Dollar Curbs Tumble Despite GDP Drop, Fed Stimulus Oath     

RELATED QUOTES

SymbolPriceChange
EURUSD=X1.3841+0.0025
USDJPY=X101.9850-0.259
NZDUSD=X0.8625+0.0002

  • Dollar Curbs Tumble Despite GDP Drop, Fed Stimulus Oath
  • Euro Climbs Above 1.3500 Despite Deepening Spanish Recession
  • New Zealand Dollar Recovers Lost Ground after RBNZ Holds
  • Japanese Yen: Escalating Threats Running Out of Influence
  • Swiss Franc Surges: Safe Haven, Euro Strength, SNB Unwind?
  • Canadian Dollar Faces Monthly GDP Read in Upcoming Session
  • Gold Weighs in on Fed Stimulus, Weak GDP with Biggest Rally in 3 Weeks

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Dollar Curbs Tumble Despite GDP Drop, Fed Stimulus Oath

The fundamental winds were blowing heavily this past session, but you would have been able to tell from the dollar or capital markets. Despite the speculative and stimulus implications of the day’s top US 4Q GDP report and Fed rate decision, neither risk trends nor dollar were significantly moved. Notably, the Dow Jones FXCM Dollar Index (ticker = USDollar) checked its sharp drop Tuesday from six months highs by closing slightly higher in the following session. From the majors, when the remarkable performances by the Swiss franc and Euro (more on that below) were excluded, the dollar managed to hold its ground well.

Market direction was not the surprising aspect of the previous trading session. Instead, the lack of volatility comes off as extraordinary. The US docket offered up two key events that could tap into two of the market’s most recurrent drivers: risk trends and competitive stimulus. First up was the advanced (first) reading of fourth quarter US Gross Domestic Product (GDP). The consensus was set for a significantly slowing from the previous quarter from a 3.1 to 1.1 percent annualized pace. The actual figure was a contraction (-) 0.1 percent. The bullish angle to the data was that the significant decline was established through the biggest drop in defense spending in 40 years and a slowdown in inventory buildup (each deducting 1.3 percentage points). Nevertheless, fast-moving speculators will often move on surface level interpretations and then the committed money comes in with a more thorough assessment. Ultimately, we are almost always met with volatility.

The second opportunity to move the greenback and broader capital markets came in afternoon trading of the New York session. The Federal Open Market Committee (FOMC) deliberated on policy the month after the group announced it would add outright purchases of Treasuries to its QE3 mortgage backed diet. That translates into $85 billion in monthly stimulus that would be sustained until unemployment was expected to hit 6.5 percent and/or inflation returned to 2.5 percent. It was unlikely that the group would follow up with another change so soon, but there was speculation that timing for a slowing or halt to stimulus would be offered drawn out of the comments or vote count. A new board member (George) did dissent, but the reflection on growth‘pausing in recent months’ spoke more to sustained stimulus. And yet, no dollar unwind.

There are explanations that can be made as to the lack of drive to each of the past sessions’ fundamental drivers, but the lack of volatility stands out as highly unusual given the connections to the risk and stimulus themes. This could very well be an indication that market participation is frozen. Though, as an early warning, the biggest drop in high-yield bond funds in seven months and pick up in volatility measures is interesting.

Euro Climbs Above 1.3500 Despite Deepening Spanish Recession

Perhaps the only currency that was more unusual in its fundamental bearings than the dollar over the past session was the euro. EURUSD rallied above the heavy 1.3500-figure (the midpoint of the 2011 high and 2012 low) despite an explicitly weak docket. Top listing was the 4Q Spanish GDP release which posted a deeper quarterly contraction (0.7 percent) which led the economy to its fastest pace of wealth evaporation since the end of 2009. Less dramatic, but contributing to the negative view: the Italian stock index plunged 3.4 percent, Catalonia asked for €9 billion in additional funds and Greece’s bank refunding group said it would need more time. Despite all of this, the euro advanced against all but the franc. Repatriated capital flows and ECB stimulus reductions (LTRO) may play a role here; but such a balance won’t last if risk trends spark.

New Zealand Dollar Recovers Lost Ground after RBNZ HoldsThough there wasn’t a material risk aversion move showing through in US equities or the Risk-Reward Index, the New Zealand dollar was falling back through much of the last session. Temporary reprieve arose when the Reserve Bank of New Zealand (RBNZ) announced its competitive 2.50 percent benchmark would be kept in place and offered no suggestion that a dovish shift was coming despite a cooling in recent inflation reads. An intraday rebound was in order, but it would fully erase the day’s losses. This disparity from supposed risk trends remains a concern.

