HotForex Forex News

20:45 USD/CAD bears in control as WTI remains above 4hr 55 sma and through 52 handle

Currently, USD/CAD is trading at 1.3269, down -0.43% on the day, having posted a daily high at 1.3336 and low at 1.3261.

USD/CAD is on the move with oil making tracks to the upside, where WTI has broken the 4hr 55 sma at 51.97 giving CAD a 0.4% lead in an environment of mild USD weakness. Focus remains on rates this week given the lack of economic scheduled data. "Interest rate differentials have been a key driver for CAD over the past two weeks," explained analysts at Scotiabank, adding, "Friday's CPI disappointment has softened expectations for BoC policy, nearly eliminating the 5bpts of tightening (12 month horizon) that OIS had been pricing in throughout most of January. We remain CAD bears on the basis of relative central bank policy, looking to a neutral BoC and a 'gradually' hawkish Fed."

How a strong dollar weighs on net exports - BBH

USD/CAD levels

Current price is 1.3269, with resistance ahead at 1.3276 (Daily 20 SMA), 1.3277 (Daily Classic S1), 1.3283 (Yesterday's Low), 1.3284 (Daily 100 SMA) and 1.3297 (Hourly 20 EMA). Next support to the downside can be found at 1.3261 (Daily Low), 1.3245 (Weekly Classic PP), 1.3230 (Hourly 100 SMA), 1.3227 (Daily Classic S2) and 1.3190 (Hourly 200 SMA).

Latest Trump news:

Trump signs an executive order to officially withdraw the U.S. from TPP

 


20:23 GBP/USD climbs to fresh 5-week highs, remains under 1.2500

The pound gained momentum during the American session and climbed, reaching fresh highs against the US dollar and the euro. GBP/USD reached 1.2492, hitting the strongest level since December 19. Then pulled back to 1.2465. 

It was trading at 1.2475/80, up more than a hundred pips for the day and headed toward the third daily gain in a row. 

If the pair consolidates around current levels it would be the highest daily close in a month and above the relevant support area located at 1.2420/30, that capped the upside, several times during January. At close at current level could open the doors for and extension of the recovery. 

GBP/USD

Looking at UK Supreme Court ruling

Tomorrow the UK Supreme Court will announce its decision, if the government needs to have a Parliamentary vote or not, to trigger the Article 50 (beginning of Brexit). 

“After Prime Minister May's speech last week, the decision may have lost some of its ability to roil the markets. May reassured that Parliament would vote on the final agreement”, said analysts from Brown Brothers Harriman.

According to them, there is little doubt a majority will vote to trigger Article 50 in the Parliament but they warn that a failure to do so, would likely spark a political crisis. “Northern Ireland will go to the polls on March 2. An anti-Brexit parliament could still frustrate May's timetable, and Scotland independence efforts may be fanned by the UK government's position.” 

Article 50 decision and the pound: It’s all about the Sewel Convention


20:17 How a strong dollar weighs on net exports - BBH

Analysts at Brown Brothers Harriman explained that investors appreciate that a strong dollar can impact US growth through the net export component of GDP.   

Key Quotes:

"The dollar's appreciation can push up the price of exports and lower the cost of imports. The St. Louis Fed took a look at how the strong dollar from 2014 to the beginning of 2016 impacted the net export function of GDP.    

It is clear that a strong dollar in this period was associated with a drag on growth from net exports. Of the two-year period, the St. Louis Fed reviewed, trade contributed positively to growth in only one quarter.  

The review found that the impact the strongest in the first half of the appreciation period reviewed. In the Q4 14 and Q1 15, net export took 1.14% and 1.65% respectively from GDP growth. As the dollar advance continued, the drag on net exports diminished. In Q4 15, net exports took 0.5% off GDP even though the dollar rose another 10%.  

The St. Louis Fed took another step. This chart here that they produced drills into the net export functions components, exports, and imports, to better understand how the rising dollar impact trade. The conclusion is that the dollar's appreciation impacts imports more than exports. The report found that the cumulative impact of imports was to shave GDP by 4.6%, while the cumulative impact of exports was actually slightly positive (0.85%)."  


20:11 Mexico s Pea Nieto: We should redefine relationship with the U.S. government

Mexican President Enrique Peña Nieto is crossing the wires last minutes, via Reuters, saying that a top priority will be ensuring "strong" dialogue in bilateral relationship with the United States.

Key headlines (via Reuters):

  • Mexico is a natural bridge for trade with other regions, must increase trade diversification
  • Mexico wants bilateral relationship with U.S. to translate into more trade, jobs
  • Says will work closer with Brazil, Argentina, and other Latin American countries
  • Says will prioritize modernizing EU trade deal
  • Mexico will immediately seek bilateral deals with countries in TPP
  • Mexico obliged to take steps to defend its interests given new vision in U.S.

20:06 Looking for clarity on Brexit - Nomura

Analysts at Nomura are looking to for some “Brexit clarity”.

Key Quotes:

"1. We have heard the political rhetoric of a “red, white and blue” Brexit, but have not heard any specifics about what Brexit will look like.

Will the UK strive for a grand bargain with the EU in the early rounds of negotiations, such as asking for single-market access and controls over its borders? Or will the UK be clear in its early approach with a workable solution towards a “clean break” from the EU. The widespread newspaper leaks over the weekend suggest the latter, which is the least market-friendly outcome

2. We don’t know yet the outcome of the Supreme Court hearing on Article 50 and therefore the political fallout from its result.

A snap general election remains unlikely, but could become a higher possibility if the parliamentary vote fails to get passed. However, polling as it stands would suggest the conservatives’ majority would increase. Therefore, rather than leading to higher “Soft Brexit” hopes it may be the end of them.

3. Will the UK’s high Inflation cause early Brexit woes? 

The consensus of economists expects growth to fall from 2% in 2016 to 1.2% in 2017. This would likely be caused by lower investment and reduced consumer spending from the uncertainty and inflationary impact on real earnings. However, after years of poor performance in economic forecasting, with the last six months of UK growth data suggesting the vote never even occurred it is difficult to have high conviction on this consensus view. Or as Andy Haldane put it recently there is “nothing inevitable” about that, it is just a “best guess.” The hardest part about calculating the inflation outlook is whether wage growth in the UK will be sustained because of the economic uncertainty ahead. For the BoE a majority of the MPC seems convinced there is a very skewed risk to the economy on a 2-3yr view that Brexit will hit the economy hard. That means there is a high hurdle to be jumped before the MPC becomes hawkish. In our view, one or two stronger wage data releases are unlikely to cause the market to prepare for hikes. Thus, we see plenty of room for 5s10s to steepen from here. 

4. Who will the UK be negotiating with and can that change the outcome? 

There are several elections in Europe that could alter the makeup of the EU leadership and are likely to cause delays in Brexit negotiations. There are some outcomes from those elections that would see the UK better off and some unlikely outcomes, where the market would be less focused on Brexit and more focused on pricing in an EU breakup scenario. The best the UK could hope for is for the EU to become more flexible and offer the UK a politically palatable exit (one of our “Grey Swans”). If the definition of freedom of movement of workers is redefined in such a way that the UK government is able to retain singlemarket access the outcome would likely be more market friendly. 

5. Will GBP and other UK assets enter a dynamic akin to what we saw in October? 

Our Brexit Stress Indicator remains elevated and has slowly been rising again with several UK asset classes underperforming their closest peers. However, it is not as high as the levels in October after the conservative party conference speech by Theresa May. The big question this morning is will UK asset class correlations with GBP move back towards the EM relationship we saw in October? In this period, we saw weaker FX drive higher Gilt yields via front-end breakevens and pricing in rate hikes to defend the currency. 

There is no way of being sure if and when this correlation will return; we would expect it would become more likely should GBP/USD drop below 1.2000 and keep going, i.e. into fresh territory, but even then we would expect it to again be a temporary phenomenon. That was before the Donald Trump victory when the FX to rates relationship moved back towards a reserve currency status. The cross-market correlation between the Brexit Stress Indicator and risk sentiment proxies, such as US and global equity prices, are shifting from positive (higher stress tends to lead higher equity prices) to more neutral. 

This correlation still suggests Brexit is not viewed as a global risk event at the moment, but more of a local story. The beta of Brexit stress to FX markets has been declining since November as the market has been focused on the US election. We expect the market to pay more attention to Brexit developments in coming weeks, but at the moment, global risk sentiment seems less likely to be significantly hit by higher Brexit stress."


19:47 EUR/JPY: yen top performer and euro losing momentum

Currently, EUR/JPY is trading at 121.23, down -1.00% on the day, having posted a daily high at 122.51 and low at 121.13.

EUR/JPY was sold off below the 122 handle as the yen takes up the lead across the board of G10's. The euro has been capped through the mid-way point of the 1.07 handle and the yen has been testing the 113 handle with a break below to 112.74. Eyes are back on the 55 dma that has been taken out by the cross at 122.26 as a key level and while below, the cross can target 120.50 and lows for 2017.

Trump signs an executive order to officially withdraw the U.S. from TPP

EUR/JPY levels

Current price is 121.24, with resistance ahead at 121.47 (Daily Classic S3), 121.70 (Hourly 200 SMA), 121.79 (Hourly 100 SMA), 121.87 (Daily Classic S2) and 121.91 (Hourly 20 EMA). Next support to the downside can be found at 121.13 (Daily Low), 121.00 (Weekly Classic S1), 120.60 (Monthly Low), 120.60 (Weekly Low) and 120.60 (YTD Low).

Analysts at Commerzbank noted the fibo at 119.70 where they would expect the cross to again attempt to stabilise. "Slightly longer term we would allow for gains to extend towards the 128.61/200 month ma."

 


19:16 NZD/USD subjugates dollar bulls at 0.7220; Sovereign foreign currency rating at AA

Currently, NZD/USD is trading at 72.15, up +0.71% on the day, having posted a daily high at 0.7227 and low at 0.7158.

Uncertainty is not exclusive or limited to the US trade partners like China, Mexico or Canada. Also, the wild personality and 'to be determined' agenda courtesy of Donald J. Trump poses a challenge for the New Zealand economy as trade has been slowing. However, according to S&P's analysts, the key to ongoing growth has been a strong real estate market, net migration that supports growth and solid consumption. 

Historical data, however, indicates that the kiwi highest performance clocked at +1.60% (Jan.17) and its lowest at -1.26% (Jan.18).

Kiwi and Trump or 'Trump and the rest of the world'

Russell Blackstock, senior reporter at NZherald, notes that KiwiSaver balances may take a bashing and mortgage rates could rise. If the new President pursues tax cuts and an expansive fiscal policy as expected, these would have significant implications beyond US shores, according to investment expert Stephen Bennie from Castle Point Funds.

He further reports, "He believes Trump's loose-canon personality is also making world money markets jittery. Bennie points to Trump's first press conference as President-elect earlier this month, which Bennie describes as "disastrous"."

Yield Advantage; against the wall

Rebecca Howard, writer at Scoop Independent News, notes that ANZ Bank New Zealand senior economist Phil Borkin said Saturday's inauguration did little to shed light on the Trump's administration's plans. Markets had rallied strongly after Trump's election in November with the greenback pushing higher on promises of tax cuts and fiscal spending but "markets are now showing a healthy dose of scepticism because we still don’t have the details, we don’t know how he is actually going to achieve the goals he’s set out," said Borkin. "Until we get that information until markets are able to dissect it, we will remain in this holding pattern," he added.

She further reports, "New Zealand Institute of Economic Research senior economist Christina Leung also said she doesn't expect a "sharp easing" in the currency from Trump's presidency. "The continued solid growth outlook for the NZ economy should continue to support the NZD at a high level," said Leung. There will be some modest easing, however, as the US Federal Reserve continues to raise interest rates which will reduce New Zealand's yield advantage."

Technical levels to watch

In terms fo technical levels, upside barriers are aligned at 0.7236 (high Dec.14) and above that at 0.7303 (horizontal resistance). On the other hand, Stochastic (5,3,3), seems to start entering the overbought territory, therefore, further gains may be expected as long as the dollar awaits for Trump's fresh ammo. 

nzdusd

On the long-term view, the kiwi faces a critical resistance at 0.7217 (long-term 38.2% Fib) if dollar bulls lack the necessary strength to build an unbreakable barrier at this point, then the next logical target in this uptrend is located at 0.7339 (short-term 61.8%Fib). To the downside, 0.7125 (short-term 50.0% Fib) is the most relevant support at this stage, an open and close below this level indicates the dollar pullback may be over. 

nzdusd

AUD/USD analysis: rally can extend on positive Austrian inflation


19:13 AUD/USD bears lurking - Commerzbank

AUD/USD charted a high last week of 0.7589 which was accompanied by a divergence of the daily RSI – this reflects a loss of upside momentum and attention reverts to the downside. 

Key Quotes:

"Currently we remain unable to rule out a move to the 0.7648 2013-2016 channel (where it should fail). But even this move will remain within the realms of a correction only. We maintain a negative bias, while capped here.

Below the uptrend at 0.7552 should trigger losses to 0.7497 200 day ma, 0.7407 the 55 day ma and then 0.7312/00 then 0.7161/64, the recent lows."


18:55 EUR/USD: staying bearish despite rally through 1.0700 - Scotiabank

Analysts at Scotiabank explained that the EUR has advanced through the low 1.07 area that capped the market last week.

Key Quotes:

"But the advance is not especially convincing and continues to reflect position adjustment rather than a fundamental change in view on the USD. 

The Fed’s growing confidence in the economy contrasts with the clearly dovish messaging from ECB President Draghi last week and, with short-term rate spreads a little narrower, but still within recent ranges, we see little scope for the EUR to gain significantly from here. 

We remain bearish on the EUR and continue to view current levels as “rich” relative to fundamentals."


18:52 Trump signs an executive order to officially withdraw the U.S. from TPP

The US President Donald Trump has formally signed an executive order to start the process of withdrawing the United States from the Trans-Pacific Partnership (TPP), Reuters reports.


18:51 AUD/USD capped below 0.76 handle, a buy on dips or overdone?

Currently, AUD/USD is trading at 0.7572, up 0.27% on the day, having posted a daily high at 0.7590 and low at 0.7550.

US stock trade with negative bias during opening hour

AUD/USD has been capped on the bid after the USD was extending the broad retreat across the broad at the start of this week and in a continuation of last week's sell-off. "Investors are perhaps reacting to the stark, dark undertones of the President’s inauguration speech Friday and awaiting early action from the new administration to bolster confidence in the Trump reflation trade," explained analysts at Scotiabank.

For the week ahead, we have a holiday-shortened week with Australian Day on Thursday wedged between Q4 CPI on Wed and Q4 Terms of Trade on Friday. "We see upside risk/strong outcomes for both," argued the analysts at TD Securities. In respect to Trump, the main concern seems to be around trade. "Trump seems to have rejected the border adjustment tax that the Congressional Republicans advocated, but taxing imports (tariffs) continues to be touted, " explained analysts at Brown Brothers Harriman.

Trump says he is going to cut taxes massively for middle class and companies - RTRS

AUD/USD levels

Analysts at Commerzbank said that currently they remain unable to rule out a move to the 0.7648 2013-2016 channel (where it should fail). "But even this move will remain within the realms of a correction only. We maintain a negative bias, while capped here."

Spot is presently trading at 0.7573, and next resistance can be seen at 0.7589 (Daily Classic R1), 0.7590 (Daily High), 0.7590 (Yesterday's High), 0.7609 (Weekly Classic R1) and 0.7626 (Daily Classic R2). Support below can be found at 0.7565 (Hourly 20 EMA), 0.7563 (Daily Open), 0.7563 (YTD High), 0.7563 (Monthly High) and 0.7563 (Weekly High).

 


18:43 USD/JPY hits fresh lows under 113.00

The yen gained momentum during the American session across the board and particularity versus the US dollar as equity prices extended losses and US bond yields decline. 

A deterioration in market sentiment took place during the last hours. The Dow Jones was falling 0.31% while the Nasdaq was losing 0.33%. The 10-year yield fell to 2.40%, the lowest since last Tuesday.  Investors continue to analyze recent statements from US President Donald Trump. He said he is going to cut taxes massively and also create border tax. 

USD/JPY reversed sharply after reaching levels on top of 114.00 and dropped more than a hundred pips, breaking below previous daily lows. The pair bottomed at 112.94 and it was trading at 113.05/10, 150 pips below Friday’s closing price. 

Levels to watch

The greenback continues under pressure against the Japanese currency. Price holds inside a bearish channel. A consolidation around current levels would leave the 112.50 area (last week lows) exposed. Below that level, the next target could be seen around 111.40, horizontal support and the lower limit of the mentioned downward channel. 

