Wednesday, November 25, 2015

German IFO surprised to the upside – Swissquote

FXStreet (Delhi) – Arnaud Masset, Market Analyst at Swissquote Bank, notes that the German IFO business climate index surprisingly jumped to 109 in November, the highest level since July 2014, from 108.2 in the previous month.

Key Quotes

“The German economy seems to have weathered the end of summer slump pretty well and the outlook looks great especially given the fact that the weaker euro will provide an extra boost to the economy.”

“The single currency recovered in the Asian session and rose 0.32% versus the dollar, bringing EUR/USD back above the 1.0650 threshold. However, we still believe that there is further room for euro depreciation.”
For more information, read our latest forex news.

USD/JPY catches fresh bid tone, revisits daily high

FXStreet (Mumbai) - USD/JPY continues to move back and forth within today’s trading range, having found strong support near Nov 16 lows, as persisting risk-conditions dictate the moves in the major.

USD/JPY jumps off 122.26 once again

Currently, the USD/JPY pair trades flat at 122.50, retesting daily highs posted at 122.54. The major recovered losses and now extends recovery from weekly lows, as the USD bulls halted its correction and jumped back into the bids across the board. The USD index bounced-off 99.43 lows and climbed to 99.72, trading modestly flat.

Moreover, a major shift in risk conditions after the European stocks opened on a firmer note and subsequently extended higher, also diminished the bids for the safe-haven JPY. While analysts believe the recent issues between Turkey and Russia are unlikely to escalate into a "hot" conflict and hence, risk-appetite returns in markets.

In the day ahead, the major is likely to take fresh cues from a batch of US economic releases for fresh direction on the USD.

USD/JPY Technical levels to watch

The prices trade near session lows and finds immediate support at 122.20 (Nov 16 Low) below which 121.70 (200-DMA) would be tested. To the topside, the immediate resistance is located at 122.59 (daily pivot). A break above the last, the major could test 122.70 (5 & 20-DMA).
For more information, read our latest forex news.

EUR/USD: Offered at hourly 200-MA, drops to hourly 100-MA

FXStreet (Mumbai) - The EUR/USD pair ran into offers around the hourly 200-MA at 1.0675 and fell back to 1.0642 (hourly 100-MA) as the European stocks extended early gains.

Trades at hourly 50-MA

The pair is now trading around the hourly 50-MA located at 1.0642 levels. The European markets opened with a mild positive tone, but went on to extend gains to trade almost 0.50% points higher on the day.

Consequently, the short-covering in the EUR ran out of steam, making way for fresh offers. The traders now await the US personal spending and corporate spending (durable goods orders) data.

EUR/USD Technical Levels

The pair could extend the drop to 1.06 levels in case the immediate support at 1.0642 (hourly 50-MA) is breached. Below 1.06, the doors will be open for a slide to 1.0520-1.05 handle. On the higher side, hourly 100-MA and hourly 200-MA at 1.0661 and 1.0675 would offer resistance, above which major hurdle is seen at 1.07.
For more information, read our latest forex news.

EUR/CHF off highs, back to 1.0830

FXStreet (Edinburgh) - After reaching session highs near 1.0850, EUR/CHF has now returned to the 1.0835/30 band.

EUR/CHF indifferent on Swiss data

The cross has found decent support around the 1.0800 area on Tuesday, managing to gather some traction and recover ground lost after recent highs north of the 1.0900 handle recorded last week.

On the data front, Switzerland’s Consumption Indicator tracked by UBS came in at 1.60 for the month of October, surpassing September’s 1.56.

EUR/CHF levels to consider

At the moment the cross is up 0.14% at 1.0830 and a surpass of 1.0930 (high Oct.30) would aim for 1.0986 (high Oct.2) and then 1.1049 (high Sep.11). On the other hand, the next support lines up at 1.0795 (100-day sma) followed by 1.0703 (low Aug.20) and finally 1.0501 (23.6% Fibo of 0.8695-1.1049).
For more information, read our latest forex news.

WTI back in the red near $ 42.50, EIA report eyed

FXStreet (Mumbai) - The US oil reversed a two-day rally and slipped back in the negative territory as the Mid-East conflict worries were set aside by resurfacing supply glut woes as focus shifts towards the weekly EIA report.

WTI retreats from 2-week highs

Currently, WTI trades 0.90% lower at 42.50, failing to resist 43 barrier. Oil prices snapped previous rally and turned lower on Wednesday as rising crude supplies as reflected by the latest API stockpiles report continue to weigh on investors’ sentiment.

US crude inventories rose by 2.6 million barrels to 488.3 million in the week to November 20, the API reported on Tuesday, against expectations of a 1.2 million barrel rise.

