- Dollar Climbs Against the Euro but Left Adrift Everywhere Else
- Euro: The Promise of a ‘Comprehensive’ Answer to Europe’s Problems Quickly Fades
- British Pound Find’s Little Strength on Better Confidence, Housing Figures
- Canadian Dollar Traders Await the Bank of Canada’s Rate Decision
- New Zealand Dollar Marches Higher though Housing Data Far from Robust
- Australian Dollar Slips Despite Hawkish Sentiment from Inflation Report
Dollar Climbs Against the Euro but Left Adrift Everywhere Else
Once again, we would have do take a more critical look at the US dollar to assess its performance Monday. An overdue correction from EURUSD seems to signal a robust performance from the individual currency. It was the first advance for the greenback in this benchmark pair in six active trading sessions; and given this particular pair’s weight in the Dollar Index, the composite would similarly show a meaningful bounce for the dollar. Yet, when we measure the performance of the other majors Monday, we are left with a very different assessment. With most of the US capital markets and banks closed for the extended Martin Luther King Jr. holiday; there was a notable lack of participation State-side. For most of majors, congestion was the appropriate outcome considering there was relatively little pressure to forge new trends or correct already overextended runs. However, for EURUSD, the situation was different. Looking beyond liquidity, this particular pair found itself repelled by a technical ceiling and further manipulated by meaningful fundamental activity from the Euro-region.
Cross-market fundamental drivers were in play to start the week, starting in the Asian session. China would once again stir the risk appetite pot by announcing yet another 50 basis point hike to its banking sector’s reserve ratio. That is the fourth hike to this measure in two months and brings the rate up to approximately 19 percent for the nation’s largest banks. This is a significant level of capital that the China’s banks must keep on hand; it is an effort directly targeted at cooling the nation’s overheated property and asset markets. Considering this emerging market is seen as the investment capital of the world; the shift dimmed risk appetite; but the impact was far more reserved than what we saw back when this was a new effort. Speculators are growing acclimated to these steps – which makes it all the more unusual that risk appetite in general continues to build without concern. Another factor playing to the dollar’s safe haven status and specifically playing to the currency’s role as a benchmark counterpart to the euro, was the Euro-are Finance Ministers meeting. Given all the conjecture over a significant increase of the region’s bailout efforts; speculators were disappointed to see little headway towards meaningful changes (more on that below).
Back at home, the dollar wouldn’t be left completely reliant on risk appetite and other offshoot fundamental trends. Philadelphia Fed President Charles Plosser added the necessary, hawkish balance to the otherwise dovish lean the central bank has maintained its policy efforts over the past few years. Long an opponent of excessive intervention, the policy maker voiced his concern that current efforts were too close to guiding asset prices; and in that aim, they would fall short to provide a material improvement. And, for those keeping constant and nuanced vigilance over the stimulus effort; Plosser further opined that he couldn’t rule out a rate hike before the end of the year and he could see the scenario for ending the stimulus program earlier. Looking ahead to tomorrow, data will start to populate the docket; but indicators like TIC flows and Empire manufacturing are not top tier releases. Instead, traders should keep an eye on equities as the 4Q earnings season ramps up.
Related: Discuss the Dollar in the DailyFX Forum, John’s Analyst Picks: EURUSD and GBPAUD Hold and Now Await True Turns
Euro: The Promise of a ‘Comprehensive’ Answer to Europe’s Problems Quickly Fades
Last week, the euro was the focus of the fundamental FX traders’ world. The combination of inflation concerns from the ECB and talk of various proposals aimed at expanding the effort to stabilize European financial markets while promoting growth would encourage a much-needed dose of optimism. However, traders have growth to be skeptical – and for good reason. With the immediate rush of optimism having already washed over the market, investors were looking for meaningful progress on these fronts. Yet, from the EU Finance Ministers’ meeting, there seemed little advance in bold proposals; and in fact, there was more contradictory commentary than anything else. Suggestions by Germany’s Finance Minister that the EFSF fund size was appropriate while the ECB’s Orphanides suggesting this program should be used to buy bonds showed mixed beliefs. Meanwhile, the ECB reported it bought 2.313 billion euros in debt last week – likely playing a big part in the market improvement. Elsewhere, Spain announced it was cancelling its January 20th bond auction to syndicate it through banks – a blow to transparency.