To the upside, above 114.40, the US dollar could remove bearish pressure, but in order to gain support for a stronger recovery, it needs to rise above 115.15/20 (upper limit of the channel). 

USD/JPY


18:34 United States 3-Month Bill Auction: 0.505% vs previous 0.53%


18:34 United States 6-Month Bill Auction: 0.6% vs previous 0.605%


18:16 Eurozone: improvements in the job market sends consumer confidence to the highest since 2015 - ING

Bert Colijn, Senior Economist at ING, points out that Eurozone consumer confidence continues its streak of optimism in 2017 as job markets improvements offset political concerns. 

Key Quotes: 

“Eurozone consumer confidence increased from -5.1 to -4.9 in January, the highest level since April 2015. Improvements in the job market seem to be outweighing concerns about political volatility among consumers for the moment.”

“Expectations of unemployment have declined significantly over recent months and expectations of the financial situation of households have improved. While 2017 could be a year full of political risk, consumers have started it full of confidence. This is a positive sign for domestic demand growth in the first quarter, which is why we expect consumer spending to accelerate in 1Q17.”

“Consumers do seem to be defying some of the more negative factors influencing confidence. Besides continued high political risk, this month gasoline prices reached the highest level since August 2015, which shows that the oil price recovery continues to work through to the headline inflation numbers in January.”


 


17:56 USD/JPY: Yield spreads have narrowed in a JPY supportive manner - Scotiabank

JPY is strong, outperforming all of the G10 currencies.

Key Quotes:

"The broader market tone is dominant as market participants respond to political uncertainty in the U.S. 

JPY’s role as a safe-haven currency leaves it vulnerable to knee-jerk rallies in periods of risk aversion. 

Yield spreads have narrowed in a JPY supportive manner, and risk reversals are showing signs of a turn following the recent moderation in the premium for protection against JPY strength. 

Domestic releases may deliver added turbulence for JPY through the remainder of the week as we look to Wednesday’s (NA Tues. PM) trade and Friday’s (NA Thurs. PM) CPI."


17:52 GBP/USD constructive above 1.2250 UOB

Cable remains well poised for a test of the 1.2480 area in the near term, according to FX Strategists at UOB Group.

Key Quotes

“We noted last Friday that GBP is expected to stay underpinned as long as 1.2250 is intact”.

“GBP touched a low of 1.2262 but recovered strongly and we continue to expect the current short-term GBP strength to extend higher towards 1.2480”.

“In order to maintain the current positive momentum, any pull-back should not move back below 1.2260/65. Looking further ahead, a clear break above 1.2480 would indicate that GBP could move much higher in the coming weeks (next resistance at 1.2570)”.

 


17:49 EUR/GBP better offered: awaiting Supreme Court

Currently, EUR/GBP is trading at 0.8613, down -0.46% on the day, having posted a daily high at 0.8666 and low at 0.8594.

EUR/GBP remains on the offer as sterling picks up a bid at the start of this week with Trump now at the helm and talking about trade tariffs already. On Friday, UK PM May will meet with Trump and prepare for Brexit together seen as a positive for sterling. 

"The pound is still deriving support from UK PM May’s key note speech last week which has helped to ease “hard” Brexit fears at least in the near-term," explained analysts at Bank of Tokyo Mitsubishi, adding, "The additional certainty provided by PM May’s Brexit plan and positive message for a more global Britain have been welcomed by the market."

Market awaits Supreme Court

The analysts at Bank of Tokyo Mitsubishi went on to explain how the pound is supported on expectations of this week's verdict:

"The market is also anticipating the verdict from the Supreme Court in the UK tomorrow which could offer some further modest support for the pound. The Supreme Court is expected to rule that parliament should have a say in triggering Article 50. The market would welcome greater parliamentary involvement in the process viewing it as reducing the risk of a more disorderly Brexit. The wording of the ruling with regards to parliamentary involvement will prove important. A defeat for the government could increase the risk that the triggering of Article 50 is a little delayed, although it will not stop Brexit. We expect a majority in parliament to honour the referendum result and vote in favour of triggering Article 50. "

EUR/GBP levels

Spot is presently trading at 0.8613, and next resistance can be seen at 0.8620 (Daily 20 SMA), 0.8630 (Yesterday's Low), 0.8631 (Daily Classic S1), 0.8633 (Hourly 20 EMA) and 0.8635 (Weekly Low). Support below can be found at 0.8608 (Daily Classic S2), 0.8594 (Daily Low), 0.8586 (Daily Classic S3), 0.8558 (Weekly Classic S1) and 0.8503 (Monthly Low).

UK Supreme Court Decision: Anti-Climactic? - BBH

 

 


17:43 WTI stays near daily lows, around $52.40

After a brief test of the $52.30 area, the barrel of West Texas Intermediate has managed to attract some attention and advance to the $52.40 zone although still well into the red territory.

WTI lower on US drill data

Crude oil prices have returned to the negative territory today despite the generalized offered bias around the US Dollar.

In fact, prices for the WTI deflated to the low-$52.00s after the weekly report by Baker Hughes showed a pick up in the US drilling activity during last week, with US oil rig count increasing by 29 to 551 (the highest level in 14 months).

Rising oil rig count in the US could spark prospects of increasing output, thus weighing on sentiment and dragging prices lower.

On the positioning front, crude oil speculative longs have climbed to record levels once again

WTI levels to consider

At the moment the barrel of WTI is losing 1.52% at $52.41 and a break below $51.39 (low Jan.20) would open the door to $50.91 (low Jan.18) and finally $50.71 (2017 low Jan.10). On the other hand, the next resistance is located at $53.47 (high Jan.23) followed by $53.52 (high Jan.17) and finally $54.32 (high Jan.6).


17:35 UK Supreme Court Decision: Anti-Climactic? - BBH

Research Team at BBH notes that the UK Supreme Court will hand down its ruling tomorrow on the government's appeal of a High Court decision that recognized the right of Parliament to vote on triggering Article 50.  Initially, this was seen a big deal.  Parliament is not so keen on the hard Brexit (clean break), so the potential of a greater role for it suggested a softer exit, which was understood to be sterling supportive.  

They further write, "However, time marches on, and Prime Minister May appears to have effectively stolen the thunder of the decision and framed the issue.  Arguably, she reduced the market significance of the Supreme Court ruling by recognizing Parliaments right to vote on the final agreement.  She framed the issue by indicating that she wants a new trade deal with the EU. Parliament may hem and haw, but the risk of it not voting to trigger Article 50 seems slim to none.  There may be some efforts to frustrate the vote, like a campaign to oppose to abstain, but approve the triggering of Article they will.  The issue is really a domestic constitutional issue about the role of Parliament.  It is much less about substance."

Key Quotes

"The vote on the final agreement may also be less than meets the eye. If an agreement is struck and Parliament votes against it, there is unlikely to be sufficient time to negotiate a new agreement.  Assuming the two-year negotiating period is up, the UK may be forced out of the EU without an agreement.  The chaos that could ensue would be laid at the feet of Parliament, not 10 Downing Street."    

"Prime Minister May will finish the week by going to Washington and meeting US President Trump. Many observers find connections between Brexit and Trump's election. Many of the analogies seem like a stretch, but unlike Obama, Trump supported the UK decision and has been antagonistic to the EU (as a German mechanism to secure trade advantage).  While Obama said a free-trade deal with the UK would not be an important priority, Trump was more sympathetic."  

"May might be hoping that Trump confirms this intent, but the UK cannot negotiate a free-trade agreement as long as it is part of the EU, which it will be for the next two years. Moreover, a free-trade agreement will take some time to negotiate the bilateral US-Canada agreement in the second half of the 1980s illustrated (which took three years from the beginning of negotiations to implementation. A week ago, sterling gapped lower anticipation of May's speech on Brexit. It briefly dipped below $1.20 for the first since the October flash crash. It rallied strongly as May's speech on January 17 failed to go beyond the extensive advanced excerpts. Sterling consolidated those gains in the second half of last week. Today it has pushed higher to reach its best level since December 19."  

"The technical outlook for sterling looks constructive. A close above $1.2475 is needed to confirm. Last week's gap looks like an exhaustion gap. The subsequent price action is bullish. There appear to be two dominant patterns and both of which suggest potential toward $1.28."    

"First, a potential head and shoulder pattern may have been carved. The left shoulder was in late December and early January near $1.22. The head was formed last Monday and Tuesday. The right shoulder was the lows from the second half of last week around $1.2255. The neckline is $1.2430. The second pattern is a potential flag pattern. The pole was last the January 17 rally (sell the rumor, but the fact) on May's speech. The flag itself was the last three sessions. Flag fly at half-staff. The $1.28 area that both patterns project toward corresponds to a 61.8% retracement of sterling's decline from the early September high near $1.3450."  

"The cross against the euro may absorb some of the pressure. A break of GBP0.8580 would suggest a move to GBP0.8515 initially, but probably back toward GBP0.8435, if note the early December low near GBP0.8300." 

The Trump unwind  


17:16 Drivers for the Week Ahead - BBH

Research Team at BBH note that the dollar is broadly weaker against the majors. The yen and sterling are outperforming, while the Antipodeans are outperforming. EM currencies are mostly firmer. MXN and ZAR are outperforming, while TRY and INR are underperforming. MSCI Asia Pacific was up 0.2%, even with the Nikkei falling 1.3%. MSCI EM is up 0.6%, with China markets rising 0.3%. Euro Stoxx 600 is down 0.3% near midday, while S&P futures are pointing to a lower open. The 10-year UST yield is flat at 2.46%. Commodity prices are mixed, with WTI oil down 1.5%, copper up 0.6%, and gold up 0.3%.

They further write, "The developments over the last few days, including the strident tones of the inauguration speech, may be a small hint to investors of the unpredictable nature of the new US President. The unorthodox style and rhetoric should not distract from the necessary focus on policy. Ultimately, public policies and private sector behavior, not speeches or wishes, drive interest rates, equities, and currencies."  

Key Quotes

"The priority appears to be to re-negotiate NAFTA. Few people are opposed to reviewing old agreements. No doubt it can be updated; it is 23 years old. Intellectual property rights have evolved, the Internet not only exists but is an important distribution channel for goods, services, and information, there are new tax and accounting rules, and the like. While modernizing old agreement is one thing, changing the essential thrust (reduced barriers to trade in the North American continent) is quite a different thing. It is not clear to many whether Trump's rhetoric is part of the "Art of the Deal," or whether it is a principled position."  

"Like his predecessors, Trump also talks about enforcing existing agreements. Sometimes there have been trade disputes among NAFTA countries. That is an important thing that is often overlooked about trade agreements. They provide a conflict resolution mechanism, invaluable for resolving and containing disputes. It is like a penalty in a football game or a foul in basketball. The violation of the rules is incorporated into the rules themselves."  

"Remember too, the desire to negotiate NAFTA (by Bush-the-elder, and approved under Clinton) was partly a reflection of the significance of north-south trade. In effect, the agreement codified and furthered trends already in place, as well as a means to address infractions. The agreement followed trade just as much as more trade followed the agreement."  

"Second, the White House says it wants the US to create 2.5 mln new jobs over the next decade. Over the last five years, the US created an average of 197k net new jobs a month. The five-year monthly average has rarely been over a 200k. Although during the campaign there was talking of achieving 5%-6% growth, the White House now says 4%, while Mnuchin said 3%-4% in his confirmation hearings."  

"The US economy grew 3.5% in Q3, and the first estimate of Q4 will be reported on January 27. The NY Fed's GDP tracker sees growth at 2.4% quarterly annualized rate (2.7% for Q1 17). The median in the Bloomberg poll is 2.2%, while the Atlanta Fed GDPNow estimate is 2.8% for Q4."

Peaceful Transition of Power, Now Get on with it!


17:13 US stock trade with negative bias during opening hour

Major US equity indices quickly reversed early losses but continued trading with mild negative bias amid uncertainties surrounding the US President Donald Trump's economic policies. 

At the time of writing, the Dow Jones Industrial Average was down around 20-points to 19,807, while the broader S&P 500 Index dropped 3-points to 2,268. Meanwhile, tech-heavy Nasdaq Composite Index slipped 3-points to 5,552.

Following Trump's inaugural speech on Friday, market participants became increasingly nervous that he will pursue protectionist trade policies that might hamper economic growth. Moreover, lack of clarity over his fiscal stimulus plans continues to prompt investors to unwind their post-election bullish bets and is also collaborating to the downslide.

However, the latest Trump comments that he is going to cut taxes massively for middle class and companies seems to have provided some immediate respite for the bulls and limited any immediate downslide for the time being. 

Investors will not only be watching for any fresh comments on Trump's promised stimulus measures but will also closely scrutinize Trump's meeting with Canadian and Mexican leaders, and UK Prime Minister Theresa May on Friday.
 

 


17:05 Technical blow in 4hr EUR/NOK chart

The set-back taking place in EUR/NOK has resulted in a crossover of the 50-period below the 200-SMA.

Under this signature, the 4hr technical picture for EUR/NOK remains fragile. However, the risks for a short-squeeze rally also exist, which may commence upon a decisive daily close above today's open. In this scenario, a degree of supply could materialize with a price reaction to the pivotal level charted through the crossover.

17:02 EUR/NOK flashing a Death Cross signal

EUR/NOK is displaying a “Death Cross” on 4hr charts, which is considered a harbinger of bad things to come.

This technical event happens when a short-term moving average falls below its long-term moving average, in this case a crossover between the 100-period and the 200-period MA.

The existence of a Golden Cross does not in itself justify buying a market. Therefore, only a bounce towards the crossover level would allow traders adhere to the trend at fair valued prices following an otherwise lagging signal.

17:01 European Monetary Union Consumer Confidence came in at -4.9, above forecasts (-5) in January


16:45 USD/CAD looks to extend gains near 1.3330

The Canadian Dollar remains on a weaker note vs. its American neighbour on Monday, now pushing USD/CAD to the area of daily highs near 1.3330.

USD/CAD firmer as oil drops

CAD is deriving extra weakness from the softer tone in crude oil price, with the barrel of West Texas Intermediate down nearly 2% following a pick up in the US drilling activity, as reported by Baker Hughes on Friday.

In the meantime, at its recent meeting, the BoC kept its monetary status quo unchanged while cited that significant uncertainties linger over the US economy, particularly in regard with Trump’s administration.

Earlier today, President Trump has signed an executive order to renegotiate the NAFTA. Rumours around the news said that Canada could seek a unilateral agreement with the US, potentially leaving Mexico out.

Strategists at ING Bank said “…we continue to see the formation of three bearish CAD factors in the near term. The first is BoC/Fed policy divergence leading to a further widening of US-Canadian rates. Secondly, the retreat in the post-OPEC oil price spike as US supply glut concerns re-emerge. Thirdly, a  NAFTA trade renegotiation risk premium being priced into CAD as Trump takes office”.

USD/CAD significant levels

As of writing the pair is gaining 0.08% at 1.3328 facing the next resistance at 1.3356 (55-day sma) followed by 1.3388 (high Jan.20) and finally 1.3463 (high Jan.3). On the flip side, a breach of 1.3268 (low Jan.23) would aim for 1.3250 (low Jan.19) and then 1.3116 (200-day sma).


16:44 Trump says he is going to cut taxes massively for middle class and companies - RTRS

The US President Donald Trump is out on wires, via Reuters, noting that he is going to cut taxes massively for middle class and companies. 

Key headlines:

•    Promises advantages for companies that make products in the US
•    Firms that move abroad will face major border tax on returning products
•    China and Japan make it difficult for the US to sell there
•    Thinks he can cut regulation by 75% or more
•    Tells execs they can have a meeting with him whenever they need them, maybe even quarterly

The comments provided a much needed respite, with the key US Dollar Index reversing majority of daily losses and currently testing session top near 100.60 region.


16:38 GBP/USD challenges 50-DMA at 1.2450, UK parliament vs. Article 50

Currently, GBP/USD is trading at 1.2446, up 0.63% on the day, having posted a daily high at 1.2471 and low at 1.2367.

It seems inevitable to fear the worst when multiple participants are on a collision course. To the left, there is a patriotic PM willing to 'no deal' rather than a bad deal, then the Article 50 which design was not expected to be required, later the UK parliament that may have the last word in the ongoing drama and finally, UK's Supreme Court to rule out if things can go May's way.

Once again, the British pound recovers and challenges its 50-day SMA; but for how long? Friday's meeting between the newest figure on the block, Donald J. Trump, and Theresa May provides more questions that answers to traders and investors and at least in the short-term, the possibility to strike a cooperation deal between both parties under the present circumstances is far from boost the pound's uptrend past the next immediate resistance; 100-DMA.