Japanese Yen: Escalating Threats Running Out of Influence

Risk trends can be ignored when they are not under significant pressure, but then we need to find another proactive catalyst like relative policy easing for sustained momentum. Therein lies the yen crosses’ quandary. The yen is currently at multi-year lows against most of its counterparts, and this move without a significant appetite for risk carry interest in the FX market or a competitive stimulus effort. Sure, the Bank of Japan (BoJ) has threatened 13 trillion yen in monthly stimulus starting in 2014, but that is a year away. The only way to keep the risk at hand while the Fed actually eases is to escalate the threats. New BoJ Governor ambitions can stoke easing speculation, but not much at these highs.

Swiss Franc Surges: Safe Haven, Euro Strength, SNB Unwind?

Hands down, the biggest mover on the day was the Swiss franc. The currency rallied against all of its counterparts with the biggest gains coming versus investment currencies (Australian and New Zealand dollars) and the manipulated yen. This is a move that has purpose and drive, yet there were no major news events or yield changes. A euro-sympathy move falls short, so perhaps it was SNB balance sheet unwind.

Canadian Dollar Faces Monthly GDP Read in Upcoming Session

There was little individual drive from the Canadian dollar this past session, but that may change in the upcoming session. On deck, we have the November GDP release. Though more timely, the monthly figures tend to lessen the data’s impact. That said, if the data offers a substantial surprise (particularly a miss), the ‘loonie’ may build on fellow commodity currency momentum and lead an underlying fundamental shift.

Gold Weighs in on Fed Stimulus, Weak GDP with Biggest Rally in 3 Weeks

All in all, it seemed that the market seemed to have little concern about the stimulus and risk implications of the US docket’s listings. That was the assessment we would draw from the mild reaction from the dollar and equities. Yet, looking gold, there seemed a material demand for an alternative to depreciating currencies. The biggest rally in three weeks should raise our interest and keep our eyes circling back to the dollar.

**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar

ECONOMIC DATA

GMT

Currency

Release

Survey

Previous

Comments

0:00

AUD

HIA New Home Sales (MoM)

4.70%

Large swings in data set.

0:01

GBP

GfK Consumer Confidence Survey

-28

-29

EU’s debt dragged confidence lower from 06/11 to 11/12.

0:30

AUD

Private Sector Credit (MoM)

0.20%

0.00%

Three year average at 0.28.

0:30

AUD

Private Sector Credit (YoY)

3.40%

3.50%

Stabilizing at around 3.5.

0:30

AUD

Export Price Index (QoQ)

-1.50%

-6.40%

Trending lower since 2012.

0:30

AUD

Import Price Index (QoQ)

0.40%

-2.40%

No obvious trend, largely subjected to trading partners’ currency.

1:30

JPY

Labor Cash Earnings (YoY)

-0.80%

Slightly trending lower since 06/10.

2:00

NZD

Money Supply M3 (YoY)

5.00%

Has remained above 5 since 2011.

4:00

JPY

Vehicle Production (YoY)

-8.40%

Plummeted between 04/12 and 09/12. Weaker yen may help autos.

5:00

JPY

Housing Starts (YoY)

13.50%

10.30%

Has decreased from its high on 10/12 at 25.2.

5:00

JPY

Annualized Housing Starts

0.895M

0.907M

Slowly trending higher since 09/11.

7:00

GBP

Nationwide House Prices s.a. (MoM)

0.20%

-0.10%

Has recovered from 06/12 low.

7:00

GBP

Nationwide House Prices n.s.a. (YoY)

-0.30%

-1.00%

7:00

EUR

German Retail Sales (MoM)

-0.10%

0.90%

Previous high on 11/12 at 1.2, testing 1.4 high made on 03/12.

7:00

EUR

German Retail Sales (YoY)

-1.50%

-0.90%

8:55

EUR

German Unemployment Rate s.a.

6.90%

6.90%

Has remained at 6.8 over 2012 and began to move to the upside.

8:55

EUR

German Unemployment Change

8K

3K

Has showed signs of improvement.

10:00

EUR

Euro-Zone CPI Estimate (YoY)

2.20%

12:30

USD

Challenger Job Cuts (YoY)

-22.10%

Has declined since 09/2011.

13:00

EUR

German CPI (YoY)

2.00%

2.10%

Declining since 10/2011.

13:00

EUR

German CPI - EU Harmonised (YoY)

2.00%

2.00%

Declining since 10/2011.

13:30

CAD

Gross Domestic Product (MoM)

0.20%

0.10%

One year average at 0.1.

13:30

CAD

Gross Domestic Product (YoY)

1.40%

1.10%

Trending lower towards 1.

13:30

USD

Personal Spending

0.30%

0.40%

Large swings in data set.

13:30

USD

Personal Consumption Expenditure Core (YoY)

1.40%

1.50%

Moving lower since 03/2012.

13:30

USD

Initial Jobless Claims

350K

330K

Broadly trending lower, although spiked on 11/12.

13:30

USD

Continuing Claims

3171K

3157K

13:30

CAD

Industrial Product Price (MoM)

0.00%

-0.30%

Has declined since 09/12.