British Pound Find’s Little Strength on Better Confidence, Housing Figures
The sterling found a few meaningful releases over the past 24 hours. Early Monday morning, the Rightmove housing price growth reading for January held at its lowest annual pace of expansion since October 2009. On the other hand, both the December RICS house price balance and Nationwide consumer confidence survey rose from near two-year lows. Our focus though should be on the inflation statistics due next.
Canadian Dollar Traders Await the Bank of Canada’s Rate Decision
Interest rate expectations for the Canadian dollar are still relatively robust (overnight index swaps are pricing in approximately 82 basis points worth of hikes over the coming 12 months). However, we have seen a dovish shift in policy officials’ commentary and data that has clearly disappointed. So, what should we expect from the BoC? A hike is very unlikely; and a statement will likely defer to Wednesday’s report.
New Zealand Dollar Marches Higher though Housing Data Far from Robust
It is unusual when New Zealand’s fundamental event risk has a tangible impact on the kiwi itself. This was case for Monday’s event risk with an 11.3 percent annual drop in the REINZ home sales report for December – though this was the smallest drop since March of last year. We are still looking ahead to the 4Q CPI data scheduled for release a little later in the week (it’s always about yield for this currency).
Australian Dollar Slips Despite Hawkish Sentiment from Inflation Report
There are two levels of discussion when it comes to the Australian dollar. On the one hand, the currency is still considered one of the most appealing currency’s out there with its 4.75 percent benchmark lending rate and high inflation outlook. Early Monday a TD Securities price gauge reading 3.8 percent would keep the pressure on. However, growth is becoming a more prominent concern in this equation with the flood.
Tell us what you think of this article!
For Real Time Forex News, visit:http://www.dailyfx.com/real_time_news/
**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar
ECONOMIC DATA
Next 24 Hours
|
Currency |
GMT |
Release |
Survey |
Previous |
Comments |
|
GBP |
0:01 |
Nationwide Consumer Confidence (DEC) |
44 |
45 |
Fell to a 20-month low in November. |
|
GBP |
0:01 |
RICS House Price Balance (DEC) |
-44% |
-44% |
Negative reading in the last 5 months. |
|
CNY |
2:00 |
Actual Foreign Direct Investment (YoY) (DEC) |
11.2% |
38.2% |
Rose YoY in the last sixteen months. |
|
NZD |
2:00 |
Non Resident Bond Holdings (DEC) |
64.6% |
At the highest level since November 2009. |
|
|
JPY |
4:30 |
Industrial Production (MoM) (NOV F) |
1.0% |
Japanese industrial production expanded in November, following five consecutive months of decline. |
|
|
JPY |
4:30 |
Industrial Production (YoY) (NOV F) |
5.8% |
||
|
JPY |
4:30 |
Capacity Utilization (MoM) (NOV F) |
-2.3% |
||
|
JPY |
5:30 |
Tokyo Department Store Sales (YoY) (DEC) |
0.3% |
Japanese department store sales declined YoY in 32 of the last 33 months. |
|
|
JPY |
5:30 |
Nationwide Department Store Sales (YoY) (DEC) |
-0.5% |
||
|
JPY |
6:00 |
Machine Tool Orders (YoY) (DEC F) |
63.5% |
Increased annually in the last 13 months. |
|
|
GBP |
9:30 |
Consumer Price Index (MoM) (DEC) |
0.7% |
0.4% |
U.K. inflation rate unexpectedly accelerated to a six-month high in November and was above the target rate for a ninth month. |
|
GBP |
9:30 |
Consumer Price Index (YoY) (DEC) |
3.4% |
3.3% |
|
|
GBP |
9:30 |
Core Consumer Price Index (YoY) (DEC) |