Historical data, however, indicates that GBP/USD highest performance in the last 3-weeks clocked at +3.01% (Jan.17) and the lowest around -1.19% (Jan.18)

Wolfgang's negotiations blueprint for Britons; Switzerland

Caroline Mortimer, reporter at The Independent, reports, "He told the Swiss newspaper Neue Zurcher Zeitung (NZZ) that he had advised the UK to find a “wise political solution” to Brexit. “Britons should take as an example how cleverly Switzerland has linked national sovereignty and close cooperation with the European Union,” he said." 

She further writes, "Switzerland is not a member of the European Union but has signed a series of bilateral trade deals which mean it has to accept free movement of people and certain trading rules, as well as contributing to the EU’s budget."

London; business as usual?

Tom Campbell, author of 'Fold and The Planner' and writer at The Guardian, notes that anyone who has recently spent time in the UK capital can attest, the referendum itself seems to have done little to dent the animal spirits of London’s consumers. Restaurants, shops and bars seem as busy as ever. Tourism numbers have held up and there is evidence that the weakened pound has encouraged more international visitors to stay and spend.

He further writes, "But London is not Barcelona or Rome. It is a city with a population of more than eight million, and an economy the size of Belgium’s. Its prosperity has depended not simply on tourism, but on being a leading centre for business, finance, education, technology and the creative industries. Will such sectors, so essential to London’s economic and cultural identity, maintain their dominance once Britain is outside the world’s largest trading block?"

Technical levels to watch

To the upside, upside barriers aligned at 1.2546 (100-DMA) and above that at 1.3182 (200-DMA). While supports are aligned at 1.2251 (horizontal support) and below that at 1.1985 (low Jan. 16). On the other hand, Stochastic (5,3,3) are running into the overbought territory, this may serve as further confirmation that a top might be around the corner. 

gbpusd

On the long term view, if 1.1985 (low Jan.16) is in fact a short-term bottom, the upside runs all the way towards 1.3210 (short-term 23.6% Fib). However, without removing the 'hard' dark cloud from all Brexit negotiations, the sterling faces a gargantuan resistance level against 1.3978 (short-term 38.2% Fib) and 1.4153 (long-term 23.6% Fib).

gbpusd

GBP/USD analysis: sellers waiting at 1.2500


16:22 BoE to keep rates on hold until 2019: Reuters Poll

The latest Reuters poll of 67 economists was published on Monday and showed that the Bank of England (BoE) would leave its monetary policy unchanged at its upcoming meeting on Feb. 2.

Key Findings of the survey:

•    BoE is likely to revise up its 2017 growth predictions again.
•    BoE would leave its record-low interest rates and other stimulus measures unchanged at least until 2019. 
•    20% chance of rates increasing this year and only 15 % chances of falling further. 
•    BoE might raise its forecast for inflation over the next two years.

Meanwhile, the GBP/USD pair maintained its strong bid tone but has failed to buidl on to its move above 50-day SMA hurdle as investors await for tomorrow's UK Supreme Court ruling on whether Parliament approval is required to trigger Article 50. 


16:13 USD/CAD bullish near-term Scotiabank

FX Strategist at Scotiabank Eric Theoret noted the pair keeps the bullish outlook unchanged in the short term.

Key Quotes

“Interest rate differentials have been a key driver for CAD over the past two weeks. Friday’s CPI disappointment has softened expectations for BoC policy, nearly eliminating the 5bpts of tightening (12 month horizon) that OIS had been pricing in throughout most of January. We remain CAD bears on the basis of relative central bank policy, looking to a neutral BoC and a ‘gradually’ hawkish Fed”.

USDCAD has completed a bullish outside reversal on the weekly charts. Daily momentum indicators have faded their bearish bias and have shifted to neutral. Near-term support is expected around 1.3250 and we look to gains back toward the recent high just below 1.3400 and the mid-point of the 2016 range”.

 


16:08 EUR/PLN seen at 4.32 in 6-month Danske Bank

Chief Analyst at Danske Bank Jakob Christensen expects the Polish Zloty to pick up further pace in the medium term.

Key Quotes

“The PLN has staged a slightly faster comeback than we thought in December. Part of the reason is the improvement in macro-data but also a weaker momentum in the Trump reflation trade, which had hurt the PLN through a global bond sell-off”.

“Furthermore, the dispute about the Sejm and budget 2017 has been resolved. However, we think renewed momentum in the Trump trade and deterioration in global risk sentiment will be a negative factor for the PLN”.

“As a result, we expect the PLN to remain around current levels in 1-3M and then to strengthen further out. Hence, our forecast for EUR/PLN is 4.37 (4.42 previously) in 1M, expecting a fall to 4.35 (4.40before) in 3M, 4.32 (4.35 before) in 6M and 4.30 in 12M, respectively”.


16:04 China CB Leading Economic Index fell from previous 1% to 0.8% in December


16:02 AUD/USD spikes to fresh session peak at 0.7580 level

A fresh wave of greenback selling pressure seems to have emerged during early NA session, with the AUD/USD pair regaining traction to hit a fresh session peak.

Currently trading around 0.7575 region, broad based US Dollar weakness helped the pair to extend its near-term recovery back above the very important 200-day SMA. Disappointment from Friday's inaugural speech by the US President Donald Trump triggered a sharp slide in the US treasury bond yields and continues to benefit higher-yielding currencies - like the Aussie, lifting the pair back closer to over two-month tops touched last week on Friday. 

Meanwhile, subdued performance in the commodity space, with copper giving up majority of its daily gains, has failed to lend any additional support. In absence of any fresh fundamental drivers, in-terms of any economic releases, the US Dollar price-dynamics remains the exclusive driver of the pair's movement on Monday. 

Technical levels to watch

From current levels, 0.7600 handle is likely to act as immediate resistance above which the pair is likely to aim towards 0.7645-50 hurdle with 0.7615-20 region acting as intermediate resistance. On the flip side, 0.7555-50 area now becomes immediate support to defend, which if broken would accelerate the slide towards 0.7520-15 support (Friday's low), en-route 200-day SMA support near 0.7500 psychological mark.

 


16:00 EUR/USD scope for a test of 1.0820 UOB

FX Strategists at UOB Group sees the pair’s upside could extend to the 1.0820 area in the next 1-3 weeks.

Key Quotes

“In line with expectation, EUR extended its rebound but struggled to move clearly above the strong 1.0700/05 resistance (high of 1.0709 last Friday). However, the strong daily closing suggests that further up-move would not be surprising”.

“The undertone for EUR has improved considerably and from here, further upward grind towards 1.0765 seems likely. A move above this level would shift the focus towards 1.0820. Overall, only a move below 1.0640 would indicate that the immediate upward pressure has eased”.

 


15:41 EUR/GBP drops to 2-week low, inching closer to 0.8600 handle

Having posted a session high near 0.8665 region, the EUR/GBP cross ran through fresh offers and dropped to the lowest level since Jan. 9.

Receding worries of a 'hard Brexit', after last week's speech by UK PM Theresa May, continues to underpin the British Pound and has been the exclusive driver of the pair's near-term movement. Brexit news would continue to dominate the headlines as markets now look forward to tomorrow's UK Supreme Court ruling on whether Parliament approval is required to trigger Article 50. 

Meanwhile, a mild retracement in the EUR/USD major also collaborated to the pair's offered tone on Monday and build on last week's sharp reversal from over two-month tops. At the time of writing, the cross was trading around 0.8615 region, having posted a session low at 0.8606 level. 

Speech from the ECB President Mario Draghi would now be looked upon for some fresh trading impetus ahead of flash Euro-zone PMI prints on Tuesday. However, the release of advanced UK Q4 GDP Print on Thursday would be the most significant economic data influencing the pair's next leg of directional move. 

Technical levels to watch

On a sustained break below 0.8600 handle, the cross seems vulnerable to head back towards 50-day SMA support near 0.8530 region with 0.8580-75 zone providing some intermediate support. On the upside, decisive move above 0.8655-60 immediate hurdle has the potential to lift the cross towards 0.8700 handle ahead of its next major hurdle near 0.8725-30 region.

 


15:34 AUD/USD: Set to extend rebound towards 0.7764-0.7777 - Natixis

Analysts at Natixis note that an ascending channel has developed in the daily chart for AUD/USD and the breakout above 0.7485-0.75 (weekly Bollinger moving average) has dealt a major blow to the downward bias in the weekly chart. 

Key Quotes

“Under these conditions, it is very likely the AUD/USD will extend its recovery towards the resistance around 0.7641-0.7657 (upper band of daily Bollinger). A breakout above these levels would open the way towards the resistance levels at 0.7714 (annual Bollinger moving average) and around 0.7764-0.7777 (upper band of weekly Bollinger) and even the psychologically all-important 0.78 level. Supports are located around 0.7485-0.75, around 0.7380-0.74, at 0.73 and around 0.7174-0.7192.”


15:31 Canada Wholesale Sales (MoM) came in at 0.2%, below expectations (0.5%) in November


15:25 EUR/USD unmotivated near 1.0720 ahead of Draghi, data

EUR/USD is now prolonging its consolidative theme in the low-1.0700s always amidst a persistent offered bias around the greenback.

EUR/USD bid above 1.0700

The pair keeps the upside momentum well and sound at the beginning of the week, always against the backdrop of a weaker Dollar as Trumphoria keeps losing vigour.

Spot advanced to fresh 7-week tops just above 1.0750 during overnight trade, although the up move lacked of follow through and prompted the current slide to the 1.0730/20 region.

Price action remains exclusively driven by USD-dynamics, which in turn keeps its focus on the developments from the new US administration and its potential future steps.

In the positioning space, the latest CFTC report showed EUR speculative net shorts have climbed to 2-week tops on the week to January 17.

On the data front, EMU’s advanced Consumer Confidence gauged by the European Commission is only due later, with consensus expecting an improvement to -4.8 for the current month.

EUR/USD levels to watch

The pair is now up 0.14% at 1.0718 and a breakout of 1.0755 (high Jan.23) would open the door to 1.0798 (high Dec.5) and then 1.0873 (high Dec.8). On the flip side, the immediate support aligns at 1.0622 (low Jan.19) followed by 1.0619 (short-term support line) and finally 1.0598 (55-day sma).


15:10 US: Market implications of possible shifts in world order Danske Bank

Research Team at Danske Bank, lists down the market implications of recent possible shifts in world order.

Key Quotes

“So far, markets have taken a relatively sanguine view on the impact. Equity markets have generally rallied, apart from a few badly hit emerging markets such as Mexico and Turkey, probably because the underlying global economic recovery is fairly strong and there are prospects of a more expansionary fiscal policy in the US. As a result, we are overweight equities. However, markets are now clearly waiting for concrete economic policies from the Trump administration, with both the upward move in US yields and the US dollar losing some momentum.”

“Furthermore, we think there is an increasing chance that global risk sentiment could be affected by a possible stand-off between China and the US. More long-term there may be risks to a global recovery from more protectionism in the world economy. The IMF this week flagged these risks in its global economic update.”


15:09 USD/JPY maintains bearish bias well below 114.00 handle

The USD/JPY pair ran through some fresh offers near 113.80 region, stalling its minor recovery attempt, and might now be heading back towards the lower end of daily trading range.

Long-dollar unwinding trade remained the key theme on Monday after the US President Donald Trump’s inauguration speech failed to provide any details over his plans for economic stimulus. However, a mild recovery in the US treasury bond yields provided a much needed respite and helped the key US Dollar Index to hold its neck above 100.00 psychological mark. 

The recovery, however, remained short-lived amid prevalent risk-off environment, which tends to benefit the Japanese Yen's safe-haven appeal. Investors' risk aversion mood is clearly depicted by weaker trading in the European equity markets and indication of a softer opening in the US. 

With the underlying uncertainty around Trump’s administration, and his fiscal stimulus measures to boost the economy, markets now turn their focus on this week's key macro releases from the US (GDP and durable goods orders) and Japan (national core CPI), slated for release on Friday. In the meantime, broader market risk-sentiment and USD price dynamics would remain exclusive drivers for the pair's movement.

Technical levels to watch

Currently trading around 113.40-50 band, immediate support is pegged at session low near 113.20-15 region below which the pair seems more likely to break below 113.00 handle and head towards testing 112.60 important horizontal support (Jan. 17 low). 

On the upside, any recovery attempt above 113.80 level might now confront immediate resistance near 114.00 handle above which the pair is likely to head back towards 50-day SMA hurdle near 114.35-40 region.

 


14:43 NZD/USD lacking follow through momentum above 0.7200 handle

The NZD/USD pair once again failed to sustain its strength above 0.7200 handle and retraced around 20-30 pips from session tops.

Currently trading around 0.7190-95 region, the pair held its neck above 100-day SMA amid persistent selling pressure surrounding the buck as investors continue to taper their expectations of aggressive fiscal stimulus measures by the new administration following Donald Trump's inaugural speech on Friday. Lack of details over Trump's economic policies triggered a sharp retracement in the US treasury bond yields and eventually was seen benefitting higher-yielding currencies - like the Kiwi.

However, a mild bounce-back in bond yields swung the pendulum mildly in favor of the greenback, with the key US Dollar Index consolidating its slide to 6-week lows, and contributing towards restricting the pair’s up-move just below over two-month high touched on Friday. 

In absence of any fresh fundamental driver from the US economic docket, the pair remains at the mercy of the greenback and bond yields price-dynamics.

Technical levels to watch

A follow through retracement below 0.7165 level now seems to find support near 100-day SMA near 0.7150 region, which if broken might accelerate the slide towards the very important 200-day SMA support near 0.7100-0.7095 region. 

On the flip side, 0.7220-25 region remains immediate strong hurdle, which if cleared decisively has the potential to lift the pair towards 0.7275-80 resistance, en-route 0.7300 round figure mark.

 


14:40 USD/TRY struggling around 3.7700

The Turkish Lira remains sidelined vs. the greenback at the beginning of the week, with USD/TRY hovering over the 3.7700 area.

USD/TRY focus on the CBR, politics

The Lira is looking to extend its upside momentum following Friday’s sharp recovery, sending the pair to 2-day lows in current levels and ahead of tomorrow’s CBRT monetary policy meeting.

Market consensus expects the central bank to tighten its monetary policy, particularly in response to a pick up in domestic consumer prices, which rose at an annualized 8.53% during December (from 7%).

Adding to the effervescence around TRY, the Turkish Parliament has approved on Sunday a new draft constitution, opening the door for a potential presidential system of government. A referendum (probably in April) will have the last word on the bill, which will become law if it gets more than 50% approval.

The potential approval of these reforms has already sparked fresh political jitters in the country as it could boos the power of current President R.T.Erdogan.

USD/TRY key levels

At the moment the pair is up 0.05% at 3.7703 facing the next hurdle at 3.8361 (high Jan.20) ahead of 3.8430 (high Jan.19) and finally 3.9423 (all-time high Jan.11). On the other hand, a breakdown of 3.7989 (low Jan.18) would aim for 3.7161 (low Jan.13) and then 3.6941 (20-day sma).

 


14:17 AUD/USD: Sell on any rebound back above 0.77 - Natixis

Analysts at Natixis note that the Australian dollar is the currency that has appreciated most against the US dollar since the start of the year.

Key Quotes

“It has benefited from the greenback’s bout of weakness, the improvement in economic activity and, especially, employment, from the rise in iron ore prices to almost US$81/t, stoked by significant Chinese imports.”

“This week, with inflation being expected to have rebounded to 1.6% in the last quarter, this ought to push up the AUD/USD to 0.77, at which level we would turn sellers of the pair, bearing in mind the US dollar will end up recovering and that iron ore prices are likely to fall back sharply this year.”


14:12 China would keep its doors open to the rest of the world Danske Bank

Chinese President gave an unprecedented speech at the World Economic Forum (WEF) in Davos as noted by the research team at Danske Bank.

Key Quotes

“For the first time ever, a Chinese President gave a speech at the WEF. In stark contrast to the signals from the new US administration, President Xi Jinping emphasised that co-operation is the only way to solve the challenges facing the world economy and that China would keep its doors open to the rest of the world, hoping other nations would follow suit.”

“Admittedly China is not the best example when it comes to free trade, with incoming US commerce secretary Wilbur Ross stressing afterwards that China is the ‘most protectionist’ major economy in the world and said China ‘talks much more about free trade than it actually practices’. However, there is probably no doubt that China wants to assert a bigger and more active role in the governance of the global economy, such as in the IMF, where China has now sought a bigger say and its currency has been included in the SDR basket. We also think that China will seek closer alliances with the rest of the emerging markets in view of more restrictive US trade and foreign policy regime.”


14:11 USD/CAD defend 100-DMA support for the time being

The USD/CAD pair built on Friday's sharp reversal move from 1.3400 neighborhood and dropped back closer to 100-day SMA support.

