged y/y from 0.2% previously, while core should be steady at unchanged y/y. November unemployment is forecast steady at 3.1%, with the job offers/seekers ratio holding at 1.24. November personal income likely dipped to 2.0% y/y from 2.6%, while PCE is seen contracting further to -2.5% y/y from -2.4% in October. November services PPI should ease to 0.1% y/y from 0.5%.

• Australia: The AUD calendar is empty this week, and remains without of top tier data until the first week of January. Markets will be closed in Australia on Friday for the Christmas holiday, with many remaining shut through Monday. The RBA takes its customary intermission from appearances or events during January, with the February 2 meeting the next event on their calendar. The RBA left rates at 2.00% in the December 1st meeting, and our base case is for steady policy to begin the New Year.

• New Zealand: The NZD calendar has November trade (Wednesday), expected to reveal an improvement in the trade deficit to -NZ$800 mln from the -NZ$963 mln deficit in October. There is nothing from the RBNZ this week following the well-anticipated 25 basis point cut earlier this month that left the official cash rate at 2.50%. The bank’s next meeting is on January 28th, and we project no change in the current policy setting.

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GBPUSD Update, Pound Remains a Sell into Strength Play

GBPUSD, Daily

The GBPUSD pair continued to grind lower at the start of the week after remarks from BoE MPC Martin Weale, highlighting that “the factors pushing down inflation have become a bit more prolonged”. Price has since recovered from the early sell-off and is currently trading higher for the day. The fundamental outlook, in my view, supports that the GBP will continue to weaken vs the USD for some time to come and that traders should be ready to resell the pair on bounces.

Technically, the GBPUSD remains within a bearish channel over the mid term. I would be on alert for entering new short sales during periods of strength with any price bounce off the current levels (1.4920) to stop near the 1.5110 area, provided that price fails to break below the 1.4860 zone. Otherwise, my short term GBPUSD view supports sell positions near the 1.4955-1.50 area for a 1.4813 target.

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MACRO EVENTS & NEWS

FX News Today

German and U.K. GfK consumer confidence unexpectedly improved with the EURUSD seeing a minor rally from lows under 1.0850 to near 1.0940 in Monday’s trade. However, price still remains below the 10 day moving average. Meanwhile, the GBPUSD price trades just above the 1.4880 support level at the time of writing.

Crude oil prices remain fragile in the face of unrelenting supply; USOil price is trading higher today with prices just under $36 at the time of writing, the lower USD this morning has supported oil prices.

Gold has been moving higher as a softer U.S. dollar activated short covering. Global stock markets are mixed with strong gains in the U.S., Japan’s Nikkei 225 closing slightly lower, while European stock exchanges closing lower by 1%+. Asian stock markets have closed mostly higher, as U.S. and U.K. stock futures did. This points to gains on European markets at the open after the Monday European market sell off, as the traditional Christmas rally continues.

The U.S. calendar data reports today aren’t likely to have much impact, as attention turns to Christmas and the New Year holidays.

Main Macro Events Today

• U.S. Richmond Manufacturing Index: Analyst expect an improvement to 0.0 from -3.0 in November. The Empire State and Philly Fed are already out and showed mixed headline performance which would indicate another month of depressed sentiment.

• USD Final GDP: Analyst expect Q3 GDP to be revised down to 1.8% from 2.1% in the final report, following 3.9% growth in Q2. Forecast risk: downward, given the huge inventory boost that is being unwound with data revisions. Market risk: downward, as weakness may delay Fed tightening assumptions for 2016.Inventories are expected to be revised down by $10 bln.

• USD Housing Price Index: Analyst expect existing home sales to rise 0.7% to a 5.400 mln unit rate in November following the 3.4% October decrease to 5.360 mln units. Forecast risk: downward, as NAHB declined in November. Market risk: downward, as a run of weaker data could impact rate hike time lines. The pending home sales index should grow by 0.3%.

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EURUSD UPDATE, 1.1060 IN SIGHT

EURUSD, Daily

EURUSD moves higher as German consumer confidence improves, and U.S. Q3 GDP growth falls slightly from 2.1% to 2.0%. EURUSD looks to be in recovery mode after dipping to a low near the 1.0520′s last week. The major trend still remains bearish; however there remains room for a price attempt towards a key resistance spotted around the 1.1060′s.