2.7% |
2.7% |
|
|
GBP |
9:30 |
Retail Price Index (DEC) |
228.4 |
226.8 |
U.K. November retail prices increased in November for a fourth consecutive month, as petrol & oil prices rose over 10% and food, alcohol, and tobacco prices rose over 5%. |
|
GBP |
9:30 |
Retail Price Index (MoM) (DEC) |
0.7% |
0.4% |
|
|
GBP |
9:30 |
Retail Price Index (YoY) (DEC) |
4.8% |
4.7% |
|
|
GBP |
9:30 |
Retail Price Index Ex Mort Int.Payments (YoY) (DEC) |
4.8% |
4.7% |
|
|
GBP |
9:30 |
DCLG UK House Prices (YoY) (NOV) |
5.5% |
UK home prices rose in the last 12 months. |
|
|
EUR |
10:00 |
German ZEW Survey (Economic Sentiment) (JAN) |
7.0 |
4.3 |
German investor confidence rose in December to its highest level since 2007. |
|
EUR |
10:00 |
German ZEW Survey (Current Situation) (JAN) |
83.7 |
82.6 |
|
|
EUR |
10:00 |
Euro-Zone ZEW Survey (Economic Sentiment) (JAN) |
16.6 |
15.5 |
Rose to a four-month high in December. |
|
EUR |
10:00 |
Italian Current Account (euros) (NOV) |
-2580M |
Deficit shrank in October from a 21-month high the month prior. |
|
|
USD |
13:30 |
Empire Manufacturing (JAN) |
13.00 |
10.57 |
Likely rose for a second month in January. |
|
14:00 |
Bank of Canada Interest Rate Decision |
1.00% |
1.00% |
Market implies 4% chance of 25bp hike. |
|
|
USD |
14:00 |
Total Net TIC Flows (NOV) |
$7.5B |
Total net TIC flows were positive in October for a fourth consecutive month. |
|
|
USD |
14:00 |
Net Long-term TIC Flows (NOV) |
$40.0B |
$27.6B |
|
|
USD |
15:00 |
NAHB Housing Market Index (JAN) |
17 |
16 |
Probably rose to 8-month high in January. |
|
USD |
22:00 |
ABC Consumer Confidence (JAN 16) |
-40 |
Currently at highest reading since 2008. |
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 |
1.5910 |
86.00 |
0.9775 |
1.0750 |
1.0200 |
0.8000 |
120.00 |
140.00 |
|
Spot |
1.3155 |
1.5878 |
82.75 |
0.9653 |
0.9874 |
0.9935 |
0.7722 |
109.95 |
131.40 |
|
Support 1 |
1.2900 |
1.5312 |
80.00 |
0.9300 |
0.9800 |
0.9600 |
0.6850 |
103.80 |
125.00 |
|
Support 2 |
1.2585 |
1.5186 |
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 |
11.9915 |
1.5423 |
6.8960 |
7.7764 |
1.2880 |
Spot |
6.7161 |
5.6076 |
5.8607 |
|
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 |
1.3401 |
1.6009 |
83.36 |
0.9706 |
0.9923 |
1.0028 |
0.7793 |
111.76 |
132.09 |
|
Resist 1 |
1.3278 |
1.5943 |
83.06 |
0.9680 |
0.9898 |
0.9982 |
0.7757 |
110.85 |
131.74 |
|
Pivot |
1.3202 |
1.5890 |
82.70 |
0.9650 |
0.9878 |
0.9922 |
0.7713 |
110.22 |
131.37 |
|
Support 1 |
1.3079 |
1.5824 |
82.40 |
0.9624 |
0.9853 |
0.9876 |
0.7677 |
109.31 |
131.02 |
|
Support 2 |
1.3003 |
1.5771 |
82.04 |
0.9594 |
0.9833 |
0.9816 |
0.7633 |
108.68 |
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 |
1.3345 |
1.6060 |
83.72 |
0.9778 |
0.9982 |
1.0082 |
0.7840 |
111.62 |
133.25 |
|
Resist. 2 |
1.3297 |
1.6015 |
83.48 |
0.9747 |
0.9955 |
1.0045 |
0.7810 |
111.20 |
132.79 |
|
Resist. 1 |
1.3250 |
1.5969 |
83.24 |
0.9715 |
0.9928 |
1.0009 |
0.7781 |
110.78 |
132.33 |
|
Spot |
1.3155 |
1.5878 |
82.75 |
0.9653 |
0.9874 |
0.9935 |
0.7722 |
109.95 |
131.40 |
|
Support 1 |
1.3060 |
1.5787 |
82.26 |
0.9591 |
0.9820 |
0.9861 |
0.7663 |
109.12 |
130.47 |
|
Support 2 |
1.3013 |
1.5741 |
82.02 |
0.9559 |
0.9793 |
0.9825 |
0.7634 |
108.70 |
130.01 |
|
Support 3 |
1.2965 |
1.5696 |
81.78 |
0.9528 |
0.9766 |
0.9788 |
0.7604 |
108.28 |
129.55 |
v
Written by: John Kicklighter, Currency Strategist for DailyFX.com
To receive John’s reports via email or to submit Questions or Comments about an article; email jkicklighter@dailyfx.com