Moreover, concerns regarding Middle-East conflicts on Russian jet shot down by Turkey, appear to have eased a bit as attention now shifts to the upcoming inventory report from the EIA.

Oil rallied on Tuesday after Turkey shot down a Russian warplane near the Syrian border on air-space violation issue, which heightened geopolitical tensions in the Middle East.

WTI Oil Technical Levels

WTI oil has an immediate resistance which stands at 43.46 (Nov 24 high) above which gains could be extended to 44 (round number). While to the downside, the immediate support is at 41.54 (Nov 12 Low), below which the prices could drop to 40.41 (Nov 23 Low).
For more information, read our latest forex news.

Gold offered at Tuesday’s high

FXStreet (Mumbai) - Gold prices ran into offers at Tuesday’s high of USD 1081/Oz levels and threatens to dip into losses as the European equities turned higher.

Markets showing resilience

The US markets rebounded after the weak start and the European equities appear to follow suit. The pan-European Euro stoxx 50 advanced 0.4%, thereby weighing over the safe haven metal. The turn around in the equities marked resilience to Fed rate hike bets and geopolitical uncertainty.

Consequently, Gold surrendered gains in Europe to trade largely unchanged around USD 1075-1076/Oz levels. the metal traders now await the US data – durable goods, personal spending.

Gold Technical Levels

The pair currently hovers around USD 1076.17 (hourly 50-MA). A failure to sustain above the same would expose 1069.12 (previous day’s low). On the other hand, the prices could once again face resistance at 1081 (Tuesday’s high).
For more information, read our latest forex news.

EUR/USD: Retreats to 10-DMA as European stocks open elevated

FXStreet (Mumbai) - A renewed rally in EUR/USD lost steam just few pips shy of 1.07 barrier after the European markets opened upbeat, although Middle-East geo-political concerns still remain in focus amid a data-quiet EUR calendar.

EUR/USD hovering around daily R1

Currently, the EUR/USD pair trades 0.25% higher at 1.0669, easing-off fresh three-day highs recorded at 1.0689 ahead of Europe open. The main currency pair trims gains and slips back below hourly 200-SMA now placed at 1.0679, as the European stocks shrugged-off weakness seen in Asian indices and trades higher on turnaround in risk-conditions in Europe.

The German benchmark, the DAX gains 0.31% while the UK’s FTSE rises 0.70% and the pan-European benchmark, Euro Stoxx 600 advances 0.20%.

Meanwhile, the US dollar is retracing a part of losses incurred since yesterday against its major competitors amid persisting weakness in the US treasury yields. Looking ahead, attention now shifts towards the US macro releases, including the durable goods and Core PCE index, in absence of economic data during the European session.

EUR/USD Technical Levels

The pair trades firmly above 1.06 handle, with the immediate support seen at 1.0642 (1h 50-SMA). Selling pressure will intensify below the last, dragging the pair towards 1.0600/1.0593 (round number/ Nov 23 Low). While to the upside the next hurdle in sight is located at 1.0689 (daily high) and from there to 1.0700 (round number).
For more information, read our latest forex news.

EUR/USD forecast: looks to US data – Commerzbank and Societe Generale

FXStreet (Edinburgh) - The single currency has returned to the 1.0660 area after another failed attempt to clinch the 1.0700 handle, all ahead key data releases across the pond.

Karen Jones, Head of FICC Technical Analysis at Commerzbank, noted the pair’s “divergence of the daily RSI is more pronounced and the market is starting to erode the accelerated downtrend at 1.0663 today. Above here we have the 20 day ma at 1.0778 and the recent high and Fibo at 1.0830/57 is likely to cap”.

In addition, FX Strategist Kit Juckes at Societe Generale suggested “EUR/USD needs to break back above 107:50 to trigger any alarm for chart-drawers, and more likely is that it meanders in a 1.06-1.0750 range for now as positions are reduced”.
For more information, read our latest forex news.

GBP/USD finds support at key fib, hovers near 1.51

FXStreet (Mumbai) - The GBP/USD surrendered part of its gains in early Europe to trade around 1.5095 levels ahead of the UK autumn statement and spending review.

Supported by Key fib

The pair found support at 1.5087 (61.8% of Apr-Jun rally), although the bounceback has been anything but strong as the cable continues to hover at 1.5090-1.5095. The immediate focus now is on the forward-looking economic comments at the UK autumn statement release.

Later today, the weekly jobless claims, personal spending and income report, and durable goods orders number could influence the Fed rate hike bets and impact overall demand for the US dollars.