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MACRO EVENTS & NEWS

FX News Today

Today’s trading session will be quiet, as Japanese markets are closed to celebrate the Emperor’s Birthday. We may see some activity around the CAD later today upon the release of the Canadian Core Retail Sales and GDP data. In over night trading, Asian equity markets closed the session mostly higher, while U.S. stocks charged higher posting gains of nearly 1% for the session.

The major USD currency pairs continued to lack direction without any market catalyst on tab to jolt the USD in any meaningful direction. EURUSD remains in a tight range within the 1.09s after marking a one week high near 1.0980′s yesterday. USDJPY also appears to be in a narrowly range around 121.00 for a third day, with the sharp volatility seen in the wake of last Friday’s BoJ policy fading away.

Industrial metals and oil prices have been moving higher, as investors’ confidence about the growth prospects in the U.S. and China increases.

Main Macro Events Today

• JPY Japan : Bank Holiday

• GBP United Kingdom Final GDP: Q3 expected to be confirmed at 0.5% q/q and 2.3% y/y

• CAD Core Retail Sales: Analyst expect retail sales values, due later today, to improve 0.8% in October (median 0.6%) following the 0.5% drop in September. The ex-autos sales aggregate is expected to gain 0.5% m/m in October (median +0.5%) after the 0.5% pull-back in September. Gasoline prices fell 2.0% m/m in October, a comparatively modest pull-back compared to the 7.9% plunge in September according to the CPI. Hence, we should see an only modest drag from gas station sales on total and ex-autos sales. Moreover, gasoline prices remain very low relative to a year ago, which could continue to underpin spending along with low interest rates. Vehicle sales were firm through November, which should be supportive of total sales in both October and November.

• CAD October GDP: Analyst expect GDP, due Wednesday, to rise 0.2% in October (median +0.3%) after the 0.5% plunge in September. The projection is driven by an expected boost from the return to production of an oil sands producer that was off-line due to fire in September. That boost is seen offsetting drags from manufacturing, wholesale and housing. But the expected boost from the oil sand producer could be tempered by temporary closures at other refineries (notably Irving Oil in St. John).

• U.S. Durable Goods: November durable goods data is out Wednesday and should reveal a 1.5% (median -0.7%) decline in orders for the month with inventories and sales both remaining unchanged in November. This follows respective October figures of 2.9% for orders with shipments down 1.0% and inventories down 0.3%. Data in line with this forecast would leave the I/S ratio steady at 1.65 from October.

• U.S. Personal Income: November personal income is out Wednesday and analyst expect a 0.3% (median 0.2%) increase in headline income with consumption up 0.3% (median 0.3%) as well. This would follow October figures of 0.4% for income and 0.1% for consumption which prompted a bounce in the savings rate to 5.6% from 5.3% in September. For price data analyst expect the PCE Chain Price Index to remain unchanged with the core up 0.2%, matching the November CPI figures.

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Macro Events & News

FX News Today

The U.S. markets will be closing early today, ahead of Christmas Day and trading should be limited. The U.S. stock markets have enjoyed 3 straight day’s of gains in the usually end of year rally. Stock markets have been partly supported by the nearly 4% gains seen in the price of U.S. Oil, with Crude prices clearing to the upside of $37.00, following news that EIA crude inventories plunged 5.88 mln bbls compared to a Reuters forecast of a 1.1 mln build (6.98 mln bbl difference). The only U.S. data report today is weekly jobless claims, expected to edge up 1k to 272k.

U.S. economic reports revealed slightly encouraging personal income data and an upside durable orders surprise.

European markets will be quiet today. The German market has already closed for Christmas, while the U.K. market will be closed on Monday for Boxing Day. The only data on the agenda is from the U.K. with BBA mortgage approvals.

The GBP has been preforming today, rising against the USD. The pound’s run higher following a near two-week period of notable under-performance as markets scaled back BoE tightening expectations. Cable has been posting gains with markets shrugging off an unexpected downward revision lower in final UK Q3 GDP data for the last two trading sessions in what continues to be a technical bounce.

The EURUSD dipped under 1.0950, which roughly marks the 50% retracement of the rally from last week’s 1.0800 low. The USDJPY broke to the downside of the 120.60 support.