Currently hovering around 1.3280-85 region, the pair lost additional ground on Monday amid broad based USD sell-off on disappointment from the US President Donald Trump's inaugural speech on Friday. 

Meanwhile, a sharp retracement in crude oil prices, with WTI crude now trading with a loss of around 1.5%, dented demand for the commodity-linked currency - Loonie, and helped the major to defend 100-day SMA support, at-least for the time being. 

With an empty US economic docket, the US Dollar price-dynamics remains the exclusive driver of the pair's movement ahead of this week's key US macro data, including the advanced quarterly growth number on Friday.

Technical levels to watch

On a sustained break below 100-day SMA support near 1.3275 region, the pair is likely to immediately drop to 1.3250 support area below which the slide could get extended towards 1.3215-10 support area. On the upside, recovery back above 1.3300 handle now seems to confront resistance near 1.3315 level, which if cleared seems to lift the pair back towards 50-day SMA resistance near 1.3350 region.

 

 


14:08 Greenback tugged both ways - Natixis

Research Team at Natixis notes that since the start of the year, the US dollar has corrected significantly against most G10 currencies.

Key Quotes

“The greenback’s depreciation has come about mainly because of uncertainties over Donald Trump’s economic programme. The president-elect has maintained radio silence when it comes to his economic stimulus package: no reference to it in his speech of 11 January or in his tweets, enough to unnerve the equity markets that rose sharply in Q4 2016 in anticipation of a substantial fiscal stimulus package. Instead, Donald Trump brought the spotlight to bear on measures that the markets had chosen to ignore, namely protectionist measures. He continued to fustigate American companies planning to relocate operations (notably in Mexico) and foreign companies wanting to do business in the US. Donald Trump also clearly inferred he considered the US dollar was too strong.”

“Despite these negative announcements, the US dollar has stabilised in recent days because of a series of hawkish statements by FOMC members and some solid macroeconomic indicators, showing the economic growth remains robust. In particular, Janet Yellen reiterated that the US economy was sufficiently solid to cope with a gradual rise in the Fed Funds rate and that the Federal Reserve needed to restore some leeway. The Fed Chair wanted to convince the market that the Federal Reserve was not behind the curve, i.e. has not fallen behind schedule in its monetary tightening cycle despite the upturn in inflation, back above 2%.”


14:02 Intrinsically difficult period ahead for the UK and Europe Danske Bank

According to the analysts at Danske Bank, Theresa May’s Brexit speech on last Tuesday served as a reminder of an intrinsically difficult period ahead for the UK and Europe.

Key Quotes

“While the speech did not contain much news, it reminded us that the UK divorce from what can be described as a 33-year marriage of convenience with the EU is likely to be contentious and complicated. While risks are clearly on the UK side, the unity in the EU will also be tested, for example on how to deal with the lack of UK contribution to the EU budget, which accounts for 15% of all contributions.”

“The EU budget is one of the most contentious issues in the EU. While the British pound rebounded after May’s speech, we think it will come under pressure as triggering Article 50 comes closer, seeing the EUR/GBP moving to 0.88 in 3M.”


13:57 Australia: Q4 CPI expected to accelerate to 1.6% from 1.3% - BBH

Research Team at BBH notes that the Australia reports Q4 CPI figures this week and the headline rate is expected to accelerate to 1.6% from 1.3%.  

Key Quotes

“Price pressures appear to be bottoming in Australia.  A 1.6% pace would be the fastest quarterly increase in 2016.  It was at 1.0% in Q2.  Rising price pressures appear to have dampened ideas that the central bank may still cut rates.  The RBA meets on February 6 and rates will most likely remain on hold.  Separately, Australia will report export and import prices, and it appears the terms of trade are improving, partly with the help of stronger iron ore prices.”


13:54 Gold firmer above $1,210, USD weaker

The ounce troy of the precious metal stays in the upper end of the recent range, posting moderate gains above the key $1,200 mark.

Gold bid on USD-selling

The demand for the yellow metal remains firm at the beginning of the week, propped up by the persistent offered bias around the greenback.

USD met extra selling pressure following the speech by President Donald Trump at his inauguration on Friday, where he delivered a protectionist message. Uncertainty around Trump’s administration and its ability to deliver his promises – particularly regarding fiscal stimulus in order to boos the economy -  is poised to remain the exclusive catalyst for the metal’s price action, at least in the very near term.

Gold has so far resumed its upside, advancing in four of the last five weeks and extending the bounce off December lows near the $1,120 area.

Gold key levels

As of writing Gold is gaining 0.63% at $1,212.45 and a breakout of $1,219.25 (high Jan.23) would open the door to $1,226.21 (100-day sma) and finally $1,229.30 (high Nov.16). On the other hand, the next support is located at $1,195.80 (low Jan.19) followed by $1,182.27 (61.8% Fibo of the 2016 up move) and then 1,176.80 (55-day sma).


13:48 Trade war making noise while EM exports quietly improve Goldman Sachs

According to Ian Tomb, Research Analyst at Goldman Sachs, with US President-elect Trump’s inauguration, the downside risk to EM exports from US protectionism is making headlines.

Key Quotes

“Against this backdrop, EM export growth quietly improved in 2016. Much of this has reflected a commodity price recovery from the 2014 oil shock but the improvement has also involved non-commodity exporting Ems and a pick-up in China-to-US trade flows in 2016H2.”

“As the incoming US administration transitions from rhetoric to policy, it will be crucial to see if this EM export momentum is maintained in 2017H1 and to what extent EM assets benefit from improving US (and global) growth.”


13:39 JPY: CPI and trade figures in focus this week - BBH

Analysts at BBH suggests that the Japan reports December trade figures and CPI which will garner maximum investors’ attention this week.  

Key Quotes

“There is a strong seasonal component to Japan's trade balance.  Over the past 20 years, the December trade balance has not improved over November only three times.  Exports appear to have risen on a year-over-year basis for the first time since September 2015.  Imports are slowly recovering as well.  Excluding food and energy, Japan's CPI is expected to fall back below zero for the first time since August 2013.”  

“The drivers of the yen seem clear, and it is not the domestic economy per se.  Rather the dollar-yen continues to be driven by two attractors - US yields and equities.  On a purely directional basis, the correlation between US 10-year yields and the dollar-yen exchange rate is above 0.95 over the past 60 and 100 days.  On a percentage change basis, the correlation is at the upper end of where it has been since the middle of 2014.  The correlation on a directional basis between the Nikkei and dollar-yen and the S&P 500 and dollar-yen are also elevated.  On a percentage change basis, the correlations are not nearly as strong, of course, but are at or near multi-month highs.”

 


13:35 GBP/USD clings to strong gains above 50-DMA

The GBP/USD pair maintained its strong bid tone above 50-day SMA, albeit has retreated around 25-pips from session peak and is currently trading around mid-1.2400s.

Receding worries of a 'hard Brexit', following last week's speech from the UK Prime Minister Theresa May, coupled with persistent US Dollar selling pressure, in wake of disappointment from the US President Donald Trump's inaugural speech, provide the required momentum to clear 50-day SMA strong barrier and jump to the highest level since Dec. 19.

Market participants, however, seems to have turned cautious and now keenly await for the UK Supreme Court ruling on whether Parliament approval is necessary to trigger Article 50, expected on Tuesday. 

In the meantime, broader market sentiment surrounding the greenback would remain the sole driver for the movement on Monday. 

Technical levels to watch

Momentum above session peak resistance near 1.2470-75 region now seems to lift the pair beyond 1.2500 psychological mark, towards its next major hurdle near 1.2575-80 area. On the downside, 50-day SMA near 1.2410-1.2400 region now becomes immediate support, which if broken is likely to accelerate the downslide towards 1.2340-35 horizontal support, en-route 1.2300-1.2290 zone.

 


13:26 DXY inter-markets: poised for a test of 100.00

Market participants continue to unwind their USD-long positions following the substantial uncertainty that surrounds the US political and economic scenario under Trump’s administration.

In fact, President Donald Trump failed to shed more light over the potential measures under his presidency, particularly on the fiscal side, prompting the buck to accelerate its sell off and at the same time opening the door for a test of the psychological support at 100.00 the figure.

US yields remain on the defensive for the time being, albeit rebounding from recent lows, which seem to have given some support to the Dollar in the vicinity of the 100.00 handle.

Adding to USD weakness, the latest CFTC report showed speculative net longs in USD have retreated to 9-week lows, levels last seen in late November, during the week ended on January 17.

In the longer run, the divergence in monetary policy between the Federal Reserve and its G10 peers remain the solid background where sits the foundation for a stronger buck in the periods ahead. In the shorter term, all eyes stay on Trump and his potential economic measures and this will be the exclusive driver behind the price action around USD.

On the technical side, the bullish undertone in DXY remains well and sound while above the 8-month support line, today around the 97.00 handle, reinforced by the critical 200-day sma at 97.17. In the very near term, the psychological handle at 100.00 the figure emerges as the next relevant support.


13:17 UK Supreme Court ruling on Article 50 in focus this week - BBH

In view of the analysts at BBH, an important non-economic event that investors will be monitoring is the UK Supreme Court ruling on whether Parliament approval is necessary to trigger Article 50.  

Key Quotes

“After Prime Minister May's speech last week, the decision may have lost some of its ability to roil the markets. May reassured that Parliament would vote on the final agreement.”

“Although many in Parliament seem to have some misgivings about the clean break strategy, which had been thought of as a hard Brexit scenario, there is little doubt a majority will vote to trigger Article 50. The failure to do so would likely spark a political crisis.  Northern Ireland will go to the polls on March 2.  An anti-Brexit parliament could still frustrate May's timetable, and Scotland independence efforts may be fanned by the UK government's position.  It is also not immediately clear the implications of the change in leadership of the European Parliament, which will also vote on the final Brexit deal.”    

“The UK also reports the first estimate of Q4 GDP.  UK growth has been remarkably stable. Quarterly growth has averaged 0.6% over the last four and 12 quarters.  Quarterly growth has averaged 0.5% over the past five years.  Economists expect the UK economy grew 0.5%-0.6% in Q4 16.”


13:13 WTI shrug-off optimistic Saudi comments, turn lower on worries over rising US drilling activity

WTI crude oil ran through fresh offers at higher level and has now reversed weekly bullish gap to mid-$53.00s region.

Currently trading just around $52.50 region, the black gold gained traction at the start of a fresh trading week in wake of comments from Saudi Arabia's energy minister Khalid al-Falih that OPEC cartel was showing “very good” compliance to oil output cut agreement reached in November last year. According to official report, OPEC and 11-non-OPEC producers have already cut oil supply by 1.5 mbpd, representing over 80% of the total collective target to reduce output by almost 1.8 mbpd. 

The initial up-move, however, turned out to be short-lived as investors remain concerned that prospects of rising US production might negate other major producers' efforts to bring back rebalance in the global oil market. The latest Baker Hughes report on US rig-counts, released on Friday, showed the number of working rigs drilling oil in the US climbed by 29 to 551, its highest level in 14-months.

Meanwhile, a mild greenback recovery from lows also weighed on dollar-denominated commodities - like oil, and collaborated to the reversal from highs.

Technical levels to watch

A follow through retracement is likely to get extended towards $52.15-10 support below which the commodity is likely to head towards $51.40 support area, en-route $51.00 round figure mark. On the upside, momentum back above $53.00 handle could get extended towards $53.30-35 resistance above which the commodity seems all set to head towards reclaiming $54.00/barrel mark.
 

 


13:12 USD: Factoring in the risk of weakness - ANZ

Research Team at ANZ notes that since 2008 the USD has become a key determinant of the direction of most currencies and it is starting to look expensive.

Key Quotes

“Our sensitivity analysis suggests that commodity currencies are most vulnerable to any correction.”

“Other factors, such as risk appetite will limit the duration of this correction, but their impact will be relatively muted.”

“Overall, this means that the 2017 USD uptrend is unlikely to be as powerful as it was in 2013-2015. The ‘new normal’ is slower appreciation, with more frequent retracements.”


13:07 US: Unpredictable nature of the new President - BBH

According to the analysts at BBH, the developments over the last few days, including the strident tones of the inauguration speech, may be a small hint to investors of the unpredictable nature of the new US President.  

Key Quotes

“The unorthodox style and rhetoric should not distract from the necessary focus on policy.  Ultimately, public policies and private sector behavior, not speeches or wishes, drive interest rates, equities, and currencies.”

“Investors will have to get accustomed to the new Administration's way of conducting itself and communicating.  With broad strokes, and recognizing some contradictory impulses, at this juncture we suggest four main elements of Trump's economic policy.”

“The first is re-writing trade deals.  This is a central plank.  It is one of the key elements of Trump's foreign policy and job creation plans.  The potential of TPP being re-purposed as a bilateral free-trade agreement between the US and Japan remains possible but unlikely.”

“The priority appears to be to re-negotiate NAFTA.  Few people are opposed to reviewing old agreements.  No doubt it can be updated; it is 23 years old.  Intellectual property rights have evolved, the Internet not only exists but is an important distribution channel for goods, services, and information, there are new tax and accounting rules, and the like.  While modernizing old agreement is one thing, changing the essential thrust (reduced barriers to trade in the North American continent) is quite a different thing.  It is not clear to many whether Trump's rhetoric is part of the "Art of the Deal," or whether it is a principled position.”  

“Second, the White House says it wants the US to create 2.5 mln new jobs over the next decade.  Over the last five years, the US created an average of 197k net new jobs a month.  The five-year monthly average has rarely been over a 200k.  Although during the campaign there was talk of achieving 5%-6% growth, the White House now says 4%, while Mnuchin said 3%-4% in his confirmation hearings.”

“Third, tax code reform appears high on the priority list.  The new Administration wants to cut corporate taxes, simplify the code and reduce income taxes.  Although there was some talk of reducing the tax rate on all income brackets, Mnuchin seemed to rule out tax cuts for wealthy households.”

“The fourth plank is the $1 trillion infrastructure initiative.  It is important for jobs and growth, though apparently not cited on the new White House website.  President Trump did include it in his inauguration speech.”


13:01 UK: More clarity post PM Mays speech, but challenges remain Goldman Sachs

Research Team at Goldman Sachs, notes that last week, Prime Minister May confirmed their expectation that the UK will seek to leave the single market, while retaining an open trading relationship with the EU and more broadly.

Key Quotes

“Although some expectations for access to EU markets have been managed down by the UK government (and towards our views), the potential for no eventual agreement, and a ‘hard Brexit’, remains.”

“Some internal tensions in the UK’s opening negotiating stance contribute to that risk, even if areas for compromise exist and will be explored further in the negotiations that follow the triggering of Article 50.”


12:57 The problem with Europe is Europe Rabobank

In view of the Jane Foley, Senior FX Strategist at Rabobank, one of the notable themes of May’s January 17 speech was her attempt to re-frame why UK voters had chosen to leave the EU. 

Key Quotes

“While this could be a source of debate for many years to come most would agree that one issue concerns the need for more reform in Europe.  Comments made by Italian Finance Minister Padoan that “the problem with Europe, is Europe” indicate that finally the establishment is beginning to understand something that millions voters have known for quite a while – that mainstream politicians are being seen as part of the problem rather than the solution to prevailing woes.  In the final months of last year, the Italian referendum on constitutional reform focussed the market on the political hurdles that Europe faces this year.  The failure of opinion polls to predict either the UK’s Brexit vote or the Trump victory in the US Presidential election arguably made the market more sensitive to the risk that voters in the Netherlands, France and Germany would move in droves away from centrist governments and vote for monumental change.  That said, while the far right will likely see increased support in this year’s elections, it is still likely that centrist governments will prevail.  This raises the prospect of relief rallies for the EUR during the course of this year.”   

“Since the start of the year the better tone of German inflation and activity data have been supportive for the EUR.  Even though ECB Governor Draghi has dismissed the prospect of higher inflation as a “high class problem” and not one that the Governing Council discussed in January, the better data has triggered a debate in Germany about the appropriateness of the ECB’s current loose monetary policy settings.  Assuming the far right do not sweep to power in Europe this year and on our view that the BoE refrains from hiking interest rates, we expect EUR/GBP to move higher this year.  The risk to our year end forecast of 0.89 by year-end is skewed to the upside.”


12:52 GBP remains under pressure, EUR/GBP at 0.88 in 3-month Danske Bank

Analyst at Danske Bank Thomas Rosenlund sees the European cross returning to the 0.8800 region within the next 3-months.

Key Quotes

EUR/GBP has stabilised around the 0.8650 level since the UK Prime Minister Theresa May’s speech last week”.