GBP/USD Technical Levels

The immediate resistance is seen at 1.5117 (hourly 50-MA)-1.5120 (23.6% of 1.5336-1.5053), above which the spot could re-test 1.5161 (38.2% of 1.5336-1.5053). On the other hand, a failure to sustain above 1.5087 would open doors for a re-test of 1.5053 (previous day’s low).
For more information, read our latest forex news.

FX option expiries for Wednesday's NY cut

FXStreet (Bali) - Find below the FX option expiries for Wednesday's NY cut 1000ET, via DTCC.

- EUR/USD: 1.0500(E1.1bn), 1.0525(E344mn), 1.0550(E1.51bn), 1.0600(E1.85bn), 1.0650(E702mn), 1.0700(E1.62bn), 1.0750-55(E668mn), 1.0800(E2.62bn), 1.0820-30(E1.04bn), 1.0850(E463mn)

- USD/JPY: 121.00-10($2.15bn), 121.75($400mn), 122.00($1.44bn), 123.00($1.72bn), 123.50($1.48bn), 123.75($500mn), 124.00($1.8bn), Y125.00($675mn)

- AUD/USD: 0.7095-0.7100(A$340mn), 0.7300(A$858mn)

- EUR/JPY Y131.65(E320mn)

- GBP/USD: $1.4980(Gbp543mn):

- EUR/GBP: 0.7100(E309mn), 0.7150(E201mn)

- USD/CAD: 1.3185-90($490mn), 1.3275($234mn), 1.3285-90(A$488mn), 1.3305($290mn)
For more information, read our latest forex news.

USD/JPY and treasury yields weaken, risk-off intact?

FXStreet (Mumbai) - The USD/JPY fell in Asia and remains below 122.41 (23.6% of 118.06-123.76), while the treasury yields weakened moderately.

Risk-off ahead?

The move indicates the risk-off mood might prevail in the European session. The major European equity index futures are trading flat to negative, while the Asian markets traded mixed.

However, the traditional safe havens are on the rise in early Europe. Even gold prices inched higher to near USD 1180/Oz levels, while the 10-year treasury yield dripped almost 2 basis points. It remains to be seen if the European equities turn higher or follow the safe havens and suffer losses.

USD/JPY Technical Levels

The pair fell to a fresh session low of 122.26. The immediate resistance is seen at 122.87 (10-DMA) and 123.00, above which it may test offers at 123.26 (Nov 23 high). On the other side, support is seen at 122.22 (Nov 16 low) and 121.76 (100-DMA).
For more information, read our latest forex news.

RBA governor Stevens “happened to agree with” the reasons for holding rate steady

FXStreet (Mumbai) - Reserve Bank governor Glenn Stevens yesterday signalled that interest rates will stay on hold at the central bank’s meeting on 2nd December. He said he agreed with the reasons for leaving the rates steady. While taking a decision on rate cuts, he said he will be ‘guided by what was effective.’ Steven noted the business cycle will continue and also predicted economic downturns from time to time.

RBA can lower rates further if it really helps

Stevens had to respond to the question why the central bank had not slashed rates again even though the economy was not growing as expected and inflation was low. The banks did not slash rates probably because it thought the economy was picking up. It is also possible that the bank refrained from slashing rates further as it thought it would hurt the incomes of retirees who lived off interest.

“How to make growth better?” is what Governor Stevens asks. He admitted on way to stimulate growth is by lowering rates. He said he would be “content” to lower rates further if it really helped. He however questions whether cutting rates is the best solution that the economy can come up with at any particular time. He has warned that cutting rates now would not yeild the kind of benefits that it used to provide to stimulate the economy when rates were cut from very high levels in the 1990s.

He also believes in considering an alternative method to boost growth. “…may be that you can make it better most effectively by articulating a case for stability, playing to the positive things that are happening, not smashing the savers over the head further, if the relative effect of that stimulating is not as great as it used to be”, he said.

Business economists surveyed at the conference expect the central bank to leave its cash rate steady at 2 per cent in 2016 and lift it only when economy picks up in 2017.

Growth will pick up when effect of decline in mining investment ebbs

The central bank lowered its forecast for inflation a little. It was noted that the effects of a decline in the exchange rate are taking a little longer that expected to be impactful. Also, slow wage growth domestic costs to pick up slowly. Steven admitted that it is difficult for a central bank alone to create inflation, when other powerful forces are at work.

Governor Stevens is of the opinion that as the impact of the decline in mining investment begins to wear out, and the effects of assumed low levels of interest rates and the exchange rate continue to increase, growth will likely pick up.

