- Dollar Slides against Fundamental, Speculative Benchmarks as Traders Await Resolution
- British Pound Surges after CPI Data Heats Up Rate Expectations – Are Hikes Ahead?
- Euro Posts a Broad advance Despite Questionable EU, ECB Progress
- Canadian Dollar Stumbles after BoC Rate Decision Despite Growth Upgrade on Currency Warning
- Australian Dollar Weathers Disappointing Consumer Confidence Figures, Holds to Risk Trends
- New Zealand Dollar: Looking ahead to the 4Q CPI Data and What Impact it Could Have
Dollar Slides against Fundamental, Speculative Benchmarks as Traders Await Resolution
Though its losses through Tuesday were moderate when measured against most of its counterparts, a lull in activity for the benchmark dollar only amplified its poor performance in its key pairings. Looking at the greenback’s most liquid crosses, EURUSD would take charge with a sharp reversal of Monday’s losses that would briefly see the pair trading at its highest level in a month. Follow through was still a notable absentee when the session closed out; but the Asian session found the market egging the pair higher. Another prominent highlight was the sharp rally from GBPUSD. Through the London session, the pair climbed as much as 175 points – helped along by a remarkable UK CPI reading. And, though the close was nearly half of the full-day’s range; it would still close out its eighth consecutive advance. What does this tell us? In the absence of tangible support for the benchmark dollar, the currency will defer to larger concerns – like risk appetite trends and stimulus.
Looking for guidance in the US economic docket would leave us coming up short for real influence over the currency’s future. At the top of the second tier list was the net foreign capital flows (TIC) data for November. Through the month, a balance of $85.1 billion of capital flowed into the US economy. Looking at the breakdown, private investors helped to offset a record sale by foreign government. Taking a closer look at the data, it is worth noting that China sold a net $11. 2 billion in US assets that was more than made up for in a $33.3 billion UK purchase of Treasuries. Demand for US government debt is particularly important in recent times as deficits continue to balloon to record highs. The two other notables on the docket were the NAHB Housing Market Index and Empire Manufacturing survey for January. The housing sector index was unchanged (fitting nicely into the anemic outlook for this vital component of growth) while the factory activity report advanced at a slower clip than expected.
With these tepid indicators providing little guidance; dollar traders were left to ruminate on their chronic concerns over the effects of risk appetite and stimulus on the safe haven benchmark. For sentiment, the S&P 500 opened the week after the extended holiday weekend with a reserved but resolute climb to a fresh 27-month high despite the questionable start to the 4Q earnings season. At the same time, those market participants that sat out Monday’s FX session likely took note of the tolerance of the only Fed hawks in allowing a full realization of the $600 billion stimulus program. Looking forward, earnings and interest in the Chinese GDP figures will likely outweigh the housing data on tap.
Related: Discuss the Dollar in the DailyFX Forum, John’s Analyst Picks: EURUSD, GBPAUD and GBPJPY are in Play, Awaiting Conviction
British Pound Surges after CPI Data Heats Up Rate Expectations – Are Hikes Ahead?
The busy UK economic docket continued through Tuesday’s active session; and the key release for the day proved exceptionally market-moving. Following early Asian session releases of both the Nationwide consumer confidence survey and RICS House Price Balance for December (each providing better than expected results but moving up from significant lows); pound traders were focused in on the December CPI numbers. The 3.4 percent forecast for the year-over-year headline reading was already an acceleration over the previous month and well above the BoE’s 3.0 percent tolerance level. And yet, the data still managed to surprise with a 3.7 percent print. This move necessitates the fifth written letter to the Chancellor of the Exchequer; but does it raise the stakes for interest rate hikes? The market seems to think so given overnight index swaps; but the BoE’s markets director remarked prices would likely peak through the first quarter. This likely tells us that rates are on hold through that period; but it is difficult to say they are ‘one-off’ pressures given the core’s painful 2.9 percent pace.
Euro Posts a Broad advance Despite Questionable EU, ECB Progress
The euro recovered lost ground Tuesday; but the foundation for this strength is questionable. It would seem that the groundwork for a recovery is pretty straightforward given the European Union’s ongoing efforts to develop a more ‘comprehensive’ effort at stabilizing the region’s financial situation and the ECB’s discussion of upside inflation risks. However, neither of these topics would meet any measure of progress over the past 24 hours. For the EU crisis, Spain managed to sell 5.5 billion euros worth of 12 and 18-month government debt at significant lower yields; but their decision to take the syndicated route on the other planned auctions this week removes a level of transparency. What’s more, there is a very clear line of debate between Germany and other EU members about whether it is appropriate to increase the bailout effort – a key point any reasonable, inclusive plan. As for interest rate speculation, market expectations have soared; but there is relatively little support for this hawkishness. In fact, ECB members Nowotny and Weber both remarked that there was little scope for a hike in the near future.