“Tomorrow, the Supreme Court will announce its ruling on whether it is the government or parliament that can trigger Article 50. It is widely expected that the government will lose the appeal, meaning that parliament will have to vote in favour of triggering Article 50 before Brexit becomes a reality. If the ruling turns out as expected, it should have little market impact, as a decent amount of short GBP bets have probably been cleared following May’s speech”.

“If the Supreme Court on the other hand rules that the government can trigger article 50, it would be very negative for GBP”.

“In any case, we still expect GBP to come under pressure as the triggering of Article 50 moves closer. We target EUR/GBP at 0.88 in 3M but see risks skewed to the upside”.

 


12:46 EUR/GBP finds some support near 0.8610

The better tone in both the Sterling and its European peer has dragged EUR/GBP to fresh lows in the 0.8615/10 band on Monday.

EUR/GBP deflates from recent highs

The European cross has resumed its downside today, extending the drop from last week’s peaks in the 0.8860 area in response to the broad-based continuation of the bid tone in the risk-associated space.

The cross remains wary of the Brexit-related headlines, with tomorrow’s UK Supreme Court ruling emerging as the next risk event around the Sterling. It is worth mentioning that the Supreme Court will rule whether the UK government or the Parliament has the capacity of triggering Article 50. Recall that PM Theresa May expects to invoke Article 50 by end of March this year.

On the data front, EMU’s Consumer Confidence is due later along with speeches by ECB’s Draghi and Praet. Across the Channel, the most significant event will be the advanced UK’s Q4 GDP figures, due on Thursday.

EUR/GBP key levels

The cross is now retreating 0.37% at 0.8619 facing the next support at 0.8605 (low Jan.19) ahead of 0.8577 (low Jan.9) and then 0.8541 (55-day sma). On the upside, a break above 0.8680 (high Jan.19) would aim for 0.8821 (high Jan.17) and finally 0.8860 (high Jan.16).

 


12:16 USD/RUB sharply lower, testing 59.30

The sell-off in the US Dollar remains unabated at the beginning of the week, now relegating USD/RUB to the lower bound of the range near the 59.30 region.

USD/RUB weaker on USD-selling

Spot has gathered extra downside traction on Monday, as the greenback is extending its descent following the protectionist tone from Donald Trump at his inaugural speech on Friday.

Somewhat limiting the pair’s downside, crude oil prices have started the week on the defensive, with the barrel of Brent crude down smalls just above the $55.00 mark.

RUB will stay under pressure in the meantime, following the usual crude oil dynamics and the US-Russia developments under Trump’s presidency.

On the positioning front, RUB speculative net longs have climbed to 5-week peaks during the week ended on January 17, as per the latest CFTC report.

Data wise, Russian Producer Prices, Unemployment Rate and Retail Sales are due on Wednesday ahead of the CBR’s FX Reserves due on Thursday.

USD/RUB levels to watch

At the moment the pair is losing 0.59% at 59.39 facing the next support at 59.11 (low Jan.6) followed by 58.57 (low Jul.29 2015) and then 56.20 (low Jul.10 2015). On the flip side, a surpass of 60.03 (20-day sma) would expose 60.24 (high Jan.19) and finally 60.66 (high Jan.11).


11:32 USD/JPY recovers back above 113.50 level as USD sell-off abates

The USD/JPY pair has managed to recover around 50-pips from session low near 113.20 region as the greenback sell-off abates. 

In a relatively brief inaugural speech on Friday, the US President Donald Trump's protectionist rhetoric and lack of clarity over his plans for economic stimulus failed to reignite the US Dollar rally. Moreover, fading market expectations of any immediate stimulus from the new administration drove the US treasury bond yields sharply lower and weighed heavily on the greenback. 

Adding to this, bearish sentiment surrounding equity markets also benefitted the Japanese Yen's safe-haven appeal and collaborated to the pair's slide to three-day low level of 113.17. 

However, the US Dollar selling pressure seems to have stalled during European session and helped the pair recover some of its lost ground. Also supporting the pair’s recovery from lows is a minor rebound in the US treasury bond yields and key European equity indices. 

In absence of any major market moving releases, USD price dynamics and broader market risk sentiment would remain key determinant of the pair’s move on Monday.

Technical levels to watch

A follow through recovery is likely to confront resistance near 114.00 handle above which the pair seems all set to extend the momentum back towards 114.65 level, with 50-day SMA near 114.40 region acting as intermediate resistance.

On the downside, 113.20-15 region (session low) now becomes immediate support, which if broken is likely to accelerate the slide below 113.00 handle towards recent lows support near 112.60 area.

 


11:31 EUR/GBP rallies find resistance around 0.8725 Commerzbank

Occasional rallies in EUR/GBP should struggle around 0.8725, according to Karen Jones, Head of FICC Technical Analysis at Commerzbank.

Key Quotes

“No change, EUR/GBP is weighing on the downside very near term having recently seen strong rejection from Fibo resistance and the top of the cloud at 0.8853. We assume that .8852/53 is a short term top and intraday rallies should remain capped circa .8725”.

“Initial support is the base of the cloud at .8479 and the 6 month uptrend at .8492. Minor support lies .8625/04”.

“Only above .8853 introduces scope for gains to the .9050 November high and even .9142 the 11th October high”.

 


11:16 USD: Correction lower extends after President Trumps inauguration speech - MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the US dollar has continued to weaken in the Asian trading session following President Trump’s inauguration speech on Friday.

Key Quotes

“It has resulted in the dollar index falling back towards support at the 100.00-level. It appears mainly part of an ongoing loss of confidence in the Trump reflation trades in the near-term. President Trump’s inauguration speech failed to provide a fresh trigger for the US yields and the US dollar to head higher. Our take on the speech in general is that it showed that President Trump plans to follow through with his campaign pledges now that he is in government. Those involve a shift to more protectionist trade policies, looser regulation, higher infrastructure investment and comprehensive tax reform. The conflicting potential impact of those policies on the US dollar is contributing to higher volatility since the election.”

“One message was loud and clear that President Trump will be putting America first which risk collateral damage for the rest of the world. A shift to more protectionist trade policies appears the initial policy focus which could be one factor weighing on the US dollar in the near-term. President Trump is expected to officially notify the other members of the Trans-Pacific Partnership trade deal that the US will not participate in the agreement, and formally announce plans to start the process to renegotiate the North American Free Trade Agreement with Canada and Mexico. Mexican President Enrique Pena is scheduled to meet President Trump at the White House on the 31st January.”

“Canada’s ambassador to the US, David MacNaughton has stated that Canada is prepared to engage in talks over NAFTA both on trilateral matters with Mexico, and bilaterally as well. He stressed that Canada wants to maintain a really successful commercial relationship with the US which has been mutually beneficial, and highlighted that the President Trump’s main trade concerns are the trade deficits with China and Mexico.”

“The shift to a more protectionist trade policy stance continues to pose downside risks mainly for the Mexico peso, the Chinese renminbi and other Asian currencies, and to a lesser extent the Canadian dollar.”

 


11:10 Dollar needs Trump pro-growth assurances to stay supported - ING

Analysts at ING note that the fundamental drivers of markets were thwarted by the words of political leaders last week.

Key Quotes

“While President Trump's 'too strong' dollar comment and combative inaugural address has taken some of the steam out of the greenback's rally, we remain wary that dollar strength could be the ultimate by-product of the new President's 'America First' policy stance. Indeed, the updated White House pages show that 25 million new jobs and 4% GDP growth remain the economic pledges of the Trump administration. With a US economy already close to full employment, it is difficult not to see Trump's fiscal plans generating sufficient inflationary pressures to drive US yields and the dollar higher.”

“But equally, investors are placing greater focus on future US trade and foreign policy. Naturally the market may be bracing itself for President Trump to formally name China a currency manipulator. In practice, this would spark bilateral negotiations rather than any immediate tariffs †but presumably the market wouldn't take too kindly to this. USD/JPY remains a bellwether of Trump sentiment: the latest move below 114 is indicative of some growing protectionist fears creeping into markets.”


11:06 French Socialist Primaries shows a clear shift to the left - SocGen

Kit Juckes, Research Analyst at Societe Generale, notes that the first round of the French Socialist Primaries shows a clear shift to the left, with Benoit Hamon gaining most votes and heading into the second round with Manuel Valls this weekend.

Key Quotes

“A Hamon win would leave a big gap in the centre ground, to the benefit of Emmanuel Macron. In many ways, it is easier for a centrist candidate to galvanise cross-party support in the Presidential election and so, this result may well be seen in FX terms as Euro-friendly. There are far too many twists and turns ahead in this election us to alter a view that at some point, political nerves will drag the euro down but today or tomorrow we may well see a break back above EUR/USD 1.08.”


11:04 UK: Supreme Court verdict could support modest pound rebound MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the pound has been one the best performing currencies against the US dollar overnight as cable has broken tentatively above its 55-day moving average at just above the 1.2400-level for the first time in over a month.

Key Quotes

“It potentially opens the door to further upside in the near-term with the next key resistance at the 1.2500-level, and then beyond from the early December highs between the 1.2700 and 1.2800- levels. The pound is still deriving support from UK PM May’s key note speech last week which has helped to ease “hard” Brexit fears at least in the near-term. The additional certainty provided by PM May’s Brexit plan and positive message for a more global Britain have been welcomed by the market.”

“The market is also anticipating the verdict from the Supreme Court in the UK tomorrow which could offer some further modest support for the pound. The Supreme Court is expected to rule that parliament should have a say in triggering Article 50. The market would welcome greater parliamentary involvement in the process viewing it as reducing the risk of a more disorderly Brexit. The wording of the ruling with regards to parliamentary involvement will prove important. A defeat for the government could increase the risk that the triggering of Article 50 is a little delayed, although it will not stop Brexit. We expect a majority in parliament to honour the referendum result and vote in favour of triggering Article 50.”

“It has not all been good news for the pound in the near-term. The release on Friday of the latest UK retail sales report revealed a sharp contraction in December. The report has heightened concerns that higher inflation from the sharply weaker pound is starting to have a more negative impact on consumer spending. One caveat is that a correction was overdue after retail sales growth surged in the previous five months. The weakness in December likely exaggerates the underling health of the consumer.”

“The release of the flash estimate for UK GDP in Q4 will be released in the week ahead. It is expected to reveal that the UK economy has been little impacted so far by the Brexit vote. We remain on the more optimistic side expecting only a modest slowdown in growth in the year ahead which in part supports our view that the pound could outperform current pessimistic expectations.”


10:58 EUR/USD off session peak, still well-bid above 1.0700 handle

The greenback selling pressure seems to have abated during European session, with the EUR/USD pair reversing around 20-pips from session tops around mid-1.0700s.

The pair, however, maintained its strong bid tone for the third consecutive session, to the highest level since early December, amid disappointment from the US President Donald Trump's inaugural speech on Friday, which failed to provide any details over his plans for economic stimulus.

From a broader perspective, the pair's post-ECB rebound from 50-day SMA neighborhood, and a subsequent decisive move above 1.0700 handle, seems to have confirmed a near-term bullish break-out and thus, increases the possibilities of additional up-move from current levels. The pair was last seen trading around 1.0730-25 region, having posted a session high at 1.0755 level. 

Monday's economic docket lacks any fundamental drivers and hence, the pair remains at the mercy of broader sentiment surrounding the US Dollar ahead of ECB President Mario Draghi's speech.

Technical levels to watch

Momentum above session high is likely to confront resistance near 1.0765-70 region above which the pair seems more likely to head towards reclaiming 1.0800 round figure mark, en-route 100-day SMA resistance near 1.0845-50 region.

On the flip side, immediate support is pegged near 1.0700 handle below which the pair is likely to drift back towards 1.0625-20 support area ahead of 50-day SMA strong support near 1.0600-1.0590 region. Intermediate support below 1.0700 mark is seen at 1.0675-70 zone.

 


10:50 GBP/USD could attempt a test of 1.2528 Commerzbank

In view of Karen Jones, Head of FICC Technical Analysis at Commerzbank, there is still scope for a test of the 1.2530 area.

Key Quotes

GBP/USD’s rebound off to the 61.8% Fibo at 1.1982 is starting to erode the 55 day ma at 1.2408 and the 1.2422 resistance line. Directly overhead lies the 100 day ma at 1.2528 and we will allow for this also to be tested. While capped here, a negative bias will remain entrenched. We suspect that prices will need to go sub 1.2200/1.2165 however to alleviate immediate upside pressure. We note that the intraday Elliott count is positive and suggesting scope for 1.2620”.

“Support at 1.1980 guards 1.1775 and then 1.1481 the recent spike low”.

 


10:45 US Dollar risks a test of 100.00

The greenback – tracked by the US Dollar Index (DXY) – remain well on the defensive at the beginning of the week, testing lows in the 100.30 region for the time being.

US Dollar weaker post-Trump speech

USD has come under further selling pressure on Monday, extending last week’s bearishness and approaching the psychological support at the 100.00 handle.

The index is retreating for the fifth consecutive week so far, as market participants are unwinding their USD-long positions at a faster pace following the recent speech by President Donald Trump at his inauguration on Friday.

The protectionist tone from President Trump at his speech has encouraged sellers to remain in the markets and intensified further the scepticism over the ability of the new administration to deliver the promised boost to the economy mainly via extra fiscal stimulus.

In the meantime, USD speculative net longs continued to retreat during the week ended on January 17, falling to levels last seen in late November, as per the latest CFTC report. 

Nothing scheduled today in the US docket, while the salient releases will be the flash Q4 GDP figures and the Reuters/Michigan index, both due on Friday.

US Dollar relevant levels

The index is retreating 0.42% at 100.33 facing the immediate support at 100.23 (low Jan.17) followed by 99.87 (low Dec.5) and finally 99.49 (low Dec.8). On the upside, a breakout of 101.23 (55-day sma) would open the door to 101.71 (high Jan.16) and then 101.84 (20-day sma).


10:32 Hong Kong SAR Consumer Price Index: 1.2% (December)


10:27 AUD/USD reverses early gains, retreats back to 0.7550 level

The AUD/USD pair caught fresh bids at the start of a fresh trading week, amid broad based greenback weakness, and moved closer to Friday's two-month high.

The pair, however, lost its upside momentum during early European session and reversed early gains to currently trade around 0.7555 area. Lack of clarity over Trump's proposed fiscal stimulus triggered a broad based sell-off in the US treasury bond yields and drove flows away from the greenback towards higher-yielding currencies - like the Aussie.

Moreover, the prevalent upbeat sentiment around commodity space, especially Copper, also boosted demand for commodity linked currencies and collaborated to the pair's up-move on Monday. 

However, stalling greenback selling pressure, with the key US Dollar Index consolidating losses to four day low to the vicinity of 100.00 psychological mark, hindered further upside for the major. 

With an empty US economic docket, the pair would remain at the mercy of the price action around US treasury bond yields and broader market risk sentiment ahead of Australian CPI print during early Asian session on Wednesday. 

Technical levels to watch

A follow through retracement below 0.7550 support seems more likely to drag the pair immediately towards 0.7525 intermediate support before eventually taking it to the very important 200-day SMA resistance turned support near 0.7500 psychological mark. 

On the upside, sustained move above 0.7580 region now seems to pave way for a move beyond 0.7600 handle, towards its next major hurdle near 0.7650 area with some intermediate resistance near 0.7630 level.

 


10:07 EUR/USD could still test 1.0820 Commerzbank

According to Karen Jones, Head of FICC Technical Analysis at Commerzbank, a visit to the 1.0820 area stays on the cards.

Key Quotes

EUR/USD has eroded the 1.07 area. The Elliott wave count is suggesting that an ‘a-b-c’ correction higher is terminating (we have TD resistance circa 1.0780om the 240 minute chart) and we look for the 1.0606 near term support line to be eroded - failure here is needed to add weight to the idea that the correction higher is complete and would cast attention back to the 1.0372/40 recent lows. Currently the market looks bid but we have no buy signal so will head to the side lines”.

“We remain unable to rule out a move to 1.0820 50% retracement and 1.0875 the December high. This will make little impact on the overall bearish chart”.

 


10:01 GBP/USD advances to 1.2470, session tops

The Sterling is following north the rest of its risk-associated peers, sending GBP/USD to print daily peaks in the vicinity of 1.2470.

GBP/USD boosted by weak USD

The generalized selling mood around the buck continues to be the exclusive driver behind the pair’s upside so far, while some extra buying interest seems to have supported GBP following recent auspicious results in the UK docket and the speech by PM Theresa May.

Concerns over the likeliness of a ‘hard Brexit’ scenario have somewhat diminished after May’s speech last Tuesday, while market participants will now look to the UK’s Supreme Court ruling on whether May or the Parliament has the power to trigger Article 50 (Tuesday).

Anyway, GBP is poised to stay under pressure in the next months, as economic and political implications from Brexit still remain a source of uncertainty for the country.