Business surveys have indicated that firms believe conditions to be above their long-term average in some key sectors. Firms have also stepped up their hiring. Job vacancies have been increasing; so has labour force participation. Unemployment rate has held stable. Steven feels that these factors have supported the income growth while the effects of the terms of trade decline wore itself out.
For more information, read our latest forex news.

EUR/USD in session highs, 1.07 closer

FXStreet (Edinburgh) - The buying interest is now picking up pace around the single currency, helping EUR/USD to clinch fresh highs in the 1.0690 area.

EUR/USD stronger ahead of US data

The pair is up more than a big-figure since recent lows in the 1.0590 area, bolstered by a softer tone in the greenback after being rejected once again from key resistance levels.

Absent data releases in Euroland today, market participants will look to the heavy US calendar for cues on the price action, as Initial Claims, PCE, Durable Goods Orders will take centre stage later in the NA session.

EUR/USD levels to watch

As of writing the pair is up 0.35% at 1.0683 with the next hurdle at 1.0805 (23.6% Fibo of 1.1496-1.0591) ahead of 1.0829 (high Nov.12) and finally 1.1058 (200-day sma). On the other hand, a breach of 1.0591 (low Nov.23) would target 1.0519 (low Apr.13) en route to 1.0456 (2015 low Mar.16).
For more information, read our latest forex news.

ECB to temporarily halt QE at the year end

FXStreet (Mumbai) - The European Central Bank (ECB) was on the wires providing an advance notice to the markets that it intends to halt its QE program in the last week of December.

The banks said it will temporarily pause Asset Purchase Programme purchases between 22 Dec - 1 Jan in anticipation of lower market liquidity during this period and may front load purchases and may front load purchases in the prior weeks.

The APP program will resume as ususal from 4th Jan. The ECB says the move is intended to reduce possible market distortions.
For more information, read our latest forex news.

NZGB 2020 tender preview - Westpac

FXStreet (Delhi) – Imre Speizer, Senior Markets Strategist at Westpac, suggests that Thursday’s tender of $200m 2020 NZGBs should be supported by NZ swap spreads at multi-year lows.

Key Quotes

Valuations & relative value: Valuations are supportive. The 2027 swap spread at 7bp is lower than the adjacent 2019 and 2021. Our Nelson-Siegel curve fitting model estimates it is fair to the fitted curve.

The 2020 swap spread is the cheapest it has been for three years. Swap spreads have fallen sharply in most developed markets, and NZ’s spreads have followed suit. However US and AU swap spreads bounced off record or multi-year lows this week and NZ could do similar during the week ahead. Notably, the 2033 swap spread became negative (-4bp) for the first time in its short history, and this may entice investors given the NZ repo market does not suffer from the distortion in the US. If investors deem the 2033 swap spread too cheap, some of that sentiment may rub off on the 2020.

Tender performance: Recent tender performance of NZGB nominals has been sub-average. The last few 2020 tenders have resulted in a slight increase in tail size, to a still respectable 1.3bp in October.

Demand: Local financial conditions remain bond-supportive: the RBNZ is expected by economists and market pricing to cut the OCR to 2.5% in December. Moreover, markets are now assigning a 20% of further easing to 2.0% next year. Any Fed tightening in December could hinder the performance of NZGBs, although shorter durations may be less affected.

Details: Tender bids close at 2:00pm NZT, with results published from 2:05pm. Settlement is on 1 December.”
For more information, read our latest forex news.

USD/CHF pullback is seen as corrective – Commerzbank

FXStreet (Edinburgh) - According to Karen Jones, Head of FICC Technical Analysis at Commerzbank, the current pullback in the pair should be corrective.

Key Quotes

USD/CHF is losing momentum ahead of the 1.0295 2015 high”.

“The recent high has yet to be confirmed by the daily RSI and the accelerated uptrend eroded, we would allow for a near term corrective set back”.

“The Elliott wave count is suggesting that we will see a correction back into the 1.0050/.9940 band ahead of recovery. Dips lower will find initial support at the 1.0122 November 19 low”.
For more information, read our latest forex news.

GBP/JPY is silent around 50% fib level

FXStreet (Mumbai) - The GBP/JPY pair is trading comatose just above 184.68 (50% of 180.66-188.70) ahead of the UK autumn statement and spending review.

Eyes UK event

The minor correction in the USD led to an equal move higher in the GBP and JPY against the greenback, hiwhc left the GBP/JPY cross largely unchanged around 184.75.

The markets now await UK autumn statement, which carries forward looking economic statements. The markets expect Osborne to sound cautious on the UK economy and is expected to announce spending cuts, and boost housing programe.