Canadian Dollar Stumbles after BoC Rate Decision Despite Growth Upgrade on Currency Warning
Little was expected of the Bank of Canada rate decision from a monetary policy perspective; and indeed the central bank would sit pat on its current bearings. However, remarks from the authority would stir the market. The bank upgraded growth projections for both 2011 (2.4 percent) and 2012 (2.8 percent); but the real interest was in the suggestion that the currency was holding back a recovery in exports.
Australian Dollar Weathers Disappointing Consumer Confidence Figures, Holds to Risk Trends
While the market is far more sensitive to pertinent fundamental developments behind the Aussie economy than it was two months ago, risk appetite is still the key measure of the currency’s performance. With world equities climbing on the day, carry traders easily overlooked the 5.7 percent drop in the Westpac Consumer Confidence survey for January. That said, this data won’t be forgotten when fundamental swell again.
New Zealand Dollar: Looking ahead to the 4Q CPI Data and What Impact it Could Have
The New Zealand dollar found a relatively restrained drive via risk appetite trends (just look at the correction from AUDNZD). However, we could see its sensitivity to risk developments increase sharply in the late US trading session Wednesday when the 4Q CPI data crosses the wires. A forecast 4.0 percent annual pace would be a sharp return of inflation pressure that will add to rate speculation.
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ECONOMIC DATA
Next 24 Hours
|
Currency |
GMT |
Release |
Survey |
Previous |
Comments |
|
AUD |
23:30 |
Westpac Consumer Confidence (JAN) |
0.2% |
Confidence rose in December from a 5-month low on an improved spending outlook. |
|
|
AUD |
23:30 |
Westpac Consumer Confidence Index (JAN) |
111 |
||
|
JPY |
23:50 |
Tertiary Industry Index (MoM) (NOV) |
0.5% |
0.5% |
Rose in October following 2-month decline. |
|
AUD |
0:00 |
DEWR Skilled Vacancies (MoM) (JAN) |
-1.0% |
Vacancies fell in the last seven months. |
|
|
JPY |
4:00 |
Tokyo Condominium Sales (YoY) (DEC) |
0.8% |
Sales rose annually in the last ten months. |
|
|
EUR |
9:00 |
Euro-Zone Current Account s.a. (euros) (NOV) |
-9.8B |
Euro-Zone current account deficit widened in October for a fourth consecutive month. |
|
|
EUR |
9:00 |
Euro-Zone Current Account n.s.a. (euros) (NOV) |
-2.3B |
||
|
GBP |
9:30 |
Jobless Claims Change (DEC) |
0.0K |
-1.2K |
U.K. jobless claims fell less than economists forecast in November, suggesting that the recovery in the labor market may be slowing. The ILO unemployment rate rose to 7.9% for the first time in six months. |
|
GBP |
9:30 |
Claimant Count Rate (DEC) |
4.5% |
4.5% |
|
|
GBP |
9:30 |
ILO Unemployment Rate (3M) (NOV) |
7.9% |
7.9% |
|
|
GBP |
9:30 |
Average Weekly Earnings inc Bonus (3MoY) (NOV) |
2.2% |
2.2% |
|
|
GBP |
9:30 |
Average Weekly Earnings ex Bonus (3MoY) (DEC) |
2.3% |
2.3% |
|
|
EUR |
10:00 |
Euro-Zone Construction Output s.a. (MoM) (NOV) |
0.0% |
Construction output was unchanged in October following a 3-month decline. |
|
|
EUR |
10:00 |
Euro-Zone Construction Output w.d.a. (YoY) (NOV) |
-6.8% |
||
|
USD |
12:00 |
MBA Mortgage Applications (JAN 14) |
2.2% |
Applications increased in the last 2 months. |
|
|
13:30 |
Manufacturing Shipments (MoM) (NOV) |
0.3% |
1.7% |
Shipments beat expectations in October. |
|
|
USD |
13:30 |
Housing Starts (DEC) |
550K |
555K |
