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Can Dollar, EUR/USD Break 1.3400-1.3250 Range on House Vote?
Can Dollar, EUR/USD Break 1.3400-1.3250 Range on House Vote?
Japanese Yen: Did the BoJ Meet Expectations, Will USD/JPY Break?
British Pound Faces Jobs Data, BoE Minutes, Cameron Speech
Euro Slides Despite Strong Investor Sentiment, Spanish Bond Sale
Australian Dollar Unfazed by 4Q CPI Miss
Canadian Dollar: What Should We Expect from the BoC Rate Decision?
Gold Positioned for Another Breakout as Dollar Faces Deficit Risk Resolution
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Can Dollar, EUR/USD Break 1.3400-1.3250 Range on House Vote?
As equities climbing to fresh five-year highs after hours following the Google and IBM earnings reports and yen’s unrelenting rally shaken, the dollar witnessed a market-wide slide this past session. A second consecutive decline for the Dow Jones FXCM Dollar Index (ticker = USDollar) has carried the benchmark further back from its six-month highs. Critical to the greenback’s performance from here is the bearings for underlying risk trends moving forward. Through the past few weeks, the safe haven currency has been able to divorce itself from the advance of speculative benchmarks like the S&P 500 as risk measures in the FX market maintained pressure for a refuge from potentially adverse swells. Yet, so far this week, fundamental Risk-Reward trendshave recovered from three-month lows and FX volatility has retreated from four month highs.
There are two ways the dollar may progress from here. If general speculative trends remain relatively unchanged, cross-market activity (like a strong yen rally forcing a serious USDJPY move) can play a bigger role. Yet, at anytime risk trends are revived – the dollar will react. Many of the global financing market’s most pressing concerns (Euro crisis, Fiscal Cliff, Chinese economic slump) have tempered. A further reduction of the so-called ‘tail risk’ may take place in the upcoming session when the US House of Representatives votes to temporarily raise the deficit ceiling (to May 19). However, the level of relief rally this provides speculative trends (weight for the dollar) may not be comparable to the Fiscal Cliff resolution as the pressure isn’t particularly intense at the moment. Nevertheless, it would further reduce risk.
Japanese Yen: Did the BoJ Meet Expectations, Will USD/JPY Break?
The market raised a collective eyebrow yesterday after the Bank of Japan (BoJ) announced its monetary policy changes. What was billed as a clear catalyst for over-extended yen crosses (either offering further fuel for sustained rallies or the spark needed for a sharp reversal) proved a complicated evaluation as to whether the speculative masses should be impressed or disappointed. The prevailing consensus heading into the event was that the central bank would adopt a 2 percent inflation target and attach to that objective a vow of unlimited stimulus that would remain in place as long as sustainable price growth remained elusive. That expectation was met…partially. The BoJ announced that it would purchase 13 trillion yen ($147 billion) worth of assets per month, which trumps the Fed’s own monthly $85 billion in Treasury and mortgage backed securities (MBS) purchases. This would have been the rally call to drive the yen crosses to fresh highs, if it weren’t for a serious caveat.
While the size of the program impressed, the market was thrown for a loop when the policy officials said that the ‘unlimited’ stimulus program wouldn’t start until January 2014. For many, this feels like the unsubstantiated threats that Japan’s central bank and government made so frequently (and to little success) over previous years. There is a program of unprecedented proportions lingering in Japan’s future, but many things can happen between now and then. In that 11 months, the Fed will have increased its balance sheet by $935 billion at its current pace - and thereby push Japan further behind in the implicit currency war. Perhaps this was a move that offers the next BoJ governor room to work when Shirakawa is replaced in April. Yet, again, there is still three months for the markets to weigh in.
In the meantime, we find many of the most liquid yen crosses (USDJPY, EURJPY, AUDJPY) standing at the threshold of serious technical support after incredible rallies. With the USDJPY best representing the ‘overbought’ sentiment that has affixed itself to the yen crosses (having matched a record 10 consecutive week rally), we can see the natural inclination for a necessary retracement is pressured by this surprisingly tame BoJ outcome. Yet, commitment to a reversal has yet to be made. Perhaps risk trends may salvage the bulls or send them scrambling.