GBP/JPY Technical Levels

The immediate resistance is seen at 185.00 and 185.47 (hourly 50-MA), above which the gains could be extended to 185.63 (38.2% of 180.66-188.70). On the other side, a failure to sustain above 184.68 (50% of 180.66-188.70) would open doors for a re-test of 184.32 and 183.73 (61.8% of 180.66-188.70).
For more information, read our latest forex news.

EUR/JPY choppy around 130.40

FXStreet (Edinburgh) - The single currency is posting meager gains vs. the Japanese yen on Wednesday, with EUR/JPY hovering over the 130.40 area so far.

EUR/JPY indifferent to BoJ

The cross keeps the trade near multi-month lows, unable to gather further traction as significant catalysts remain absent so far.

Nothing new from the BoJ in its minutes today, with the central bank blaming the decline in energy prices for the current lack of reaction of domestic inflation. The BoJ has also reiterated that it is not considering further stimulus for the time being, broadly in line with market expectations.

EUR/JPY significant levels

The cross is up 0.08% at 130.49 with the next hurdle at 133.23 (high Nov.6) followed by 134.25 (200-day sma) and finally 134.93 (100-day sma). On the other hand, a break below 130.29 (low Nov.23) would expose 130.12 (low Jan.26) and finally 130.00 (psychological level).
For more information, read our latest forex news.

US: Jam packed trading session – Danske Bank

FXStreet (Delhi) – Research Team at Danske Bank, we have several important releases in the US today ahead of Thanksgiving on Thursday and Black Friday.

Key Quotes

“Most important is the release of PCE inflation in November. Consensus anticipates that PCE core (the inflation measure FOMC targets) increased 0.1% m/m in October (1.3% y/y). The subdued core inflation is the number one worry for the FOMC as growth remains solid and the labour market continues to tighten.”

“The slowdown in China and the strong USD weigh on the US manufacturing sector. This is likely to be reflected in the durable goods orders which, however, is quite volatile from month to month.”

“Also due today in the US is the October report on personal income and spending, preliminary data for Markit PMI services in November, initial jobless claims and final University of Michigan consumer sentiment for November. New home sales in October could also attract attention as the September figure was very weak.”
For more information, read our latest forex news.

US: Hectic day ahead of Thanksgiving - TDS

FXStreet (Delhi) – Prashant Newnaha, Rates Strategist at TD Securities, suggests that it will be a very busy day for data as the release dates on several reports have been moved forward in observance of US Thanksgiving.

Key Quotes

“The October data for personal income and outlays and durable goods orders will be the highlights. We are looking for personal spending to accelerate from +0.1% to +0.3% m/m (in line with consensus), supported by a 0.5% monthly gain in personal income (consensus: +0.4%).”

“Core PCE inflation (the Fed’s preferred measure of price pressures) is expected to print at +0.1% m/m (in line with consensus), with the year-ago pace of inflation edging higher from +1.3% to +1.4%. We are looking for a firm rebound in durable goods orders at +2.1% m/m thanks to strength in the aerospace component (consensus: +1.6%), though the ex. transport number should still be modestly positive (TD: +0.8% m/m, consensus: +0.3% m/m) which will bode well for business investment.”

“There will also be a slew of lower-tier releases, including initial jobless claims for the third week of November and the October new home sales data. We are looking for jobless claims to pop higher from 271K to 282K (consensus: 270K) which will see the 4-week moving average rise from 271K to 276K, while we are forecasting a 3.8% rebound in new home sales to 486K (consensus: 500K).”

“Lastly, we will be watching the U. Michigan Consumer Confidence Index (TD: 92.4, consensus: 93.1) following the very soft reading on the Conference Board’s consumer sentiment measure.”
For more information, read our latest forex news.

NZ: Forward indicators warns of economic slowdown in Kiwi economy – Westpac

FXStreet (Delhi) – Imre Speizer, Senior Markets Strategist at Westpac, suggests that the NZ economic data continues to point to the NZ economy ticking along at a respectable, albeit slowed, pace through the middle part of this year.

Key Quotes

“But recent forward looking indicators of activity are not looking nearly as encouraging, and leave us feeling a little more confident in our call for a December rate cut, which we previously viewed as a close call. Furthermore, inflation pressure remains notably absent. This supports our view that the RBNZ will eventually lower the OCR below 2.5%.”

“Last week’s data (weaker dairy auction, solid retail spending) has caused us to raise our probability of a December cut from 60% to 70%. Yet no matter what happens in December, the inflation outlook remains weak. We’ve recently lowered our December 2015 quarter forecast to -0.2% which leaves us forecasting just 1% inflation for September next year. Consequently, we remain comfortable forecasting further cuts in the OCR.”

