Global Markets:

  • Asian stock markets: Nikkei up 1.10 %, Shanghai Composite gained 0.80 %, Hang Seng declined 0.10 %, ASX dropped 1.40 %
  • Commodities: Gold at $1183 (-1.20 %), Silver at $16.10 (-3.10 %), Crude Oil at $68.95 (-6.50 %)
  • Rates: US 10 year yield at 2.211, UK 10 year yield at 1.922, German 10 year yield at 0.702

News & Data:

  • Japan CPI 2.9 % y/y, Expected: 3.0 %, Previous: 3.2 %
  • Japan Core CPI 2.9 % y/y, Expected: 2.9 %, Previous: 3.0 %
  • Japan Tokyo CPI 2.1 %, Expected: 2.3 %, Previous: 2.5 %
  • Japan Industrial Production 0.2 %, Expected: -0.4 %, Previous: 2.9 %
  • Japan Retail Sales 1.4 %, Expected: 1.5 %, Previous: 2.3 %
  • New Zealand ANZ Business Confidence 31.5 %, Previous: 26.5 %
  • Australia Private Sector Credit m/m 0.6 %, Expected: 0.5 %, Previous: 0.5 %
  • Japan’s LDP Secretary General Tanigaki says its not desirable for forex to move rapidly, watching moves of $JPY closely
  • Yen Falls Toward Seven-Year Low as Spending Falls; Aussie Drops (BBG)
  • Oil Heads for Biggest Drop Since 2011 as OPEC Targets U.S. Shale (BBG)
  • Gold Set to Snap Three Weeks of Increases on Lower Energy Prices (BBG)

Markets Update:

The USD strengthened overnight, mostly driven by weak commodities. Oil prices fell sharply after the OPEC decided to leave production unchanged. Some think that this decision has been made to hurt the US shale oil industry, given the comments from members that OPEC countries shouldn’t be the only one’s carrying the burden of declining oil prices. Brent Oil dropped to a low of $71.22, while WTI briefly traded below $68. This has also dragged precious metals lower, with Gold at $1185 and likely heading for another test of the $1774 support level. A break beneath would pave the way for another move towards $1150. Looking at Silver, there has been some decent downside momentum in the past few sessions and $15.90 will be the pivotal level in the near-term. A break lower would suggest that the downtrend will resume with the $15.00 level again targeted.

In FX, EUR/USD weakened to a low of 1.2441 overnight. Support at 1.2440 looks decent for now, but is unlikely to hold after the clear rejection off 1.2530 resistance and overall selling interest remaining intact. Plenty of stops resting sub-1.2440 and not much support noted then until 1.2350/60. Cable is also showing signs of weaknesses as it failed to hold above the 1.5730/35 area (a strong resistance area prior to breakout). Intraday support noted at 1.5690 and then at 1.5650, while to the topside, resistance seen at 1.5740/45 and then 1.5820.

USD/JPY rallied overnight and the pair reached a high of 118.30. Offers are solid ahead of 118.50, but a break above is likely to attract further momentum buying and pave the way for another 119.00 test. To the downside, bids reported at 117.80 and towards 117.50. Meanwhile, the commodity currencies are under pressure again. AUD/USD is back sub-0.85 and could reach a fresh multi-year low today. Beneath 0.8475, not much support seen until around 0.8400. USD/CAD remained well-bid in Asia and the next bull target is the 1.1400/10 resistance area. Keep in mind that we’ll have the Canadian GDP release today at 1330 GMT.

Upcoming Events:

  • 07:00 GMT – German Retail Sales (1.7 % y/y)
  • 10:00 GMT – Italian CPI (-0.3 % m/m, 0.0 % y/y)
  • 10:00 GMT – Euro Zone Core CPI (0.7 % y/y)
  • 10:00 GMT – Euro Zone CPI (0.3 % y/y)
  • 10:00 GMT – Euro Zone Unemployment Rate (11.5 %)
  • 13:30 GMT – Canadian GDP (0.4 % m/m, 2.1 % q/q)