- US Dollar: S&P 500 Reverses and Points to Safe-Haven USD Demand
- British Pound Forecast Improves on Bank of England Interest Rate Expectations
- Euro Unable to hold Gains, Seems Likely to Hold Recent Trading Range
- Commodity Dollars Mostly Unchanged, Trade off of S&P 500, Gold, and Oil Prices
- Japanese Yen looks to Tankan Manufacturing Report
US Dollar: Surging US Treasury Yields and Falling S&P Bolster US Dollar Outlook
The US Dollar rallied sharply into the New York close on another eventful day for US Treasuries, as yields on the 10-year Bond hit their highest in 7 months. A disappointing Treasury International Capital (TICS) report was the apparent catalyst for the initial sell-off in long-dated debt, and a general lack of confidence meant that yields rose noticeably for the third consecutive trading day. Rising Treasury yields bode poorly for ‘risk’, and the US Dollar broadly benefited from sympathetic tumbles in the S&P 500 and other risky asset classes.
Economic data was broadly supportive of US Dollar strength with Consumer Price Index inflation data coming in marginally above consensus forecasts, while Empire Manufacturing and Industrial Production figures likewise beat expectations. Core CPI inflation rose to 0.8 percent in the 12 months ending November, beating forecasts of a 0.6 percent rate. Yet the result had little effect on expectations for Federal Reserve monetary policy, and it will likely take a much larger surprise to shift forecasts for Fed policy.
Moving forward, US Dollar traders will need to see corroboration from top-tier economic data to truly force a shift in broader outlook for growth. In the meantime, it seems much more important to watch for moves in US Treasuries and the S&P 500. The fact that stocks have now opened higher and closed lower for three consecutive trading days bodes poorly for ‘risk’, and US Dollar momentum favors continued gains through short-term trade.
Related: Discuss the Dollar in the DailyFX Forum, Forex Futures and Options Confirm Dollar Bottom
British Pound Tumbles on Disappointing Jobless Claims Data
The British Pound fell sharply through European trade on key disappointments in UK Jobless Claims data, with a noteworthy gain in the ILO Unemployment rate putting a damper on growth forecasts. Yesterday’s upward surprise in UK Consumer Price Index inflation numbers bolstered outlook for the future of Bank of England monetary policy and domestic interest rates. Yet, as we claimed yesterday, the employment results could ultimately prove pivotal in outlook for the BoE’s interest rate policy and for the British Pound itself. A surprising jump in the UK jobless rate hardly rules out interest rate hikes down the line, but yield-linked demand for the British currency seemingly took a hit all the same. Tomorrow’s UK Retail Sales data could prove similarly significant in setting market yield expectations, and traders should keep a close eye out for any surprises.
Euro Falls on Moody’s Possible Downgrade for Spain, S&P Tumbles
A virtually empty European economic calendar meant that the Euro traded off of broader shifts in financial market sentiment, falling on the sudden sell-off in ‘risk’ and closing lower against the US Dollar. Market attention now turns to the European Union summit on Thursday and Friday in Brussels—broadly expected to focus on the ongoing fiscal crises among member states. Rating agency Moody’s shook European markets today in announcing that it may look to downgrade Spain’s sovereign debt rating due to high debt levels and the need to raise significant capital in the year ahead. It is difficult to know when exactly officials will announce the results of their talks, but one can be reasonably sure that any action—or lack thereof—could force Euro volatility.
Canadian Dollar holds on Oil Strength, Australian, NZ Dollars Tumble on Sell-off in S&P
The Australian and New Zealand Dollar were among the worst-performing currencies on the day as financial risk sentiment took a turn for the worse. Yet the Canadian Dollar actually squeezed out a gain against its US namesake on a strong day for Crude Oil prices. A Department of Energy report showed that US Crude Oil Inventories fell a much-larger-than-expected 9.854 million barrels in the week ending December 10—almost four times consensus forecasts of a 2.5 million barrel drawdown. The correlation between Crude Oil prices and the Canadian Dollar continues to trade near record-highs, and a break higher in energy prices could certainly boost the Loonie through short-term trade. Yet both the CAD and the WTI Crude Oil contract have been unable to break their recent range highs, and continued failures leave risks to the downside for both the currency and the futures price.
Japanese Yen Falls Against US Dollar on Higher Treasury Yields, Could Fall Further
The US Dollar/Japanese Yen pair continued to track moves in bond yields, rallying sharply on today’s jump in US Treasury yields. The 10-year bond saw its yield rise considerably above important Fibonacci resistance on its way to its highest since May, and trends point to further gains (fall in bond prices). We believe that USDJPY risks remain to the upside through upcoming trade, and evidence suggests that the USDJPY set an important bottomthrough the past several months of trading.