Main Macro Events Today

• JPY Monetary Policy Meeting Minutes: Reveled slow wage and capital expenditure growth are areas of concern but were optimistic that companies will start to boost spending once emerging economies improved. The BOJ kept policy steady since October, betting that companies will use their profits to lift wages and capital expenditure and help kick off a positive economic cycle. The Nov. 18-19 rate review, the BOJ board discussed why companies were slow to respond. Companies probably felt their current record profits were due to temporary factors like the weak yen and low energy costs, and weren’t convinced that earnings would remain strong in the future, the minutes showed. At the time of writing the JPY is sharply stronger vs the USD with the USDJPY pair down around 50 pips for the session.

• EUR German Bank Holiday:

• USD Unemployment Claims: U.S. initial jobless claims are expected to be 272k (median 270k) in the week-ended December 19. Continuing claims are expected to fall to 2,232k for the week-ended December 12. Forecast risk: upward, as holiday hiring could hold down claims. Market risk: downward, as weaker than expected data could slow the path of rate hikes.

• NZD Bank Holiday:

• AUD Bank Holiday:

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Macro Events & News by HotForex’s Senior Currency Strategist John Knobel.

FX News Today

The USD majors continued to trade in narrow ranges, strong stock markets in Asia coupled with a recent rebound in diary prices have helped underpin the New Zealand dollar, the NZD continues it’s multi-week rally against the USD gaining nearly 450 pips since mid November. The EURUSD, meanwhile, remained in the mid-1.09s, below yesterdays near two week high at 1.0992, and USDJPY has remained above yesterday’s two-month low at 120.16.

The European calendar is once again very quiet, with only Italian consumer and business confidence numbers of note. There remains little data on tap from the Central Banks as we move closer to the end of 2015.

U.S. calendar has the trade in goods, home price index, and consumer confidence, the focus will be on the Consumer Confidence report.

Asian markets moved higher, with banks leading stocks to the eighth straight day of gains, at the time of writing U.S. stock futures are in positive territory.

Oil prices are slightly higher, with USOil trading just under the 37 per barrel mark.

Main Macro Events Today

• USD U.S. Consumer Confidence: December consumer confidence is out later today and analyst expect to see a headline increase to 94.0 from 90.4 in November. Along side the headline, analyst expect current conditions t o rise to 110.0 from 108.1 and current conditions to improve to 83.4 from 78.6.Michigan Sentiment improved in December with a climb to 92.6 as of it’s second release from 91.3 in November and the IBD/TIPP poll rose to 47.2 from 45.5.

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EURUSD Update, 1.12 target on break of the 1.1060’s

EURUSD, Daily

For the moment, EURUSD remains in the 1.08 – 1.1060 range since mid December 2015. The pair is bouncing off the 50 SMA in the wake of the mucky Chicago ISM report. I remain with the view that the underlying trend is bearish, however, over the medium term prices may be setting up a recovery towards the 1.12′s on a potential clean break of the 1.1060′s.

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MACRO EVENTS & NEWS

FX News Today

The dollar was mostly higher with a bit of a safe-haven money flowing into the USD as geopolitical tensions and a slowdown in China’s economic expansion on Monday, contributed to the 7% sell off in Asian stock markets at the start of the new year. The global stock market sell-off spill over into the European and the U.S. stock markets with U.S, markets preforming better than European equities. However, in overnight Tuesday trading, Chinese stocks traded back from session lows, after the Shanghai Comp tumbled over 3% at the open before reversing back into the green, as officials came in to inject cash into the banking system via a $20 bln open market reverse repo operation to ensure liquidity while also reportedly intervening to support the yuan.

Yesterday, The EURUSD fell to one-month lows near 1.0780 before buyers moved in to support prices; the USDJPY broke below the 118 handle before rallying to 119.70. Meanwhile, the GBP touched close to multi-month lows of 1.4660, and the USDCAD pulled back early on higher oil prices, however, the USDCAD rallied back over 1.3980 when crude Oil prices failed to retain gains.

Monday U.S. data was not uplifting, as both manufacturing ISM and construction spending both missed expectations. The U.S. calendar is thin today, featuring December auto sales and weekly chain store data. The Canadian calendar has industrial product price index for November while the European calendar has U.K. Construction PMI, Italy HICP, Spain unemployment.

Main Macro Events Today

• EUR German Unemployment: Yesterday’s PMI readings confirmed that growth is broadening and the improvement is also helping the labor market across the Eurozone and analyst are looking for a fresh decline in German jobless numbers of 5K (median -8K), which should leave the December jobless rate steady at a very low 6.3%.

• EUR Preliminary December Inflation: Preliminary December inflation numbers for Italy and the Eurozone. The Spanish reading last week came in higher than expected, while the German HICP, released yesterday, unexpectedly fell.