“Our model of short-term NZ economic momentum shows a small rebound from a low level, which is consistent with the slower pace of economic activity we have witnessed lately. Our data pulse model’s reading supports our view that 2yr swap rates and the NZD/USD will fall during the next few months, given the usual lag between the data pulse and markets.”
For more information, read our latest forex news.

Brazil: Selic rates likely to be on hold in today’s meeting - TDS

FXStreet (Delhi) – Prashant Newnaha, Rates Strategist at TD Securities, expects the Selic rate to be kept on hold at 14.25% in Brazil.

Key Quotes

“The press statement accompanying the October COPOM meeting repeated the formula “that the maintenance of this basic interest rate level, for a sufficiently long period, is necessary for the convergence of the inflation to the target in the relevant horizon for the monetary policy”. Inflation is continuing to creep up, with November IPCA-15 reaching 10.28% Y/Y, but inflation should start falling next year, if only because of base effects. The DI curve is pricing in a lowish chance of a 25bps hike at today’s meeting, but is continuing to price in large rate hikes further out.”

“Our central expectation is that 14.25% will represent the high point in the tightening cycle and that rates will start being cut towards the end of next year. However, in the near-term the risk to rates is to the upside.”
For more information, read our latest forex news.

GBP/USD: Recovery halts above 1.51 ahead of UK autumn statement

FXStreet (Mumbai) - The GBP/USD, at 1.5105, is struggling to extend recovery ahead of the UK autumn statement and spending review due today.

Stalls near key fib level

The momentum stalled in Asia as the pair neared 1.5120 (23.6% of 1.5336-1.5053). Traders would watch out Osborne’s comments over the UK economy. Carney and Co maintained their cautious tone yesterday and markets believe Osborne is likely to follow them today.

Later in the day, the cable could witness action on the batch of US data – durable goods orders, weekly jobless claims, personal spending and income report.

GBP/USD Technical Levels

The immediate resistance is seen at 1.5117 (hourly 50-MA)-1.5120 (23.6% of 1.5336-1.5053), above which the spot could re-test 1.5161 (38.2% of 1.5336-1.5053). On the other hand, a failure to sustain above 1.51 would open doors for a re-test of 1.5053 (previous day’s low).
For more information, read our latest forex news.

RBNZ: December to be a close call – Westpac

FXStreet (Delhi) – Imre Speizer, Senior Markets Strategist at Westpac, suggests that markets have slightly increased the chance the RBNZ will ease by 25bp on 10 December, to 56%, but a full cut is not priced until January 2016.

Key Quotes

“We assess the chance of a December at around 70%.”

“What could swing the odds of a cut one way or the other ahead of 10 December? There’s a dairy auction on 1 December (a price bounce, currently predicted by futures, would argue towards not cutting), and US payrolls on 27 November (a strong number would push the USD higher and argue towards not cutting).”
For more information, read our latest forex news.

BoJ Minutes: No monetary policy action required for now - TDS

FXStreet (Delhi) – Prashant Newnaha, Rates Strategist at TD Securities, notes that the just released BoJ minutes from the Oct 30th meeting indicated that further monetary policy action is not needed for now.

Key Quotes

“The Board believes that low core CPI is temporary and is largely due to the decline in energy prices. That said the Board did acknowledge it is willing to make some adjustments to monetary policy, but the Board gave itself more breathing space to achieve its 2% inflation objective out to the 2nd half of the 2016 fiscal year.”
For more information, read our latest forex news.

USD: Uptrend is here to stay – Westpac

FXStreet (Delhi) – Imre Speizer, Senior Markets Strategist at Westpac, recommends to buy on dips in the USD as the uptrend for the currency remains intact.

Key Quotes

“Absent a significant adverse shock resulting in a materially weaker run of data and/or a deep risk-off episode over the next four weeks lift-off next month is assured. With markets pricing in a 70% probability, the implied odds of an adverse shock that veers the Fed off course are thus an unrealistically high 30% (assuming effective Fed Funds rises 25bp on a hike).”

“Yield support for the USD should thus continue to build into the Fed meeting. A probable “dovish” Fed hike as Chair Yellen emphasises a gentle trajectory suggests the Dec 16 hike could mark a temporary high for the USD, especially given the temptation to lighten positions into year’s end. But until then,.”

“The first week of Dec is an especially key one including two Fed Chair appearances, Nov payrolls, the much anticipated 3 Dec ECB meeting and OPEC’s bi-annual meeting.”
For more information, read our latest forex news.