Housing starts likely below 600K for a third consecutive month in December. |
|
USD |
13:30 |
Housing Starts (MoM) (DEC) |
-0.9% |
3.9% |
|
|
USD |
13:30 |
Building Permits (DEC) |
555K |
544K |
Adjusted building permits in November were the lowest since April 2009. |
|
USD |
13:30 |
Building Permits (MoM) (DEC) |
2.0% |
-4.0% |
|
|
NZD |
21:30 |
Business NZ Performance of Manufacturing Index (DEC) |
52.7 |
Manufacturing index is at a five-month high. |
|
|
NZD |
21:45 |
Consumer Prices Index (QoQ) (4Q) |
2.4% |
1.1% |
Inflation accelerated in 3Q, led by higher government charges on tobacco and energy. |
|
NZD |
21:45 |
Consumer Prices Index (YoY) (4Q) |
4.1% |
1.5% |
|
|
Currency |
GMT |
Upcoming Events & Speeches |
|||
|
CAD |
15:30 |
Bank of Canada Monetary Policy Report |
|||
|
EUR |
18:00 |
ECB’s Juergen Stark Speaks on European Economy |
SUPPORT AND RESISTANCE LEVELS
CLASSIC SUPPORT AND RESISTANCE – 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist 2 |
1.3615 |
1.6420 |
89.00 |
1.0000 |
1.0922 |
1.0600 |
0.8230 |
127.60 |
146.05 |
|
Resist 1 |
1.3400 |
1.6300 |
86.00 |
0.9775 |
1.0750 |
1.0200 |
0.8000 |
120.00 |
140.00 |
|
Spot |
1.3387 |
1.5963 |
82.56 |
0.9634 |
0.9913 |
0.9994 |
0.7719 |
110.52 |
131.78 |
|
Support 1 |
1.2900 |
1.5660 |
80.00 |
0.9300 |
0.9800 |
0.9600 |
0.6850 |
103.80 |
125.00 |
|
Support 2 |
1.2585 |
1.5345 |
75.00 |
0.9000 |
0.9700 |
0.9375 |
0.6585 |
100.00 |
119.00 |
CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT
|
Currency |
USD/MXN |
USD/TRY |
USD/ZAR |
USD/HKD |
USD/SGD |
Currency |
USD/SEK |
USD/DKK |
USD/NOK |
|
Resist 2 |
13.8500 |
1.6755 |
7.2790 |
7.8165 |
1.4945 |
Resist 2 |
7.7500 |
5.7800 |
6.2750 |
|
Resist 1 |
12.5000 |
1.5931 |
7.1750 |
7.8075 |
1.4655 |
Resist 1 |
7.5800 |
5.6625 |
6.1150 |
|
Spot |
12.0182 |
1.5424 |
6.9067 |
7.7779 |
1.2817 |
Spot |
6.6509 |
5.5655 |
5.8283 |
|
Support 1 |
11.7200 |
1.4724 |
6.4000 |
7.7490 |
1.2750 |
Support 1 |
6.4500 |
5.2625 |
5.7030 |
|
Support 2 |
11.4400 |
1.3475 |
5.9200 |
7.7450 |
1.2500 |
Support 2 |
6.1250 |
5.1000 |
5.5200 |
INTRA-DAY PIVOT POINTS 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist 2 |
1.3582 |
1.6148 |
83.07 |
0.9720 |
0.9992 |
1.0057 |
0.7767 |
111.99 |
133.07 |
|
Resist 1 |
1.3484 |
1.6055 |
82.82 |
0.9677 |
0.9953 |
1.0026 |
0.7743 |
111.26 |
132.43 |
|
Pivot |
1.3369 |
1.5967 |
82.57 |
0.9614 |
0.9895 |
0.9994 |
0.7718 |
110.42 |
131.86 |
|
Support 1 |
1.3271 |
1.5874 |
82.32 |
0.9571 |
0.9856 |
0.9963 |
0.7694 |
109.69 |
131.22 |
|
Support 2 |
1.3156 |
1.5786 |
82.07 |
0.9508 |
0.9798 |
0.9931 |
0.7669 |
108.85 |
130.65 |
INTRA-DAY PROBABILITY BANDS 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist. 3 |
1.3573 |
1.6136 |
83.49 |
0.9756 |
1.0016 |
1.0130 |
0.7827 |
112.00 |
133.45 |
|
Resist. 2 |
1.3526 |
1.6093 |
83.26 |
0.9725 |
0.9991 |
1.0096 |
0.7800 |
111.63 |
133.03 |
|
Resist. 1 |
1.3480 |
1.6050 |
83.03 |
0.9695 |
0.9965 |
1.0062 |
0.7773 |
111.26 |
132.61 |
|
Spot |
1.3387 |
1.5963 |
82.56 |
0.9634 |
0.9913 |
0.9994 |
0.7719 |
110.52 |
131.78 |
|
Support 1 |
1.3294 |
1.5876 |
82.09 |
0.9573 |
0.9861 |
0.9926 |
0.7665 |
109.78 |
130.95 |
|
Support 2 |
1.3248 |
1.5833 |
81.86 |
0.9543 |
0.9835 |
0.9892 |
0.7638 |
109.41 |
130.53 |
|
Support 3 |
1.3201 |
1.5790 |
81.63 |
0.9512 |
0.9810 |
0.9858 |
0.7611 |
109.04 |
130.11 |
v
Written by: John Kicklighter, Currency Strategist for DailyFX.com
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