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ECONOMIC DATA
Next 24 Hours
|
Currency |
GMT |
Release |
Survey |
Previous |
Comments |
|
JPY |
23:50 |
Japan Buying Foreign Bonds (Yen) (DEC 10) |
-762.3B |
Japanese investors were net sellers of foreign bonds during the week ended Dec. 3. |
|
|
JPY |
23:50 |
Japan Buying Foreign Stocks (Yen) (DEC 10) |
25.0B |
||
|
JPY |
23:50 |
Foreign Buying Japan Bonds (Yen) (DEC 10) |
221.6B |
||
|
JPY |
23:50 |
Foreign Buying Japan Stocks (Yen) (DEC 10) |
210.7B |
||
|
AUD |
0:00 |
Consumer Inflation Expectation (DEC) |
3.1% |
Declined from 3.8% in Oct. |
|
|
NZD |
2:00 |
NBNZ Business Activity Outlook (DEC) |
35.3 |
November reading was highest in five months. |
|
|
NZD |
2:00 |
NBNZ Business Confidence (DEC) |
33.2 |
||
|
CHF |
8:15 |
Industrial Production (QoQ) (3Q) |
0.9% |
5.7% |
Industrial production rose in 2Q as exports surged. |
|
CHF |
8:15 |
Industrial Production (YoY) (3Q) |
5.0% |
7.8% |
|
|
CHF |
8:30 |
Swiss National Bank Interest Rate Decision |
0.25% |
0.25% |
Implied no chance of hike |
|
EUR |
8:30 |
German PMI Manufacturing (DEC A) |
58.2 |
58.1 |
Services gauge rose to a 2-year high in November. |
|
EUR |
8:30 |
German PMI Services (DEC A) |
59.0 |
59.2 |
|
|
EUR |
9:00 |
Euro-Zone PMI Manufacturing (DEC A) |
55.2 |
55.3 |
Services & manufacturing industries beat expectations in November. |
|
EUR |
9:00 |
Euro-Zone PMI Services (DEC A) |
55.2 |
55.4 |
|
|
EUR |
9:00 |
Euro-Zone PMI Composite (DEC A) |
55.3 |
55.5 |
|
|
EUR |
9:00 |
Italian CPI (NIC incl. tobacco) (MoM) (NOV F) |
0.0% |
0.0% |
Prices declined in Nov for the first time in 4 months, as communication costs fell 1.6%. |
|
EUR |
9:00 |
Italian CPI (NIC incl. tobacco) (YoY) (NOV F) |
1.7% |
1.7% |
|
|
EUR |
9:00 |
Italian CPI – EU Harmonized (MoM) (NOV F) |
-0.1% |
-0.1% |
|
|
EUR |
9:00 |
Italian CPI – EU Harmonized (YoY) (NOV F) |
1.8% |
1.8% |
|
|
GBP |
9:30 |
Retail Sales ex Auto Fuel (MoM) (NOV) |
0.3% |
0.3% |
Sales rose in October for the first time in 3 months as consumers spent before 2011 VAT hike. |
|
GBP |
9:30 |
Retail Sales ex Auto Fuel (YoY) (NOV) |
1.4% |
1.2% |
|
|
GBP |
9:30 |
Retail Sales inc Auto Fuel (MoM) (NOV) |
0.3% |
0.5% |
|
|
GBP |
9:30 |
Retail Sales inc Auto Fuel (YoY) (NOV) |
0.7% |
-0.1% |
|
|
EUR |
10:00 |
Euro-Zone Consumer Price Index (MoM) (NOV) |
0.1% |
0.4% |
European inflation rose to the fastest in almost two years in October, led by surging energy costs. |
|
EUR |
10:00 |
Euro-Zone Consumer Price Index (YoY) (NOV) |
1.9% |
1.9% |
|
|
EUR |
10:00 |
Euro-Zone Core CPI (YoY) (NOV) |
1.1% |
1.1% |
|
|
EUR |
10:00 |
Euro-Zone Labor Costs (YoY) (3Q) |
1.5% |
1.6% |
|
|
CAD |
13:30 |
Int’l Securities Transactions (CAD) (OCT) |
10.000B |
12.253B |
3-month low in October |
|
USD |
13:30 |
Housing Starts (NOV) |
550K |
519K |
October starts were the lowest since April 2009. |
|
USD |
13:30 |
Housing Starts (MoM) (NOV) |
6.0% |
-11.7% |
|
|
USD |
13:30 |
Building Permits (NOV) |
560K |
552K |
Permits likely rose for 2nd month in November. |
|
USD |
13:30 |
Building Permits (MoM) (NOV) |
1.5% |
0.9% |
|
|
USD |
13:30 |
Current Account Balance (3Q) |