On the positioning side, GBP speculative net shorts have advanced to 5-week tops during the week ended on January 17, according to the latest CFTC report. Open Interest has been reinforcing the move, climbing as well to multi-week highs.

In the data space, UK’s GDP figures will be the salient release this week ahead of the meeting between PM T.May and President D.Trump, expected on Friday.

GBP/USD levels to consider

As of writing the pair is gaining 0.70% at 1.2462 facing the next hurdle at 1.2518 (100-day sma) ahead of 1.2729 (high Dec.13) and finally 1.2776 (high Dec.6). On the downside, a break below 1.2277 (low Jan.18) would aim for 1.2250 (low Jan.18) and finally 1.1979 (low Jan.16).


09:59 USD/CNY: Depreciation trend to continue in coming years Danske Bank

Allan von Mehren, Chief Analyst at Danske Bank, suggests that they are looking for CNY to weaken gradually as growth is under pressure, debt risks are rising, the Fed is resuming rate hikes and net FDI flows are no longer positive for China.

Key Quotes

“However, we do not expect a bigger devaluation as the CNY is not overvalued and China wants stability for its currency. However, against EUR, we still expect CNY to depreciate close to 10% on a 12M horizon.”

“The CNH-CNY spread moved into negative territory in early January as the CNH strengthened sharply on the back of Chinese intervention in the offshore market, which led to a big capitulation of short CNH positions. However, we expect the spread to come back gradually to around zero as the situation calms down again.”


09:56 USDJPY to stay supported - ING

Research Team at ING notes that the consensus expects $/JPY to stay supported and end this year at around 116/117.

Key Quotes

“US yields are expected to stay firm and we see the 10-year Treasury at 2.75% in the early part of the year, some correction mid-year when Congress reins in Trump’s plans, and then a further rise in yields into year-end when a serious debate is had about the size of the Fed’s balance sheet.”

“With the BoJ still heavily buying JGBs at a time when the Fed is tightening, USD/JPY should be biased towards 120. At some point, however, Japan’s super-loose policy may come into question given signs that domestic activity is picking up.”

“Main downside risk to USD/JPY comes from the White House, however. Protectionism and Japan appearing to be in Trump’s sights warn of the occasional bouts of safe haven JPY strength.”


09:53 NZD/USD to continue its gradual drift lower in longer term Danske Bank

Minna Kuusisto, Analyst at Danske Bank, notes that led by the USD developments, NZD sank to a six-month low in December but in January, the cross has recovered more than 2%.

Key Quotes

“In the short term, we see broader USD developments and market expectations of changes in US economic policy and growth as key to the pair. In the longer term, we expect NZD/USD to continue its gradual drift lower. Even though the markets could speculate on the RBNZ hiking rates towards year-end, we still see relative monetary policies supporting the USD in the short term.”

“We keep our forecast unchanged and expect the NZD to bottom in 3-6M before heading slightly higher towards the year-end. Our 6M forecast is 0.68 and 12Mtarget0.70.”


09:49 USD/CHF sustaining weakness below parity mark

Extending its near-term corrective slide, the USD/CHF pair broke below parity mark and dropped to the lowest level since mid-November. 

Currently hovering around 100-day SMA near 0.9980 region, the pair traded with negative bias for the third consecutive session and is weighed down by disappointment from the US President Donald Trump's inaugural speech, which failed to shed any light on details of his promised fiscal stimulus measures. 

Adding to this, bearish sentiment surrounding equity markets extended additional support to the traditional safe-haven currencies - like the Swiss Franc, and aggravated the selling pressure around the major. 

In absence of any market moving releases from the US, the pair remains at the mercy of USD price-dynamics and broader risk sentiment. 

Technical levels to watch

A follow through selling pressure below 100-day SMA support near 0.9970 region is likely to accelerate the slide towards 0.9950-45 support area below which the pair seems vulnerable to head towards 0.9900 round figure mark. On the flip side, recovery back above parity mark might now confront resistance near 1.0035-40 region, which is followed by resistance near 1.0075 level.

 


09:47 US should grow 2.8% this year - ING

Research Team at ING notes that we have seen little detail on Donald Trump’s fiscal agenda and the presumption is that Congress will water down some of the plans he presents in his February – but overall the US should grow 2.8% this year and 3.2% next.

Key Quotes

“What we have seen, however, is a more hawkish Fed that expects three hikes this year instead of two. We tend to favour hikes in March and June, followed by focus on the Fed shrinking its US$4tr balance sheet.”

“Loose fiscal and tight monetary policy is typically positive for a currency. The main US challenge to the dollar will come from Trump’s hawkish trade team, where fears of protectionism could intermittently weigh on USD. Strong dollar policy is also in focus.”

“ECB will look to keep the EUR as weak as possible for as long as possible. But undervaluation should lend support to EUR by end-17.”


09:42 AUD/USD: Broader USD moves dominate the pair Danske Bank

Minna Kuusisto, Analyst at Danske Bank, notes that the AUD moves since December have been led by the broad USD index and the appreciation momentum of USD has eased in January as Chinese officials have taken decisive measures to support the CNY (and weaken the USD).

Key Quotes

“Another reason for the USD rally taking a breather could be that markets are starting to lose patience as the lack of details and concrete economic plans mark the upcoming inauguration of Donald Trump. Led by the USD developments, AUD sank to a seven-month low before year-end. In January, the cross has recovered an impressive 4%, pushing the AUD to overbought territory. Thus, we see the pair reversing back to 0.72-0.73 in1-3M.”

“For 6-12M, we keep our forecasts unchanged and expect monetary policy divergence (Fed hikes) to be the key factor curbing AUD strength even though stronger global growth and higher commodity prices give support.”


09:27 Gold retreats after hitting two-month highs

Gold gained some fresh traction at the start of a new trading week and rose to the highest level in two-month. 

Trump's inaugural speech failed to impress the markets and uncertainty around his proposed fiscal policy measures continues to weigh on the US Dollar, thus, boosting demand for dollar-denominated commodities - like Gold. This coupled with weaker sentiment surrounding equity markets is lending additional support to the yellow metal's safe-haven appeal and collaborating to the bid tone. 

The upward trajectory, however, lacked conviction amid growing prospects of additional Fed rate-hike action in 2017, following last week's optimistic rhetoric from the Fed Chair Janet Yellen. Higher US interest-rates tend to drive flows away from non-yielding precious metal. 

Nevertheless, the yellow metal traded with positive bias for ninth session in the previous ten, albeit has retreated from session peak level of $1219.50 level and is currently trading around $1214 region.

Technical levels to watch

Immediate support is pegged at session low near $1210 level below which the commodity is likely to head back towards $1202-1200 strong support area. A follow through weakness back below $1200 mark is likely to accelerate the slide towards $1190-88 support area with $1195-94 zone providing some intermediate support.

On the flip side, sustained move above session peak resistance near $1219-20 area now seems to pave way for continuation of the metal near-term upward towards 100-day SMA hurdle near $1235 region. Intermediate resistance on the upside is seen at $1230 horizontal level.

 

 


09:20 CBRT expected to hike rates on Tuesday BBH

The Research team at BBH expects the Turkish central bank to hike its benchmark rate at its meeting on Tuesday.

Key Quotes

Central Bank of Turkey meets Tuesday and is expected to hike the benchmark repo rate 50 bp to 8.50%”.

“However, the market is truly split. Of the 22 analysts polled by Bloomberg, 4 see no change, 3 see a 25 bp hike, 8 see a 50 bp hike, 2 see a 75 bp hike, and 5 see a 100 bp hike”.

“We think it will hike 50 bp, even though it SHOULD hike by 100 bp. The bank is also expected to hike the top of the rates corridor by 75 bp and the bottom by 25 bp”. 

 


09:16 Option expiries for today s NY cut

Option expiries for today's NY cut at 10:00ET, via DTCC, can be found below. 

- EUR/USD: 1.0500(E1.33bn), 1.0600(E815mn), 1.0700(E535mn) 

- GBP/USD: 1.2060(Gbp464mn), 1.2300(Gbp628mn) 

- AUD/USD: 0.7500(A$363mn) 

- USD/JPY: 112.00($525mn), 114.00($426mn), 115.00($586mn), 115.50($516mn), 116.00($1.25bn), 116.50($536mn), 117.15($407mn) 

- USD/CAD: 1.3550($410mn) 


09:11 EUR/USD keeps pushing higher, in highs near 1.0750

The bearishness around the greenback is now allowing EUR/USD to clinch daily tops in the mid-1.0700s ahead of the European open.

EUR/USD stronger on USD-selling

The selling interest in USD has nothing but intensified in response to the protectionist tone from President D.Trump’s speech at his inauguration on Friday.

In addition, Trump failed to shed more light over the potential political and economic measures to be implemented in his presidency, increasing the scepticism among investors and thus weighing further on the buck.

Spot has managed to break above the critical 1.0700 barrier on a more sustainable fashion for the time being, now targeting December highs near 1.0800 the figure ahead of the boundaries of the 1.0900 handle following the spike post-ECB meeting that month.

In the positioning space, the latest CFTC report showed EUR speculative net shorts have climbed to 2-week tops on the week to January 17.

On the data front, EMU’s Consumer Confidence gauged by the European Commission is only due later along with speeches by President Mario Draghi and Board Member Peter Praet.

EUR/USD levels to watch

The pair is now up 0.39% at 1.0745 and a breakout of 1.0755 (high Jan.23) would open the door to 1.0798 (high Dec.5) and then 1.0873 (high Dec.8). On the flip side, the immediate support aligns at 1.0622 (low Jan.19) followed by 1.0619 (short-term support line) and finally 1.0598 (55-day sma).


09:10 EUR/CHF: Set to stay low near term on political uncertainty Danske Bank

According to Jens Nærvig Pedersen, Senior Analyst at Danske Bank, political uncertainty in Europe, coupled with rising geopolitical risks following the election of Donald Trump as the next US president, has supported CHF and put pressure on SNB to act to curb CHF appreciation pressure.

Key Quotes

“Political uncertainty looks to be a key theme for FX markets again this year. EUR/CHF is still trading close to 1.07. We expect it to stay here in the near term as focus turns to European political uncertainty.”

“Longer term, we continue to expect fundamentals to support a higher EUR/CHFandkeepour6M and12M forecasts unchanged at 1.10 and 1.13, respectively.”


09:05 UK: Can the Supreme Courts ruling change Mays Brexit-plan? - Rabobank

Carlijn Prins, Economist at Rabobank, notes that the UK Supreme Court is expected to rule this month whether Ms. May has the power to invoke Article 50 of the Treaty of Lisbon, without the prior approval of parliament.

Key Quotes

“If the Supreme Court mandates a role for Parliament, May’s end-March 2017 deadline for invoking Article 50 might not be met. Parliament even has the power to prevent Brexit, although at this point it seems unlikely that the Commons or the Lords would vote against triggering Article 50, as they would be blamed for voting against the referendum decision.”

“If legislation is required to exit the EU, parliament will probably have more say in the negotiation strategy of the UK. The majority of Members of the House of Commons (MPs) is pro-EU and they are likely to give priority to access to the Single Market.”


09:02 Turkey Consumer Confidence rose from previous 63.4to 66.9 in January


09:01 Euro area: Consumer confidence to show a modest increase for January Danske Bank

Research Team at Danske Bank suggests that in the euro area , the consumer confidence figure for January is due to be released today which will garner maximum attention from investors.

Key Quotes

“Consumer confidence has improved since August 2016 despite political turmoil regarding Brexit and Donald Trump and remains at a high level. Consumer confidence may thus still prove resilient even as Theresa May signals a 'Hard Brexit' and Trump lingers on specifying the economic plans for his administration. We expect it to show a modest increase for January as the labour market still shows strength.”


08:55 Forex Today: Trump-led USD selling extends at the start of a new trading week

Unwinding of the Trump long-dollar trade extended through Asian session on Monday and the greenback traded with bearish bias across the board. The markets were disappointed by lack of details on Trump's expansionary fiscal policies at his inaugural speech on Friday.

The Japanese Yen got an additional boost from prevalent risk-off mood, while upbeat sentiment in commodity space was seen lending support to the Antipodeans. 

In absence of any major market moving releases, market movement remains at the mercy of US Dollar price-dynamics, which could remain weak until some clarity emerged on Trump’s promised fiscal stimulus measures. 

Main topics in Asia

Saudi – Oil supply cut by 1.5 million barrels per day

The countries have already cut oil supply by 1.5 million barrels a day, more than 80% off their collective target, said Saudi Arabia’s Energy Minister Khalid Al-Falih.

Asian stocks are on the back foot on Trump’s protectionist agenda

Major Asian indices dropped along with the US dollar as fears about Trump’s protectionist policies forced investors to move out of risky assets and into safe havens - gold, Yen, treasuries. 

Key focus for the day ahead

GBP: Technical indicators suggest another attempt higher is likely - BBH

Analysts at BBH note that owing largely it seems to the issues surrounding Brexit, sterling marched to a different beat in the previous week. 

EUR/USD extends gains, will it end the three-month losing streak?

EUR/USD extended gains to fresh session high of 1.0750 as the unwinding of the Trump trade gathered pace.

Theresa May to unveil new industrial strategy

UK PM Theresa May will publish a paper today that shall detail how business will be spread throughout the country.

US: Markets have priced in most of the positives and not enough of the negatives - Rabobank

Analysts at Rabobank note that Trump’s plans to increase spending on infrastructure, reduce tax rates, slash regulation, and liberalize the energy sector should boost the US economy in the coming years. 


08:50 Too early to change ultra loose monetary policy ECBs B.Coeure

Benoit Coeure, member of the ECB Executive Board, said on Monday that it is still premature to change the current loose monetary stance from the ECB.

Coeure also deemed Trump’s protectionism as a ‘bad idea’.

He said reforms should continue in France in order to boost growth, while he expects the French deficit to fall below 3% this year.


08:36 USD/JPY sinks to lows near 113.30 on USD selling

The selling pressure around the greenback is gathering traction at the beginning of the week, now dragging USD/JPY to test fresh lows in the 113.30 region.

USD/JPY in 3-day lows

Spot is extending the downside for the second session in a row on Monday, coming down to the 113.30/20 band after last week’s tops in the 115.60 region.

Market participants continue to unwind their USD-long positions against growing disappointment on the recent speech by US President Donald Trump. In fact, at his presidential inauguration, Trump delivered quite a protectionist message along with a lack of detail over his potential political/economic measures, particularly on the fiscal side.

In addition, the softer tone in US yields continues to fuel the downside mood around the buck, all resulting in the pair shedding more than 1% ahead of the opening bell in Euroland.

In the same line, speculative positioning remains supportive of the ongoing JPY strength, as net shorts have retreated to 4-week lows during the week ended on January 17, as showed by the latest CFTC report.

Data wise in Japan, the Leading Index dropped to 102.8 in November, while the Coincident Index ticked higher to 115.00 during the same period. There is no scheduled releases in the US calendar today.

USD/JPY levels to consider

As of writing the pair is losing 1.13% at 113.33 facing the next support at 112.55 (low Jan.18) ahead of 111.98 (38.2% Fibo of the November-December 2015 up move) and the 111.32 (low Nov.28). On the upside, a breakout of 113.97 (high Jan.23) would open the door 114.20 (55-day sma) and then 115.62 (high Jan.19).


08:25 Expect USD/JPY to increase further in coming months Danske Bank

Morten Helt, Senior Analyst at Danske Bank, notes that the USD/JPY has fallen in recent weeks as markets’ pricing of reflation has taken a breather and the USD has declined as the lack of information on Trump’s plans for the economy have weighed on investor sentiment.

Key Quotes

“We still expect the JPY to continue suffering in an environment with rising global bond yields and a higher oil price and expect USD/JPY to increase further in coming months. However, short term, momentum for additional yen weakening is likely to level off as the short JPY trade has become crowded. Moreover, a stretched short yen positioning warrants a larger USD/JPY downside risk and higher sensitivity to investors’ risk appetite. We target the cross at 117 in 1M (previously121) and 118 in 3M (119).”

“Longer term, we expect USD/JPY to stabilise, targeting 118 in 612M, as we expect portfolio outflows out of Japan to counter the underlying appreciation pressure on JPY stemming from fundamentals.”


08:21 UK: A happy consumer is not built to last Deutsche Bank

Oliver Harvey, Macro Strategist at Deutsche Bank, notes that the UK retail sales numbers for December were softer than market expectations on Friday, with core retail sales dropping 2% mom versus a consensus of 0.4%.

Key Quotes

“Discounting before the Christmas period was one culprit fingered by analysts, but a closer look at the detail reveals some more concerning trends.”