British Pound Faces Jobs Data, BoE Minutes, Cameron SpeechThere is a heavy round of event risk for the British pound for the upcoming session. Yet, much of its market-moving potential may have already been undermined over the past 48 hours. Prime Minister Cameron’s speech on a possible referendum on the UK’s place in the EU is a top-tier concern, but many of the details were leaked after the initial address was delayed. The typically hit-or-miss BoE minutes may have had their thunder stolen by an assessment offered by BoE Governor King yesterday. Still open to surprise though is the December employment data.
Euro Slides Despite Strong Investor Sentiment, Spanish Bond Sale
The euro lost ground against most of its major counterparts this past session. While risk trends and the yen may skew a performance assessment, it is still surprising that the shared currency did not do better on the day’s headlines. Eurozone investor sentiment hit a two-and-a-half year high; a Spanish 10-year bond sale drew record demand; and the EU is considering term changes for Ireland and Portugal’s rescue.
Australian Dollar Unfazed by 4Q CPI Miss
Last week, a significant miss by New Zealand’s fourth quarter CPI reading led AUDNZD to cover a more than 100-pip range in the span of minutes. The potential was clear for the Australian version of the data considering the RBA is active in altering its monetary policy. Yet, the 2.2 percent annual inflation pace tempered the speculative ranks. It missed expectations, but remains above target.
Canadian Dollar: What Should We Expect from the BoC Rate Decision?
Monetary policy decisions are important events nowadays. Though, for the Bank of Canada (BoC), these gatherings have proven less than mundane. The central bank has maintained a hawkish bearing with no sign of action through the immediate future. The market will meet the upcoming policy decision with tame expectations – but those are the conditions that ‘surprise’ plays out best in.
Gold Positioned for Another Breakout as Dollar Faces Deficit Risk Resolution
We have seen many lead-ins to breakouts for gold over the past few months, and we find ourselves at yet another catalyzing point. Price action has contracted into a terminal congestion just below $1,700. At the last break point, follow through lacked due to a lack of a fundamental catalyst. This time, however, we may find more of a push should the dollar respond significantly to a House vote to lift the debt ceiling.
**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 |
0:30 | AUD | CPI (QoQ) | 0.4% | 1.4% | Showing signs of higher inflation since its trough reached in 12/2011 (QoQ) and 06/2012 (YoY). Higher inflation is AUD positive. |
0:30 | AUD | CPI (YoY) | 2.4% | 2.0% | |
0:30 | AUD | CPI RBA Trimmed Mean (YoY) | 2.4% | 2.4% | |
2:00 | CNY | Conference Board China Leading Eco Index (DEC) | |||
5:00 | JPY | Bank of Japan Monthly Economic Report (JAN) | |||
9:30 | GBP | Bank of England Minutes | |||
9:30 | GBP | Claimant Count Rate (DEC) | 4.8% | 4.8% | Moving between 4.40 and 4.90 since 2009. |
9:30 | GBP | Jobless Claims Change (DEC) | 0.5K | -3.0K | Oscillates between 5 and -15 in every quarter since 2012. |
9:30 | GBP | Average Weekly Earnings (3M/YoY) | 1.6% | 1.8% | Three year average at 2.1. |
9:30 | GBP | Weekly Earnings exBonus (3M/YoY) | 1.5% | 1.7% | Non finaicial industry earnings remains far from 2007 high. |