• GBP PMI Construction: Analyst forecast a 56.0 reading up from the previous 55.3.

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Macro Events & News

FX News Today

A tumultuous session in Asia, initiated by China stocks markets closing limit down within the first half an hour of trade, saw the yen extend recent outperformance and the commodity currencies extend recent underperformance. Asian currencies, ex-yen, also went into a tailspin, although most managed to regain poise as the session progressed. AUDJPY, which is a forex proxy of China sentiment, dove to a new four-month low, and AUDUSD a three-month low. The NZD and CAD also fell to new lows. Oil prices dove over 4%, driving Brent crude prices to fresh 11-year lows. The catalyst of the carnage was an accelerated depreciation of the yuan, of 0.5% today, which is the biggest drop since last August.

German Nov retail sales up 0.2% m/m, a tad weaker than expected and bringing the annual rate to 2.3% y/y from 2.5% y/y in October. The three months trend rate was unchanged at 0.2%. Annual rates remain robust and monthly numbers are volatile and subject to sizeable revisions, but on the whole the data confirms that consumption remains underpinned by the improvement in real disposable income on the back of rising wages, low unemployment and low oil prices.

German Nov orders much stronger than expected. Manufacturing orders jumped 1.5% m/m in November, after already rising a very strong 1.7% m/m in the previous month. The robust rise lifted the annual rate to 2.1% y/y from -1.6% y/y and while the three months trend rate remains in negative territory, it improved markedly from -1.3% from -2.9% in the three months to October. The numbers tie in with the better than expected confidence readings and show the German economy on track for ongoing robust growth.

World Bank cut its global growth outlook to 2.9% for 2016, versus the prior 3.3% projection from June. It missed its 2015 estimate of 2.8% on the low side as GDP rose only 2.4% last year, a 5th straight year below 3%. The forecast for Chinese growth was trimmed to 6.7% versus 7.0% previously, while the U.S. expansion was shaved to 2.7% from 2.8%, due in part to the damping effect of the firmer dollar. The Bank also sees a “low probability risk of disorderly” slowing in major emerging markets due to Fed tightening, a firmer dollar, and geopolitical concerns.

FOMC minutes indicated nearly all members believed conditions had been met for liftoff in December, though some noted it was a “close call.” Inflation was a major point of discussion. Overll, the FOMC was “reasonably confident” that the 2% goal would be achieved, though some saw “considerable” risk that price pressures would not build due to the stronger dollar and soft oil prices. Expectations for a gradual policy path was also the general outlook, and there were several reasons for the cautious approach, including maintaining an accommodative stance and the uncertain outlook over inflation. It would also allow policymakers time to assess the economy’s reaction to tightening. But, there were also statements that policy would be be data dependent. There was no clear indication over the likelihood of another hike in March. However, more weak economic reports like the ones so far this year, and increased uncertainty over the inflation trajectory (the worry of several Fed officials), could leave rates on hold.

Main Macro Events Today

European Unemployment Rate: no change is expected in the European unemployment rate. It is expected to stay at 10.7%.

BoC Governor Poloz Speech: markets are focusing on the Governor Poloz speech in order to see if the Fed’s rate in December and the continued downfall in the price of crude oil impacts the BoC rate decisions.

US Continuing Jobless Claims are expected to rise 190k in December vs 217k.

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GOLD (XAUUSD) Update

f geopolitically tensions and uncertainty about global growth prospects. Long term price remains bearish. My strategy is to go long for the following short term targets: 1st target $1118.00, 2nd target $1140 before we see a retest of $1046.

Summary, XAUUSD (GOLD) for the short term trader supports buy positions for price targets $1118.00 and $1140.00. Short positions are supported for medium term traders for a $$1046.00 target.

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Safe haven JPY buying drives CADJPY lower

CADJPY, Daily

CADJPY has been falling over the last three days as there haven’t been bidders for the crude oil while problems with the Chinese stock market (limit down again today) have caused the traditional safe havens, such as Japanese Yen and Gold market to rally.

This sudden increase of volatility in the CADJPY pair opens up opportunities for both intraday and swing traders. Yesterday price fell below March 2012 pivotal support at 85 area and allowed the price to move to current levels of 83.20 where a small range (82.40 – 83.00) from November 2012 has been providing some support. In the daily picture the pair is trading below a 2 standard deviation regression channel which suggests that the move is overdone on the downside. Stochastics (7) and RSI (7) are deeply oversold as well. Nearest important support and resistance level are at 81.38 and 86.38 while the nearest Fibonacci retracement level (23.6%) that coincides with market pivots is at 87.32.