-$126.0B |
-$123.3B |
Deficit largest since 08. |
|
USD |
13:30 |
Initial Jobless Claims (DEC 11) |
425K |
421K |
Claims fell last week from 438K in the week prior. |
|
USD |
13:30 |
Continuing Claims (DEC 4) |
4115K |
4086K |
|
|
USD |
15:00 |
Philadelphia Fed. (DEC) |
15 |
22.5 |
At highest level of 2010. |
|
Currency |
GMT |
Upcoming Events & Speeches |
|||
|
AUD |
0:30 |
Reserve Bank of Australia Quarterly Bulletin |
|||
|
GBP |
9:30 |
Bank of England Publishes Inflation Survey |
SUPPORT AND RESISTANCE LEVELS
CLASSIC SUPPORT AND RESISTANCE
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist 2 |
1.3840 |
1.6420 |
89.00 |
1.0460 |
1.0922 |
1.0600 |
0.8230 |
127.60 |
146.05 |
|
Resist 1 |
1.3700 |
1.5910 |
86.00 |
1.0000 |
1.0750 |
1.0200 |
0.8000 |
120.00 |
140.00 |
|
Spot |
1.3212 |
1.5541 |
84.26 |
0.9681 |
1.0044 |
0.9856 |
0.7378 |
111.32 |
130.94 |
|
Support 1 |
1.3000 |
1.5500 |
80.00 |
0.9500 |
0.9950 |
0.9600 |
0.6850 |
103.80 |
125.00 |
|
Support 2 |
1.2925 |
1.5300 |
75.00 |
0.9000 |
0.9700 |
0.9375 |
0.6585 |
100.00 |
119.00 |
INTRA-DAY PIVOT POINTS
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist. 2 |
1.3440 |
1.5860 |
85.03 |
0.9772 |
1.0141 |
1.0047 |
0.7574 |
112.40 |
132.87 |
|
Resist. 1 |
1.3326 |
1.5700 |
84.65 |
0.9726 |
1.0092 |
0.9951 |
0.7476 |
111.86 |
131.91 |
|
Pivot |
1.3268 |
1.5616 |
84.12 |
0.9651 |
1.0047 |
0.9897 |
0.7425 |
111.58 |
131.34 |
|
Support 1 |
1.3154 |
1.5456 |
83.74 |
0.9605 |
0.9998 |
0.9801 |
0.7327 |
111.04 |
130.38 |
|
Support 2 |
1.3096 |
1.5372 |
83.21 |
0.9530 |
0.9953 |
0.9747 |
0.7276 |
110.76 |
129.81 |
CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETSSCANDIES CURRENCIES
|
Currency |
USD/MXN |
USD/TRY |
USD/ZAR |
USD/HKD |
USD/SGD |
Currency |
USD/SEK |
USD/DKK |
USD/NOK |
|
Resist 2 |
14.4500 |
1.6755 |
8.7915 |
7.8165 |
1.4945 |
Resist 2 |
7.7500 |
5.7800 |
6.2750 |
|
Resist 1 |
13.8500 |
1.5362 |
8.3675 |
7.8075 |
1.4655 |
Resist 1 |
7.5800 |
5.6625 |
6.1150 |
|
Spot |
12.4534 |
1.5254 |
6.8630 |
7.7755 |
1.3183 |
Spot |
6.8514 |
5.6398 |
5.9705 |
|
Support 1 |
12.0500 |
1.3665 |
6.6950 |
7.7490 |
1.2750 |
Support 1 |
6.4500 |
5.2625 |
5.7030 |
|
Support 2 |
11.7200 |
1.3475 |
6.4300 |
7.7450 |
1.2500 |
Support 2 |
6.1250 |
5.1000 |
5.5200 |
INTRA-DAY PROBABILITY BANDS
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist. 3 |
1.3401 |
1.5712 |
85.25 |
0.9801 |
1.0151 |
0.9993 |
0.7483 |
112.91 |
132.70 |
|
Resist. 2 |
1.3354 |
1.5669 |
85.01 |
0.9771 |
1.0124 |
0.9959 |
0.7456 |
112.51 |
132.26 |
|
Resist. 1 |
1.3307 |
1.5627 |
84.76 |
0.9741 |
1.0097 |
0.9924 |
0.7430 |
112.11 |
131.82 |
|
Spot |
1.3212 |
1.5541 |
84.26 |
0.9681 |
1.0044 |
0.9856 |
0.7378 |
111.32 |
130.94 |
|
Support 1 |
1.3117 |
1.5455 |
83.76 |
0.9621 |
0.9991 |
0.9788 |
0.7326 |
110.53 |
130.06 |
|
Support 2 |
1.3070 |
1.5413 |
83.51 |
0.9591 |
0.9964 |
0.9753 |
0.7300 |
110.13 |
129.62 |
|
Support 3 |
1.3023 |
1.5370 |
83.27 |
0.9561 |
0.9937 |
0.9719 |
0.7273 |
109.73 |
129.18 |
v
Written by: David Rodríguez, Quantitative Strategist for DailyFX.com
To submit Questions or Comments about an article; email drodriguez@dailyfx.com
