Global Markets: 

  • Asian stock markets: Nikkei down 2 %, Shanghai Composite gained 0.10 %, Hang Seng gained 0.75 %, ASX rose 1.00 %
  • Commodities: Gold at $1234 (+0.35 %), Silver at $17.50 (+0.85 %), Crude Oil at $85.10 (-0.80 %)
  • Rates: US 10 year yield at 2.25 

News & Data: 

  • Australia NAB Business Confidence 5.00, Previous: 7.00
  • UK BRC Retail Sales Monitor -2.1 %, Expected: +1.0 %, Previous: 1.3 %
  • Japan CGPI 3.5 %, Expected: 3.6 %, Previous: 3.9 %
  • RBA’s Debelle: fixed income sell-off could be violent when data comes out, divergent global policy a challenge for FX markets
  • RBA’s Debelle: lower AUD would be helpful in achieving balanced growth; when market volatility returns it may rise rapidly
  • RBA’s Debelle: AUD still above most estimates of fundamentals and still too high despite recent weakness 

FX Overview: 

We saw a fair amount of volatility yesterday despite the holidays in the US and Canada. US equities got hit ahead of the close and the S&P 500 finished the day 1.65 % lower. The move in equities dragged the USD/JPY lower as well and led to broad USD weakness into the Asian open. Overnight, APAC stock markets have performed well aside from the Nikkei, which declined 2 % on the day. Precious metals and Oil have been consolidating, while in FX, the Aussie Dollar remains the top performer.

After the strong bounce off 0.8650, AUD/USD remained well bid throughout the day and was able to extend gains to 0.8811 overnight. Dealers noted demand from leveraged funds and trust names and decent AUD/JPY buying from specs. Key intraday support now lies at 0.8740 and a daily close above 0.88 would pave the way for another 0.89 test. In AUD/JPY, there is solid resistance at 94.62, in form of the 200 DMA.

EUR/USD hit a high of 1.2760, but ran into decent selling interest there. Asia reports offers from macro funds at 1.2770, while key intraday support lies at 1.2680. Techs and positioning suggest there is still plenty of room for a further correction to the upside. GBP/USD failed to sustain momentum above 1.61 and is consolidating around 1.6070 as we are heading into the London open. The market is now waiting for the inflation figures at 0830 GMT with key support at 1.60 and resistance at 1.6135.

USD/JPY broke beneath the 106.80 support level, but bounced from there. Japanese names were again keen buyers and the pair managed to reach a high of 107.30. Solid offers reported into 107.50, while systematic stops noted through 106.70 and 106.50. 

Upcoming Events: 

  • 06:45 GMT – French CPI (-0.3 % MoM)
  • 07:00 GMT – Spanish CPI (0.2 % MoM, -0.2 % YoY)
  • 07:15 GMT – Swiss PPI (-0.1 % MoM, -1.4 % YoY)
  • 08:30 GMT – UK CPI (0.2 % MoM, 1.4 % YoY)
  • 08:30 GMT – PPI Input (-0.4 % MoM, -6.7 % YoY)
  • 08:30 GMT – PPI Output (-0.1 % MoM, -0.3 % YoY)
  • 09:00 GMT – Italian CPI (-0.3 % MoM, -0.1 % YoY)
  • 09:00 GMT – German ZEW Economic Sentiment (1.0)
  • 09:00 GMT – Euro Zone ZEW Economic Sentiment (7.1)
  • 09:00 GMT – Euro Zone Industrial Production (-1.6 % MoM, -0.9 % YoY)