With the market being oversold in several meters and resting at this 82.40 – 83.00 range (from November 2012) a probability of market correcting higher has increased. Though, at the time of writing there is no indication in the lower time frame charts that price would in fact do that yet. We are however preparing for short trades at resistance levels in case such a rally would take place. Based on intraday charts there are two levels of interest for those looking to participate in the short side. The nearest one is at 83.93 while the next one is a zone reaching from 84.80 to 85.16. We look for short entry signals at these levels as per teachings in my webinars. Targets are 82.46 (T1) and 81.38 (T2).

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CADJPY Update

CADJPY, Daily

Last week I wrote how CADJPY had been falling as there weren’t bidders for the crude oil as problems with the Chinese stock market caused the traditional safe havens, such as Japanese Yen and Gold market to rally. I said that the move is overdone on the downside was probably overdone and we should prepare to short at higher levels. The pair rallied to my 83.93 resistance and provided short trading opportunities for those who had been to my webinars and knew what to look for. My Target 1 at 82.46 was hit earlier today after which market created a bullish pin bar at the level. This suggests that the same target level was chosen by the institutional players as well.

CADJPY has now been falling for five consecutive days. With the market trading at support after such a continuous fall it wouldn’t be a surprise if it took a breather and moved sideways before extending its move to the downside towards my Target 2 at 81.38. This is supported by the 60 min chart in which price has reached a breakout target that was based on a triangle formation. Price should be moving sideways between the 82.46 support and the above triangle formation today.

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MACRO EVENTS & NEWS

FX News Today

Oil prices are pushing 12-year lows, trading below $31 bbl at the time of writing, as concerns about the global economy push traders into risk-off mode.

Commodity related currencies are under-performing the USD, with the AUD, NZD, and CAD all under pressure.

The U.S. Dow Jones stock markets closed higher on Monday, suggesting that the recent stock market sell off is starting to stabilize.

The EUR attempted to rally back over 1.0900, however failed to keep gains and fell back into the mid 1.08’s with the EURUSD lacking any meaningful direction without any market moving European economic data.

The economic calendar for today does not have any heavy data release on tap, apart from the GBP Industrial Production and the USD November JOLTS job opening survey.

Main Macro Events Today

• GBP U.K. November Industrial Production: Analyst expected a rise of 0.1% m/m, actual missed , and came in lower at -0.4%.

• USD Fed’s Stanley Fischer to Speak: No commentary

• EUR ECB speak from Praet and Lautenschlaeger: On January 6, 2016 Praet said the following “the ECB stands ready to take all measures that are necessary to bring inflation to 2%. If you print enough money you will always get inflation. Always”. “But if oil and commodities prices tumble, it is more difficult to allow inflation to rise. If a whole series of such factors occur, you can’t do anything other than somewhat postpone the data on which you seek to reach the higher rate of inflation”. “The emergence of bubbles is a justified concern”.

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Today’s Currency Movers

The dollar is firmer against the yen and euro today, but softer against outperforming Aussie and Kiwi dollars and near net unchanged against the Canadian dollar, despite a 1% gain in NYMEX crude futures. Risk appetite picked up a little in Asia, with most stock markets outside China rebounding. A rise in Chinese exports and the PBoC’s maintaining of the daily fix of the CNY near unchanged for a fourth straight day helped calm investor sentiment. AUDJPY, a barometer of China-related sentiment, has breached its previous day’s peak for the first time in eight sessions, and is up by 0.8% on the day, which is the biggest mover out of the dollar pairings and currency crosses that we track.

USDJPY, Daily

USD has fallen against the JPY due to safe haven flows seen after Chinese stock market circuit breakers stopped the trading only after 15 minutes of trading as the market fell by more than 7%. Now USDJPY has been oversold and during last two days has stabilized. This was due to the market moving near the August lows and traders are now trying to push the pair higher. Market has now moved above Monday’s high and broken out of the descending regression channel in the 4h chart. This is a bullish sign after the market had the first proper up day on Monday since December 17th. The 4h chart reveals that this market is at the time of writing battling with the upper Bollinger Bands and the 50 period SMA. The fact that market has managed to break above 118.06 and created a higher low in the hourly time frame is encouraging. If the market holds this level and clear the Bollinger resistance above it has space to move up to 120 region where a resistance coincides roughly with the 50% Fibonacci level at 120.26. The next support levels below the latest low of 116.70 are at 116.19, 115.83 and 115.60.