13:30

USD

Personal Income

0.80%

0.60%

Approaching the peak on 01/12.

13:30

USD

Personal Consumption Expenditure Deflator (YoY)

1.40%

1.40%

Signaling inflation will head to the downside in 2013.

13:30

CAD

Raw Materials Price Index (MoM)

0.00%

-1.90%

Large swings in data set.

14:45

USD

Chicago Purchasing Manager

50.5

50

Declining since 01/2011.

22:30

AUD

AIG Performance of Manufacturing Index

44.3

Broadly trending lower since 04/10.

23:30

JPY

Jobless Rate

4.10%

4.10%

Showing a clear downward trend over 2012.

23:30

JPY

Household Spending (YoY)

-0.20%

0.20%

Expenditure reached a two year high on 05/12, but returned lower.

GMT

Currency

Upcoming Events & Speeches

JPY

Bank of Japan Deputy Governor Yamaguchi Speaks

EUR

Greek Retail Sales

SUPPORT AND RESISTANCE LEVELS

To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal

To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table

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

15.5900

2.0000

9.2080

7.8165

1.3650

Resist 2

7.5800

5.8300

6.1150

Resist 1

15.0000

1.9000

9.1900

7.8075

1.3250

Resist 1

6.8155

5.7350

5.8200

Spot

12.7243

1.7690

9.0207

7.7580

1.2385

Spot

6.3473

5.4978

5.4751

Support 1

12.5000

1.6500

8.5650

7.7490

1.2000

Support 1

6.0800

5.4440

5.5000

Support 2

11.5200

1.5725

6.5575

7.7450

1.1800

Support 2

5.8085

5.3350

5.3040

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

1.3683

1.5924

91.98

0.9175

1.0090

1.0481

0.8435

125.16

145.56

Resist. 2

1.3654

1.5895

91.71

0.9156

1.0074

1.0460

0.8416

124.71

145.10

Resist. 1

1.3626

1.5866

91.44

0.9137

1.0057

1.0439

0.8396

124.26

144.64

Spot

1.3570

1.5809

90.91

0.9100

1.0024

1.0398

0.8356

123.37

143.73

Support 1

1.3514

1.5752

90.38

0.9063

0.9991

1.0357

0.8316

122.48

142.81

Support 2

1.3486

1.5723

90.11

0.9044

0.9974

1.0336

0.8296

122.03

142.35

Support 3

1.3457

1.5694

89.84

0.9025

0.9958

1.0315

0.8277

121.58

141.89

v

--- Written by: John Kicklighter, Chief Strategist for DailyFX.com

To contact John, email jkicklighter@dailyfx.com. Follow me on twitter at https://www.twitter.com/JohnKicklighter

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Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    1.2508-0.00010.00%
    USDSGD=X
    1.7313+0.0031+0.18%
    EURSGD=X
    2.1054+0.0041+0.19%
    GBPSGD=X
    81.5572-0.1792-0.22%
    SGDJPY=X
    6.1989+0.00010.00%
    SGDHKD=X
    2.59170.000.00%
    SGDMYR=X
    9,137.8652-5.1523-0.06%
    SGDIDR=X
    4.97300.000.00%
    SGDCNY=X
    1.1705-0.0014-0.12%
    AUDSGD=X
  • Commodities
    Commodities
    NamePriceChange% Chg
    1,300.20-3.30-0.25%
    GCM14.CMX
    19.55-0.09-0.45%
    SIK14.CMX
    90.83-1.04-1.14%
    ^XAU
    3.030.00+0.02%
    HGK14.CMX
    104.10+0.34+0.33%
    CLK14.NYM
  • Bonds
    Bonds
    TreasuryYield (%)Yield Change
    1.65+0.04
    ^FVX
    2.64+0.01
    ^TNX
    3.45-0.01
    ^TYX

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    0.116-0.001-0.85%
    B22.SI
    0.485+0.025+5.43%
    5GJ.SI
    2.27+0.090+4.13%
    5ME.SI
    2.190.0000.00%
    JS8.SI
    0.6050.0000.00%
    E5H.SI
  • % Gainers
    % Gainers
    NamePriceChange% Chg
    0.20+0.034+20.48%
    5WD.SI
    0.215+0.015+7.50%
    5UE.SI
    0.485+0.025+5.43%
    5GJ.SI
    0.68+0.035+5.43%
    5DP.SI
    0.18+0.008+4.65%
    5IF.SI
  • % Losers
    % Losers
    NamePriceChange% Chg
    0.141-0.012-7.84%
    5HH.SI
    0.112-0.008-6.67%
    5RC.SI
    0.355-0.025-6.58%
    KJ9.SI
    0.192-0.008-4.00%
    567.SI
    0.84-0.040-4.55%
    S05.SI