“First, the drop in household goods store volumes, encompassing bigger ticket items, was the weakest monthly fall in history save for the 2008 crisis. Retail sales are notoriously volatile and one shouldn’t read too much into a single data print; but greater than two standard deviation falls in this series have presaged slowdowns in the past, the one caveat being February 2013, just before the start of the current recovery.”

“More importantly, there are compelling macro reasons for sales volumes to start falling. Retail discounting, a trend in place since 2013, has reversed with the price deflator for core retail sales now in positive territory. Unsurprisingly, as prices rise volumes should fall. In the UK’s case, however, discretionary consumer spending is also likely to be hit by rises in oil, with fuel prices having far outstripped the cost of other consumer goods since Brexit. Elsewhere, internet purchases have risen in price faster than many high street goods, likely reflecting both lower and the ease of changing menu costs for online retailers reacting to the fall in GBP.”  

“A key question is whether volume growth slows enough to lower overall sales values. On that front, it’s helpful to refer to recent consumer survey data. Both the GFK and ECFIN surveys agree that consumer confidence has resumed its downtrend after recovering somewhat during last summer. Retail sales now look very out of line with economic confidence, and history suggests it’s the former not the latter that catches up.” 

“It may be that retail sales have held up so far because consumers have front-loaded purchases ahead of an anticipated inflation shock this year. Under this scenario, the UK’s economic resilience since June represents no more than an Indian summer, or perhaps a Brussels summer, before political and economic realities take their grip.”

“In terms of sterling implications, the market is now pricing around a 50% chance of a hike from the Bank of England by the end of the year. A more dovish Bank of England is not a core component to our bearish sterling view, but if the analysis above materializes this would appear a mispricing. A more cautious UK consumer should be consistent with lower real rates and a weaker pound.”


08:15 EUR/GBP: Brexit uncertainty is back on the agenda Danske Bank

Morten Helt, Senior Analyst at Danske Bank, notes that the EUR/GBP has increased substantially since the beginning of 2017, as markets have turned their focus back to the Brexit theme.

Key Quotes

“We still see potential for further GBP weakness in coming months as the triggering of article 50, which we expect by the end of March, moves closer. We have lifted our 1M target to 0.89 (previously 0.84) and 0.88 (0.87) in 3M but stress that the risk is skewed on the upside relative to our forecasts.”

“Longer term, we expect EUR/GBP to stabilise within the 0.84-0.88 range targeting the cross at 0.86 in 6M and 0.86 in 12M. As more clarification on the outcome of Brexit negotiations becomes available, we see a case for GBP strengthening due to positioning and valuation as Brexit uncertainty declines. This represents downside risk to our 6-12M forecast.”


07:38 US: Markets have priced in most of the positives and not enough of the negatives - Rabobank

Analysts at Rabobank note that Trump’s plans to increase spending on infrastructure, reduce tax rates, slash regulation, and liberalize the energy sector should boost the US economy in the coming years. 

Key Quotes

“However, increased government spending and lower tax revenues may also push up the public debt trajectory. This could hurt the long-term outlook for the US economy.”

“What’s more, Trump’s trade policies could backfire rapidly and undermine the positive impact of his fiscal policy initiatives. Finally, his micromanagement of business investment decisions may have a negative impact on the domestic business climate.”

“On balance, it seems that financial markets have priced in most of the positives and perhaps not enough of the negatives.”


07:19 EUR/USD: In the hands of Trump and Fed near term Danske Bank

Research Team at Danske Bank notes that the EUR/USD has moved higher in the past few weeks, driven by a narrowing of the US-EU interest rate spread, the indirect effect of a lower USD/CNH, which transmitted to a more broad-based long USD covering.

Key Quotes

“Moreover, the pricing of reflation has been taking a breather due to, among other things, the high uncertainty about Trump’s economic policy plans. Near term, we believe growth and relative rates will continue to move in favour of a stronger USD.”

“We target EUR/USD at 1.04 in 1M (1.02 previously) and 1.05 in 3M (1.04 previously) but stress that risks are skewed on the downside in the short term, conditional on Trump and the Fed.”

“Longer term, we maintain our long-held view that the undervaluation of the EUR and the wide Eurozone-US current account differential are EUR positives. In addition, the Fed may become worried about the strength of the trade-weighted USD, which would mitigate rate increases. We target EUR/USD at1.08 in 6M and 1.12 in 12M.”


07:12 AUD/NZD will trend higher in coming weeks Westpac

Sean Callow, Research Analyst at Westpac, suggests that their short term fair value estimate of AUD/NZD has not been below 1.10 since June 2016 and rose as high as 1.15 in November before easing back to 1.13 by early January 2017, cooling slightly in line with coking coal prices. 

Key Quotes

“The gap between the spot rate and 1.13 fair value is a function of both yield spreads and relative commodity prices.”

“This is key to our expectation that AUD/NZD will trend higher in coming weeks, though we don’t expect such a wide gap to be closed quickly. Fair value estimates are always a simplification of a currency pair’s fundamental drivers, so deviations from the spot rate can persist for some time.”

“The current phase of AUD/NZD undervaluation is both unusually large and sustained.”


07:03 USD longs pared, treasury net shorts reduced Deutsche Bank

Research Team at Deutsche Bank lists down the commitment of traders report for the week ended on Tuesday, January 17, 2017.

Key Quotes

“Interest Rates: Speculators reduced their net shorts in Treasury futures from a record level last week by $13.1 billion in ten-year cash equivalents to $86.3 billion. Spec positioning eased to -9% from -10% of the total open interest after adjusting to TY risk. Most of short covering came in FV (64K contracts) followed by in US where specs pared 21K contracts. They also bought back 19K contracts in both TU and TY futures. However, they cut their net longs in TN by 11K contracts to an almost neutral level.”

“FX: Specs pared over 2K contracts from net shorts in both CAD and JPY futures. They also turned net long 5K contracts in AUD, buying 9K contracts over the week. Meanwhile, they pared 4K contracts from their net longs in US Dollar index futures.”

“Commodities: Specs increased their net longs in oil and silver futures by 31K contracts and 5K contracts, respectively. They pared over 2K contracts from their net longs in gold.”

“Equities: Specs added 7K contracts to their net longs in Nasdaq mini futures. They also added over 2K contracts to their net longs in S&P 500 consolidated and Nikkei futures, in each.”


07:02 Singapore Consumer Price Index (YoY) climbed from previous 0 to 0.2 in December


07:02 Japan Coincident Index down to 115 in November from previous 115.1


07:01 Japan Leading Economic Index increased to 102.8 in November from previous 102.7


06:59 Mexican Peso hits two-week high, Double top reversal on USD/MXN

Finally some respite is in the offing for the Mexican Peso… a currency popularly known as the ‘Trump Thermometer’.

USD/MXN dropped to two-week low (Peso hit two-week high) 21.4151 this Monday morning. Note that Trump has not softened his stance with respect to Mexico, still the pair dropped in Asia on account of the broad based USD-sell-off.

Moreover, the unwinding of the Trump trade has gathered pace following Trump’s inauguration speech. ‘Sell the fact’ trade and market pricing-in the risks associated with Trump Presidency is weighing over the US dollar.

The US data docket is thin; hence the spot remains at the mercy of Trump related news flow and the resulting action in the treasury yields.

USD/MXN Double Top Reversal pattern

The pair has breached the neckline level of 21.4611. The next major support is seen at 20.20 (Jan 6 low), under which the losses could be extended to 20.8387 (50-DMA). On the other hand, a break above 21.4611 (former neckline support, now resistance) could yield a re-test the recent highs around 22.03 (double top level). Only a daily close above 22.03 would signal the continuation of the Trump rally.


06:54 AUD/NZD seems to be under-priced overall - Westpac

Sean Callow, Research Analyst at Westpac, notes that the AUD/NZD started the year at 3 month lows below 1.04, for no apparent fundamental reason and the subsequent rally above 1.05 thus seems warranted, yet the pair remains a historically long way below Westpac’s fair value estimate, currently around 1.13.

Key Quotes

“Australia has returned to producing a trade surplus, with the steep rise in key commodity prices over the past year finally showing in official data. Iron ore prices remain strong though coal has lost momentum in recent weeks. For NZD, the rally in dairy prices has also been supportive but overall, relative commodity prices suggest AUD/NZD is cheap.”

“The sharpest contrast is arguably on domestic strength. New Zealand’s GDP jumped 1.1% in Q3 16, whereas Australia slid -0.5%. New Zealand unemployment is lower than in Australia and population growth faster. Markets are firm in pricing the RBNZ’s next move as a hike but not convinced on the RBA.”

“So we continue to see AUD/NZD as underpriced overall, but 1.0750 seems likely to be the extent of gains multiweek given the underlying strength of NZD sentiment.”


06:45 Theresa May to visit Trump on Friday

Prime Minister Theresa May will meet US President Donald Trump in Washington, DC on Friday, the White House has confirmed.

UK-US trade deal, Brexit, defence and Russia are the topics most likely to be discussed in the meeting.

It must be noted that the UK cannot initiate trade deals with nations outside the EU as long as it is the member of the union.


06:33 Japan All Industry Activity Index (MoM) rose from previous 0.2%to 0.3% in November


06:32 Dollar index clocks 4-day low

Dollar index dropped to a four-day low of 100.28 in Asia as the markets began pricing-in the risks associated with Trump Presidency.

The index had dropped to a low of 100.26 last week before recovering to a high of 101.73 (Thursday’s high). However, the index failed to take out the 100-DMA and fell to a low of 100.72 on Friday after Trump talked about his protectionist agenda during the inaugural speech.

The US data docket is light; hence the dollar is likely to move in tandem with the US treasury yields.

Dollar index Technical Levels

A break below 100.00 (psychological level) would open doors to 99.43 (Dec 8 low), under which a major support is seen at 99.30 (100-DMA). On the other hand, a breach of resistance at 100.72 (Friday’s low) could yield a re-test of 101.00 levels (zero figure). A violation there would expose 100.68 (50-DMA).

 


06:28 US: Trump it up ANZ

Philip Borkin, Senior Economist at ANZ, notes that in his much anticipated inauguration speech, President Trump largely focused on the main principle that won him the election: a strong anti-establishment message and putting America above all else.

Key Quotes

 “Every decision on trade, on taxes, on immigration, on foreign affairs will be made to benefit American workers and American families. We must protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs. Protection will lead to great prosperity and strength… I will fight for you with every breath in my body. And I will never, ever let you down… From this day forward, it’s going to be only America first – America first.”

“With numerous reports of protests and violence, clearly it has been a turbulent start to his presidency, and so the focus is not only going to be on how Trump plans to achieve his economic goals (with clear details still scant on that front), but also how he intends to unite a country that seems anything but that at the moment.”


06:24 GBP: Technical indicators suggest another attempt higher is likely - BBH

Analysts at BBH note that owing largely it seems to the issues surrounding Brexit, sterling marched to a different beat in the previous week. 

Key Quotes

“It gapped lower to start the week and rallied strongly on January 17.  It consolidated since, finding support near the 20-day moving average near $1.2260.  The technical indicators suggest another attempt higher is likely, perhaps in response to the Supreme Court decision expected early in the week ahead.  The downtrend line connecting the early September high and the highs from the first of December is found near $1.2440 at the start of next week and finishes the week near $1.2400.  Another nearby target could be the 61.8% retracement of the fall since the December 6 high near $1.2775.” 


06:09 EUR/USD extends gains, will it end the three-month losing streak?

EUR/USD extended gains to fresh session high of 1.0750 as the unwinding of the Trump trade gathered pace.

The spot now trades more than 200 pips above the last month’s closing price of 1.0517. This forces us to consider the possibility of the pair snapping the three-month losing streak.

Trump related good news has been priced-in

Markets have priced-in pretty much every other positive news associated with the Trump Presidency. Consequently, the odds of a 200-pip sell-off in the EUR/USD pair are low.

More importantly, the risks associated with the Trump Presidency are yet to be priced-in. Furthermore, the US preliminary Q4 GDP is likely to show the growth rate cooled to 2.2% from the previous figure of 3.5%. Consequently, the bid tone around EUR/USD is likely to stay intact heading into the month end.

The EUR could roll over only if the EU crisis raises its ugly head in form or another.

EUR/USD Technical Levels

The spot was last seen trading around 1.0740. A break above 1.0768 (Dec 7 high), above which the spot could target 1.08 (zero figure). A violation there would expose 1.0851 (Oct 25 low). On the other hand, failure to hold above 1.0707 (38.2% of Trump rally) would open the doors to 1.0684 (10-DMA) and then to 1.0640 (10-DMA).

 


05:51 Asian stocks are on the back foot on Trumps protectionist agenda

Major Asian indices dropped along with the US dollar as fears about Trump’s protectionist policies forced investors to move out of risky assets and into safe havens - gold, Yen, treasuries. 

At the time of writing, Japan’s Nikkei index was down 1.11%. Australia’s S&P/ASX 200 was trading 0.75% lower on the day. China’s Shanghai Composite index avoided losses, but traded largely flat on the day. 

Trump sounded protectionist as he pledged to end what he called an "American carnage" of rusted factories and vowed to put "America first". Trump also intends to withdraw from the 12-nation Trans-Pacific Partnership (TPP) trade pact and is planning to renegotiate the North American Free Trade Agreement (NAFTA).

Thus, the risk assets are having a hard time in Asia. Gold rallied 1% to $1217/Oz levels, while the 10-yr treasury yield dropped almost four basis points. 


05:31 USD/CAD - Doji followed by drop to 100-DMA

The USD/CAD pair is losing height in Asia, now trading just short of the 100-DMA support of 1.3278 following Friday’s Doji candle.

USD is on the back foot

The drop in the USD/CAD in Asia is due to broad based USD sell-off and not due to oil prices, which are trading flat to positive.

The greenback is under pressure as the market  is pricing-in the risks associated with the Trump Presidency. The resulting safe haven demand for the treasuries is weighing over the yields, thus leading to USD weakness.

The USD/CAD pair is trading around 1.3280 levels, while the Dollar index is down 0.50% at 100.27 levels. The 10-year treasury is down almost four basis points.

USD/CAD Technical Levels

A break below 100-DMA level of 1.3278 would open doors for a drop to 1.3247 (5-DMA), under which a major support is seen at 1.32 (zero figure). On the higher side, a daily close above 1.3335 (Asian session high) could yield a re-test of 1.3350 (50-DMA). A daily close above 1.3388 (Friday’s high) would signal failure of Doji candle and revive bullishness.

 


05:04 GBP/JPY drops to 200-DMA

The risk-off tone in Asia is boding well for the Japanese Yen, thus pushing the GBP/JPY cross lower to 200-DMA support of 141.03. 

The pair hit a session low of 140.90 and was last seen trading around 141.10 levels. 

The demand for the Japanese Yen spiked in line with the gains in the treasuries. Moreover, the investors are seeking safety on heightened odds of trade war, protectionism under the Trump Presidency. 

The Dollar-Yen pair is down almost 0.90% at 113.65. Meanwhile, GBP/USD is up 0.37% at 1.2420. 

UK PM May is due to unveil the new industrial strategy later today and that could influence the GBP pairs.

GBP/JPY Technical Levels

A break above the session high of 141.66 could see the cross revisit 142.00, above which a major hurdle is seen at 142.49 (Jan 5 low). On the other hand, failure to hold above 141.03 (200-DMA) would open the doors to 140.32 (10-DMA) and 140.00 (zero figures). 


04:44 Theresa May to unveil new industrial strategy

UK PM Theresa May will publish a paper today that shall detail how business will be spread throughout the country.

PM will attend her first ‘regional cabinet’ meeting in the North West, where she will present the strategy paper. Under the new strategy, government will offer support and amend regulations to allow businesses to explore new sectors.

The PM has set out ten areas for industrial strategy, which include infrastructure investment and affordable and clean energy.


04:24 GBP/USD takes out 50-DMA hurdle

All love is lost between the FX markets and the US dollar after Trump’s inauguration speech failed to deliver the policy specifics that traders were looking for.

Consequently, the GBP/USD pair rallied in Asia to print a session high of 1.2426 levels. The 50-DMA is seen at 1.2409 levels.

Unwinding of Trump trade gathers pace

The rise in the GBP/USD pair is partly due to ‘sell the fact’ trade in the USD. The greenback has been ruling the roost ever since Trump won the elections.

The other reason for the retreat in the US dollar is the heightened odds of Trade war between US and China. Trump has not softened his stance on trade and China and reiterated the America first policy during his speech on Friday.

The US and UK data calendar is light, hence the spot remains at the mercy of the Trump/Brexit news flow and the action in the treasury yields.