EUR/GBP in a tight range near 0.7060

FXStreet (Edinburgh) - EUR/GBP is extending its weekly rebound from sub-0.7000 levels, managing to clinch the 0.7060/65 band so far.

EUR/GBP bid on GBP weakness

The European cross has met significant buying interest on Tuesday following dovish comments by BoE officials against the backdrop of the Inflation Report Hearings.

In fact, the pound has been sold off after A.Haldane casted a mantle of doubt over the possibility of inflation figures picking up pace at any time soon, while Governor M.Carney argued that lower interest rates could stay for longer.

Nothing worth mentioning data wise in Euroland, with only Italian Industrial Sales/Orders due. Across the Channel, Mortgage Approvals by BBA are also due.

EUR/GBP important levels

As of writing the cross is down 0.01% at 0.7059 and a break below 0.6985 (low Nov.17) would open the door to 0.6948 (low Aug.5) and then 0.6934 (2015 low Jul.17). On the flip side, the next hurdle lines up at 0.7101 (23.6% Fibo of 0.7496-0.6979) ahead of 0.7196 (100-day sma) and finally 0.7210 (200-day sma).
For more information, read our latest forex news.

AUD: Construction activity posts record fall - TDS

FXStreet (Delhi) – Prashant Newnaha, Rates Strategist at TD Securities, notes that the value of Australian Construction activity in Q3 fell 3.6%, more than the 2% decline the market had pencilled in.

Key Quotes

“This was the largest percentage quarterly drop since 2000 and was largely due to the decline in resource related engineering, -7.3%/qtr with investment in housing (+2%/qtr) and office buildings (-1.9%) failing to plug the gap. What today’s data shows is that the Australian economy is heavily reliant on housing.”

“Looking ahead we expect the large pipeline of work remaining to push construction higher over the next few quarters. As a result, value of construction activity will continue to remain reliant on housing.”

“There were no real monetary policy implications from the RBA Gov’s speech titled ‘The Long Run’ to the Australian Business Economists dinner. He suggested market participants ‘chill out’ over the Christmas period and assess the data then, more or less dismissing the possibility of a Dec cut, but then again the market is virtually prices for that anyway.”
For more information, read our latest forex news.

Shouldn’t rule out any options to adjust policy – BOJ’s Shirai

FXStreet (Mumbai) - Bank of Japan (BOJ) board member Sayuri Shirai was on the wires today, and noted that the central bank 2% price target should be met at the earliest. He further added should the prices fail to rise as expected, then the BOJ may consider rolling out further stimulus.

Key Quotes:

No change to my view Bank of Japan must hit 2 pct
inflation at earliest date possible but must be mindful of how rising prices could hurt households

Some households are enjoying benefits of rising wages and spending more, monetary policy must support such positive momentum

Must consider two-year timeframe for hitting boj's inflation target with some flexibility

Unclear at what pace inflation expectations will heighten ahead

Bank of Japan isn't having any problem buying assets under QQE

If any problems emerge in buying assets in future, Bank of Japan can come up with other ways to sustainably achieve 2 pct inflation

Can determine outlook for inflation expectations once underlying prices start to rise

If broad uptrend in prices fails to materialise, Bank of Japan must consider whether easing is not enough or whether other steps are needed

Changing size of BOJ's purchases of jgbs, risk assets or buying longer-dated Japanese Govt. Bonds most likely first option if Bank of Japan were to adjust policy again

Bank of Japan shouldn't rule out any policy options but basic idea is to maintain framework of QQE even if it were to adjust policy
For more information, read our latest forex news.

NZD/USD remains undervalued – Westpac

FXStreet (Delhi) – Imre Speizer, Senior Markets Strategist at Westpac, suggests that according to their short term fair value model for NZD/USD shows it remains undervalued by around 6 cents, as it has been for the past month.

Key Quotes

“Our fair value range is 0.71-0.72, based on the NZ-US interest rate spread, commodity prices and risk sentiment.”

“Significant NZD/USD undervaluation has persisted since mid-2015. One explanation is the US dollar’s overvaluation, markets pricing more Fed tightening into the US dollar than is implied by US interest rates.”

“NZ dairy prices risk bouncing at the next auction on 1 Dec. The front WMP futures contract is predicting a 13% rise at this juncture, and more distant contracts are pointing to a steep price curve. Coming on the back of a large surge in prices from August and then a sharp fall from October, this suggests markets are trying to find an equilibrium ahead of a looming El Nino-induced drought.”
For more information, read our latest forex news.

USD/JPY: Recovery stalls near 122.50

FXStreet (Mumbai) - The risk-off sentiment appears to have eased heading into early Europe, lending support to the recovery in USD/JPY from weekly lows. Although the price struggles to extend beyond 122.50 over the last hours.