9:30 | GBP | ILO Unemployment Rate (3M) | 7.8% | 7.8% | |
9:30 | GBP | Employment Change (3M/3M) | 28K | 40K | Declining since high on 07/2012 at 236K. |
10:00 | EUR | Euro Area Government Debt | |||
10:00 | CHF | ZEW Survey (Expectations) (JAN) | -15.5 | Growth prospect trending higher from previous low on 09/2011. | |
12:00 | USD | MBA Mortgage Applications (JAN) | 15.2% | Large swing in the data set. | |
14:00 | CAD | Teranet/National Bank HPI (MoM) (DEC) | -0.3% | -0.4% | Consistent peaks seen in June of each year. |
14:00 | CAD | Teranet/National Bank HP Index (DEC) | 154.02 | Trending higher since 2007. | |
14:00 | CAD | Teranet/National Bank HPI (YoY) (DEC) | 3.1% | 3.4% | Moving around 3 over the last two years. |
14:00 | USD | House Price Index (MoM) | 0.7% | 0.5% | Trending higher since 03/2011 |
15:00 | CAD | Bank of Canada Rate Decision (JAN) | 1.00% | 1.00% | Expected to remain unchanged at 1%. |
15:00 | EUR | Euro-Zone Consumer Confidence (JAN) | -26 | -26.5 | Six year average at -16.6. |
21:30 | NZD | Business NZ PMI (DEC) | 48.8 | Declining moderately over the last three years. | |
23:50 | JPY | Merchandise Trade Balance Total (Yen) (DEC) | -¥953.4B | The seasonally adjusted trade balance shows a larger trade deficit. | |
23:50 | JPY | Adjusted Merchandise Trade Balance (Yen) (DEC) | -¥868.5B | ||
23:50 | JPY | Merchandise Trade Exports (YoY) (DEC) | -4.2 | -4.1 | Exports are increasing since 09/2012. |
23:50 | JPY | Merchandise Trade Imports (YoY) (DEC) | 1.7 | 0.8 | One year average at 4.1. |
23:50 | JPY | Foreign Buying Japan Bonds (Yen) (JAN) | ¥139.0B | Large swing in data set. | |
23:50 | JPY | Foreign Buying Japan Stocks (Yen) (JAN) | ¥233.8B | Capital inflow decreases since 01/04/2013. |
GMT | Currency | Upcoming Events & Speeches |
05:00 | JPY | Bank of Japan Monthly Economic Report |
08:00 | GBP | UK PM Cameron to Deliver Speech on EU Relationship |
15:00 | ALL | IMF Releases World Economic Outlook Update |
16:15 | CAD | BoC Governor Carney Holds Press Conference |
21:30 | USD | || Earnings – Apple 4Q |
- | USD | US House of Reps Votes on Extending Debt Ceiling to May |
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 | 6.1875 | 6.1150 | |
Resist 1 | 15.0000 | 1.9000 | 9.1900 | 7.8075 | 1.3250 | Resist 1 | 6.8155 | 5.9190 | 5.8200 | |
Spot | 12.6375 | 1.7687 | 8.8500 | 7.7533 | 1.2282 | Spot | 6.5146 | 5.6050 | 5.5812 | |
Support 1 | 12.5000 | 1.6500 | 8.5650 | 7.7490 | 1.2000 | Support 1 | 6.0800 | 5.5840 | 5.6000 | |
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 | 1.3429 | 1.5951 | 89.47 | 0.9371 | 0.9985 | 1.0619 | 0.8482 | 119.49 | 141.88 |
Resist. 2 | 1.3401 | 1.5921 | 89.24 | 0.9352 | 0.9970 | 1.0599 | 0.8463 | 119.09 | 141.46 |
Resist. 1 | 1.3373 | 1.5892 | 89.02 | 0.9332 | 0.9955 | 1.0579 | 0.8444 | 118.70 | 141.04 |
Spot | 1.3316 | 1.5832 | 88.56 | 0.9292 | 0.9924 | 1.0539 | 0.8405 | 117.92 | 140.21 |
Support 1 | 1.3259 | 1.5772 | 88.10 | 0.9252 | 0.9893 | 1.0499 | 0.8366 | 117.14 | 139.38 |
Support 2 | 1.3231 | 1.5743 | 87.88 | 0.9232 | 0.9878 | 1.0479 | 0.8347 | 116.75 | 138.96 |
Support 3 | 1.3203 | 1.5713 | 87.65 | 0.9213 | 0.9863 | 1.0459 | 0.8328 | 116.35 | 138.54 |
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--- Written by: John Kicklighter, Chief Strategist for DailyFX.com
To contact John, email jkicklighter@dailyfx.com. Follow me on twitter at http://www.twitter.com/JohnKicklighter
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