GBP/USD Technical Levels

Failure to hold above 1.2409 (50-DMA) would open doors for a re-test of 1.2363 (5-DMA), under which the losses could be extended to 1.2302 (Nov 18 low). On the other hand, a break above 1.2433 (Jan 5 high) could yield a rally to 1.25 (psychological level), above which a major hurdle is seen at 1.2546 (100-DMA). 

 


03:56 USD/JPY hit fresh session low, whats next?

The Dollar-Yen extended losses to hit a fresh session low of 113.67 on fears of global trade wars.

A moderate recovery from the early Asian session low of 113.73 quickly ran out of steam near 114.00 handle. Moreover, the 10-year treasury yield is down more than three basis points and that is keeping the USD under pressure.

As per the Bloomberg report, the quarterly correlation between the US yields and the Yen is near record highs.

Further losses likely

Trump promised to stir a "new national pride'' and protect America from the "ravages'' of countries he says have stolen US jobs. This combined with a lack of policy specifics is not only forcing markets to consider the possibility of trade wars, but also question the Trump trade.

Later today, European and US desks may hit the markets with fresh offers, leading to a further losses in the pair. The US calendar is light, hence the focus remains on the Treasury yields.

USD/JPY Technical Levels

The spot was last seen trading around 113.70 levels. A break below 113.13 (Dec 8 low) would expose 112.57 (last week’s low), under which the spot could target 111.99 (38.2% fib of Trump rally). On the other hand, breach of resistance at 114.08 (5-DMA) would open doors for 114.38 (50-DMA). A violation there would expose 115.00 levels.

 

 


03:44 Trump s first day - Nomura

Analysts at Nomura explained that Trump's inaugural address was relatively short (just 1,433 words) and high level. 

Key Quotes:

"The key economic themes were putting American workers first, the need to reverse the adverse effects of trade, and the need to rebuild US infrastructure. The new White House website went live shortly after President Trump took the oath of office. It included brief issue papers on: energy, foreign policy, jobs and growth, rebuilding the military, law enforcement, and trade. These papers didn’t contain any real surprises. 

The paper on jobs and growth calls for lower tax rates for both individuals and businesses. The paper on trade includes withdrawal from TPP and a call to renegotiate NAFTA. It also calls for rigorous enforcement of existing trade deals. The paper on rebuilding the military calls for higher military spending. The paper on energy calls for a roll back of regulations that restrict US energy production and transportation. 

Trump chose not to highlight a number of issues that were important to his campaign. In particular, Trump did not discuss, either in his address or on the new White House website, the repeal of the Affordable Care Act (a.k.a. “Obamacare”). In addition, immigration was not a focus for Trump. It was somewhat surprising that President Trump did not take any substantive policy actions today. 

We had expected him to at least reverse some of Obama’s executive orders, such as the one that established the Deferred Action for Childhood Arrivals (DACA) program that protects some undocumented immigrants to the United States who entered the country as minors from deportation. 

Trump may take some of these actions in coming days. At this point, we feel that our core assumptions about economic policy under Trump – substantial fiscal stimulus from tax cuts starting in the second-half of the year, meaningful reductions over time in labor supply owing restrictive immigration policies, a moderate increase in trade protection and limited macroeconomic impact from deregulation – still seem reasonable." 


03:29 PBOC sets USD/CNY at 6.8572 vs 6.8693

PBOC sets USD/CNY at 6.8572 vs 6.8693


03:22 NZD/USD: headed lower to 0.6800 - Westpac

Analysts at Westpac offered an outlook for NZD/USD and levels.

Key Quotes:

"NZD/USD 1 day: The kiwi has failed repeatedly since Nov on probes above 0.72 but seems likely to have another try today given lukewarm USD sentiment. 0.7130 should offer support.

NZD/USD 1-3 month: Lower to 0.6800. The US dollar has had an impressive rise since the US election and has potential to rise further during the months ahead. The Fed’s assertive tightening projections plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar. Against that, the NZ economy is strong and dairy prices have risen, but these forces are subservient to the US dollar’s trend. (21 Dec)."


03:21 Saudi Oil supply cut by 1.5 million barrels per day

The countries have already cut oil supply by 1.5 million barrels a day, more than 80% off their collective target, said Saudi Arabia’s Energy Minister Khalid Al-Falih.

Al-Falih said on Sunday that “Compliance is great -- it’s been really fantastic”.

Over the weekend, OPEC and other oil producers agreed on a way to monitor compliance.

The reaction in oil prices is muted. WTI oil and Brent oil front-month contracts were seen changing hands at $53.25/barrel and $55.50/barrel, respectively. 


03:16 Trump it up - ANZ

Analysts at ANZ explained, in his much anticipated inauguration speech, President Trump largely focused on the main principle that won him the election: a strong anti-establishment message and putting America above all else. 

Key Quotes:

"“Every decision on trade, on taxes, on immigration, on foreign affairs will be made to benefit American workers and American families. We must protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs. Protection will lead to great prosperity and strength... I will fight for you with every breath in my body. And I will never, ever let you down... 

From this day forward, it’s going to be only America first – America first.” With numerous reports of protests and violence, clearly it has been a turbulent start to his presidency, and so the focus is not only going to be on how Trump plans to achieve his economic goals (with clear details still scant on that front), but also how he intends to unite a country that seems anything but that at the moment."


03:08 Quarterly correlation between US yields and JPY is near record-high

As per Bloomberg report, the USD/JPY pair is closely following the action in the treasury yields. The quarterly correlation between the two is near record-high.

The 10-year treasury yield dropped more than three basis points in Asia. In response, the Dollar-Yen pair dropped below 114.00 levels.


03:03 AUD/JPY capped and sold off, esting 86 handle with Yen strength across the board

AUD/JPY was offered at the start of the week, dropping with USD/JPY breaking below the 114 handle with a sell-off in the dollar with a flight to safety following Trump's inauguration speech that left markets disappointed. 

Trump: "Time for action!" - Watch to watch for now and how to trade Trump? - Nomura

AUD/JPY is now just starting to stabalise and AUD/USD remains robust with bulls in control at the start of the week while the dollar remains out of favor with the market that is long the Trump/Fed trade still that has been unwinding over the last few weeks this year. The Yen will continue to be under demand as the Vix and volatility in markets dominate throughout uncertain times and paints  a neutral to bearish outlook for the risk-barometer that is the cross.  AUD/USD: Trump fuelled a sell-off in the greenback, but dollar could bounce back

AUD/JPY levels

A break below 86.00 and 85.50/60 would clear a test for the 0.85 handle and recent lows of Jan 17th, a robust support line guarding the last December lows of 2016 at 83.73. 82.50 and 15th nov highs is the high of 9th Nov rally from below the ascending channel from 76.77. To the upside, 87.56 is the 15th Dec high. 

USD/JPY: large early offers taking out 114 handle to the downside

 

 


02:52 Gold clocks three-day high on haven demand

Increased risks of global trade wars during Trump Presidency is pushing the safe haven metal higher in Asia.

Gold is trading 0.90% higher around $1216/Oz levels as the Dollar index is down 0.33% at 100.77. Meanwhile, the 10-year treasury yield has shed three basis points.

The USD sell-off is gathering pace, pushing the metal higher due to lack of (policy) specifics in Trump’s inauguration speech. Moreover, Trump has not softened his stance on trade after entering the White House, which is forcing markets to seriously consider the possibility of a global trade war

The US data calendar is light; hence the metal remains at the mercy of the action in the treasury yields. Unwinding of the Trump trade could gather pace in European session on fears of a rise in protectionism.

Gold Technical Levels

A break above $1218.90 (Jan 17 high) would open the doors to $1230.07 (50% Fib of Trump rally). The next hurdle is seen at $1235 (100-DMA). On the other hand, the upward sloping 10-DMA level of $1202 is a strong support, given the metal rebounded from the moving average in the previous two trading days. A break below 10-DMA could yield a sell-off to $1196 (Thursday’s low), under which the losses could be extended to $1176 (50-DMA).

 


02:35 EUR/USD clocks fresh 6-1/2 week high on Trump-led USD sell-off

EUR/USD clocked a fresh 6-1/2 week high of 1.0720 in Asia on the back of a broad based USD weakness. 

The currency pair closed higher on Friday at 1.07 after Trump promised to stir a "new national pride'' and protect America from the "ravages'' of countries he says have stolen US jobs. Trump’s

signal of protectionism has raised risk of trade wars and retaliatory tariffs. 

The American dollar could maintain the soft tone as Trump trade could continue to unwind. The Euro side of the story could be influenced by Draghi’s speech and Eurozone consumer confidence release later today. 

EUR/USD Technical Levels

The spot was last seen trading around 1.0715. A break above 1.0768 (Dec 7 high), above which the spot could target 1.08 (zero figure). A violation there would expose 1.0851 (Oct 25 low). On the other hand, failure to hold above 1.0707 (38.2% of Trump rally) would open the doors to 1.0684 (10-DMA) and then to 1.0640 (10-DMA). 


02:12 USD/CNY fix model: Projection at 6.8601 - Nomura

Nomura's model projects the fix to be 92 pips lower than the previous fix (6.8601 from 6.8693) and 151 pips lower than the previous official spot USD/CNY close of 6.8752. The basket implied change is 190 pips lower than the previous official spot USD/CNY close (6.8562 from 6.8752), Nomura adds. 


01:56 USD/JPY: large early offers taking out 114 handle to the downside

USD/JPY has dumped in Asia before the Tokyo open, falling from 114.49 to a low of 113.74 so far.

USD/JPY is currently testing the handle to the downside after a quick recovery fro the lows, but the bears remain in control while the dollar remains out of short term favour on the back of Trump's failings in respect to deliver to the market's something concrete in respect to economic reforms in his inauguration speech that was ambiguous to say the least when it came to expectations from a Trump presidency. 

Trump: "Time for action!" - Watch to watch for now and how to trade Trump? - Nomura

USD/JPY levels

In respect to any bullish analyses, Marc Chandler, Global Head of Currency Strategy and team noted that the US dollar recorded an outside up day against the yen on January 18, adding, "There was follow through buying that lifted the greenback to about JPY115.60. This corresponds to a 50% retracement of the dollar's slide since retesting the December 15 high near JPY118.60 on January 3.  The 61.8% retracement is near JPY116.30. The Slow Stochastics and MACDs are poised to turn higher in the coming days."

How to trade Trump?

 


01:14 Trump: Time for action! - Watch to watch for now and how to trade Trump? - Nomura

Analysts at Nomura noted that President Trump said that the time for action had arrived and below is a list of what they will be watching in the days, weeks and months ahead. 

Key Quotes:

Regulation

"We expect Trump to call a pause in issuing new regulations in executive branch agencies. 

We expect Congress to begin the process of deregulation by using authority under the Congressional Review Act (CRA) to repeal regulations that have been issued recently. We think that the energy sector will be a particular focus. 

Trade 

One of Trump’s first trade actions will likely be to formally withdraw from TPP. He will then likely initiate negations with Mexico and Canada aimed at renegotiating NAFTA. We also expect Trump to launch bilateral negotiations on trade and related issues with other countries, notably China. 

We expect the Trump administration to launch a comprehensive review of performance under existing trade agreement. This investigation could lead to the imposition of new targeted tariffs within three to six months. The President has the authority to impose across the board tariffs, at least temporarily. While press reports suggest that the Trump transition team considered this option, we do not think it is likely. We also expect the Treasury Department to publish the next currency report in the next three months. A number of countries may be labeled as currency manipulators, including South Korea, Taiwan and China. 

Immigration

We expect President Trump to overturn, possibly within days, some of President Obama’s executive orders that affected immigration policy. In the next couple of weeks, we expect Trump to come forward with a detailed proposal for a more secure border with Mexico, including the construction of a wall along a portion of the border. Over the next several weeks, we expect the Justice Department (Jeff Sessions has been nominated to be the Attorney General) and the Department of Secretary of Homeland Security (General Kelly has been nominated to be Secretary) to start tightening up immigration enforcement. 

Healthcare

 We expect the Trump administration to put forward a plan to “repeal and replace” the ACA within a few weeks. We expect legislation replacing the ACA to become law within the first quarter. 

Federal Spending 

Trump may put a freeze on Federal hiring very quickly. We expect the President to lay out plan plans for Federal spending within the next few months. Recent press reports suggest that the Trump Transition team has considered deep cuts in discretionary spending outside of Defense and Veterans Affairs. 

Federal Taxes 

Congress, particularly the House Ways and Means Committee, continues to work on tax reform. We expect a draft bill within a couple of months and we expect a major tax reform bill to pass the House by the end of the summer. We anticipate final passage sometime in the fall. At this point, we still expect the plan outlined by the Republicans in the House last June, which includes so-called “border adjustments” to be the basis for the draft bill that we should get in a couple of months. 

Federal Reserve Leadership 

Transition We expect the Trump administration to nominate someone to be the Vice Chair for Regulation within the next few months and possibly another Board member. Supreme Court We expect Trump to make a nomination for the vacant seat on the Supreme Court within the next month."

How to trade Trump? 

 


01:03 AUD/USD: Trump fuelled a sell-off in the greenback, but dollar could bounce back

AUD/USD is currently 0.7559 with a high of 0.7565 and a low of 0.7551.

AUD/USD was able to rally at the end of last week as the dollar failed at highs of 101.50 and closed at 100.80, -0.4% on the day on the back of Trump's speech. Once again. Trump failed to light up enthusiasm with very vague and ambiguous rhetoric around economic policy and only managed to beat the same beat of his protectionist, 'America first' drum.

As for the Aussie and domestic data, we are light this week although CPI has the potential to be a market mover considering the negative growth in Q3 and how the RBA may need to cut their chill-out summer vacation early and look again at their interest rate. Meanwhile, day two (in terms of markets) of Trump's presidency could bring a fair bit of noise to the arena with the potential to stir up a storm this week. The USD's fall on Trump’s speech leaves AUD/USD making higher highs, seemingly on track to probe above 0.7600 for the first time since 11 November, explained analysts at Westpac and noted that solid support on dips this week is likely in the 0.7430-50 area.  

AUD/USD 1-3 month: 

The analysts at Westpac actually expect a weaker Aussie down to 0.74 in the medium term. "The US dollar’s impressive post-election rally may have paused, but still has potential to rise further during the months ahead. The Fed’s assertive tightening bias plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar. Against that, coal and iron ore are likely to sustain a good portion of their dramatic rises, and economic data for Q4 and Q1 should improve, but these forces are subservient to the US dollar’s trend. Australia’s AAA rating will remain an issue into the May budget."

AUD/USD levels 

The Australian dollar tacked on a little more than 0.5% against the dollar to reach almost $0.7600 and its best level since mid-November, noted analysts at Brown Brothers Harriman, adding, "At $0.7540, the Aussie retraced 61.8% of the drop since the US election.  The technical indicators are getting stretched, but only the Slow Stochastics appear near turning down.  Initial support is likely to be seen around $0.7500-$0.7525.   It may take a break of $0.7425 to encourage ideas that a top is in place. We suspect that above $0.7600 and the risk-reward changes and may deter new buyers."

 


00:28 Market wrap: Trump s protectionist tone in inauguration speech weighed on USD - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

Global market sentiment: The US dollar, yields and equities rose in the NY morning then fell in response to the protectionist tone of President Trump’s inauguration speech. Gold and oil rallied while GBP and CAD were hit by soft retail sales and CPI data respectively. AUD and NZD recovered most of London morning losses.  

The S&P 500 had a strong morning, sitting up 0.5% as President Trump began his inauguration speech. It fell sharply to lows just above flat on the day, perhaps in response to the strongly protectionist rhetoric, then chopped around and closed up 0.3%, extending to 7 sessions an alternation between gains and losses.

Interest rates: US 10yr treasury yields resumed the mid-week rise to 2.51% (high since 3 Jan) in the NY morning but began to fall during Trump’s inauguration speech, later extending to 2.47%, little changed on the day. The 2 year treasury yield rose to 1.24% but then tracked down to 1.19%. Fed funds futures rates fell by 1-3bp along the curve, still fully pricing the next rate hike to be in July.

Currencies: The US dollar index rallied into the NY morning but failed at 101.50 and closed at 100.80, -0.4% on the day. Its key component the euro bounced off lows around 1.0630, oscillating during the Trump speech and closing just above 1.07. USD/JPY rolled over from a London high of 115.37 to a low of 114.24 in the NY afternoon, closing at 114.62, watching US yields and equities. AUD/USD fell in line with US dollar gains in the London morning, from 0.7560 to a low of 0.7517, chopped around 0.7530-55 as Trump spoke, then closed at 0.7555 . NZD/USD slid under 0.7200 after the NZ close, as far as 0.7129, later trimming losses to 0.7170 as the US dollar faded. AUD/NZD bounced from under  1.0500 to 1.0540."


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