NZDJPY

NZDJPY has fallen to a range that constrained its movements in September. This has supported the price and like in USDJPY there are signs of NZDJPY turning higher as well. Day before yesterday the pair created the first upside candle after falling for seven consecutive trading days. Now the pair is trading above Monday’s high and has broken out of the bearish channel in 4h chart. Price is also trading above a 4h triangle formation and 30 period SMA but below the upper 4h Bollinger Bands. As JPY is getting stronger against the other currencies as well it is likely that the NZDJPY also to work its way higher. This is supported by a successful test of the 77.32 level and a higher low in the hourly chart. The region of 79.45 is a major resistance while significant daily support levels are at 76.13, 74.93 and 74.47.

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MACRO EVENTS & NEWS

FX News Today

German GDP growth accelerated to 1.7% in 2015, from 1.6% in 2014 and in line with expectations. On a working day adjusted basis though, growth slowed to 1.5% from 1.6%, so despite the improvement in the headline number the German economy didn’t quite escape the slowdown in world growth, but both numbers are clear above the long term average of 1.3%. The German statistical office said that growth was relatively broad based across the manufacturing and construction as well as the services sectors. Overall then a solid number, although even in Germany structural issues remain and this year the refugee influx will put a strain on the economy.

ECB lowers Greek ELA ceiling to EUR 72 blnfrom EUR 75.8 bln. The Greek central bank said in a statement that the ECB did not object to lowering the ceiling by EUR 3.8 bln, which reflects an improvement of the liquidity situation of Greek banks amid a reduction of uncertainty and the stabilisation of private sector deposit flows, as well as the progress achieved in the recapitalisation process of Greek banks”.

Fed Beige Book: “mostly positive” was the outlook on future economic growth in the District reports for the January 26-27 FOMC meeting, seeming to supplant the “modest to moderate” mantra that had been in place for more than a year. Labor markets were seen to have tightened further, in four districts along with “flat to moderate” wage pressures, half reporting higher wage pressures for more skilled workers and those positions in short supply. Manufacturing remained weakened, with the declines in commodities/oil, the stronger dollar, and slipping global demand remaining headwinds for most districts (energy sector hurt in particular). Consumer spending was moderate, though credit conditions generally improved, along with growth in loan demand. The Book was prepared by the Philly Fed with data collected before January 4, which wouldn’t include the December payrolls print.

Chicago Fed dove Evans said he pays attention to international developments and how they impact the U.S. economy, noting he will monitor the effects of the decline in China’s growth. We thought he might take this global path on the economic outlook and monetary policy, given his dovish credentials. In addition, he says that the Fed is about as transparent as it can be.

Main Macro Events Today

Bank of England interest rate decision: The BoE policy announcement is widely expected to see the bank leave policy unchanged. We expect the vote also to remain unchanged from last month, with 8-1 in favour of leaving the repo rate at its historic low of 0.5%. Come March, it’ll be seven years that the rate has been at this level and we don’t expect a tightening until later in the year. Last week’s December PMI survey data were sympathetic to the view that the BoE is likely to tighten policy later and it will be interesting to see in the minutes in how far the most recent bout of risk aversion and the slump in oil prices have rattled policy makers.

ECB Monetary Policy Meeting Accounts: markets wait for Draghi’s views on economic and monetary developments.

US Jobless Claims: initial jobless claims are expected to be 272k (median 270k) in the week-ended January 9. Continuing claims are expected to fall to 2,200k for the week-ended January 2. Forecast risk: downward, as layoffs from holiday hiring could boost claims. Market risk: downward, as weaker than expected data could slow the path of rate hikes.

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EURGBP UPDATE, BULLISH MOMENTUM DOMINATES

EURGBP, Monthly

EURGBP Monthly chart bullish momentum continues to dominate. Current price is higher by around +110 pips since my Jan 11 2016 EURGBP, update.

My monthly chart targets remain for a test of the October 2008 lows (0.7700), currently around 128 pips from current market price (at the time of writing), while the extended price target remains at the measured move near the July 15 (Low) – Oct 15 (High) Fibo 161.8 expansion 0.7860. This is currently around 228 pips away from current market price.