USD/JPY bounces-off lows near 122.20

Currently, the USD/JPY pair drops -0.11 to 122.40, attempting a tepid-recovery from fresh weekly lows reached at reached at 122.26 earlier on the day. The Japanese currency trims gains versus its American counterpart, as risk-aversion eases with the Asian markets recovering losses towards the closing hours. Chinese stocks have in fact turned positive while Nikkei closed -0.39%.

Also, the greenback recovered partially against its six major competitors as focus remains on a swarm of US economic data amid a data-dry EUR calendar ahead. The USD index recovers to 99.55 from lows struck at 99.43, losing -0.14% on the day.

Meanwhile, markets now await the European open for further cues on the risk-off/on sentiment, which is likely to impact USD/JPY.

USD/JPY Technical levels to watch

The prices trade near session lows and finds immediate support at 122.20 (Nov 16 Low) below which 121.70 (200-DMA) would be tested. To the topside, the immediate resistance is located at 122.59 (daily pivot). A break above the last, the major could test 122.70 (5 & 20-DMA).
For more information, read our latest forex news.

Global disinflation and structure of EM balance sheets point to value in EM duration - Nomura

FXStreet (Delhi) – Research Team at Nomura, suggests that the last two years have seen significant pressure on EM assets, but EM local rates have generally been resilient.

Key Quotes

• “There have been specific areas of tension in local bonds, with Brazil the best example. But most EM local curves have been resilient, despite pressure on EM FX, credit, and equity markets.

• The resilience of EM local debt was particularly impressive in Q3, when selling pressure of EM assets was otherwise fairly indiscriminate.

• Structural global forces continue to be broadly favorable for high-grade fixed income instruments. For example, the FOMC recently recognized that the equilibrium real interest rate (r*) is lower in this cycle than in past cycles.

• Moreover, China is facing a cyclical downturn, driven by a significant moderation in industrial and property market activity. This is set to be a powerful global disinflationary force over the next few years.

• At the local level, we continue to note that emerging market balance sheets (at the country level) have a very different structure today than they did in the 1980s and 1990s. In particular, the exposure to hard-currency debt looks manageable in most countries. Importantly, this means that currency depreciation does not feed into rising default risk on EM sovereign debt in the way EM markets have typically seen in the past.

• For global investors, the opportunity to take advantage of bond bullish forces (disinflationary and low real yield drivers) in major markets is limited, simply because nominal yields are already at historically low levels (although some would argue that the U.S. may be an exception to this).

• These arguments imply that EM bond markets are an obvious place to look for returns (and hedges) related to a low-growth / low-inflation global equilibrium in coming years.”
For more information, read our latest forex news.

EUR/USD: Rejected near hourly 200-SMA, tests 1.0650

FXStreet (Mumbai) - The EUR/USD pair met fresh supply near 200-SMA at 1.0680 and reverted to familiar ranges around 1.0655 levels, as the US dollar recovered partial losses against its major peers.

EUR/USD remains below 10-DMA at 1.0664

Currently, the EUR/USD pair trades 0.10% higher at 1.0654, testing good support at hourly 20-DMA (1.0652). The main currency pair failed near hourly 200-SMA and dropped sharply to the hourly 20-SMA, where bids seem to re-emerge.

The renewed bout of risk-aversion seen in Asia as traders continue to weigh the persisting geo-political risks, continue to aid the recovery in the EUR/USD pair from multi-month lows. Although the pair lacked follow-through and hovers within previous trading range centered around 1.0650 levels.

In the day, there is nothing relevant in terms of economic news in the EUR calendar and hence, the focus now remains on the US macro releases, with the durable goods and Core PCE index in the spotlight.

EUR/USD Technical Levels

The pair trades firmly above 1.06 handle, with the immediate support seen at 1.0639 (1h 50-SMA). Selling pressure will intensify below the last, dragging the pair towards 1.0600/1.0593 (round number/ Nov 23 Low). While to the upside the next hurdle in sight is located at 1.0681 (1h 200-SMA) and from there to 1.0700 (round number).
For more information, read our latest forex news.

NZD/USD to trade range bound – Westpac

FXStreet (Delhi) – Imre Speizer, Senior Markets Strategist at Westpac, holds a neutral bias for the week ahead, with the pair locked in a 0.6500-0.6600 range.

Key Quotes

“There’s nothing in the NZ event calendar this week to ruffle the NZD, it containing only two minor data releases - migration (Mon) and the trade balance (Thu) which should remain in deficit, thanks to lower commodity prices.

3 months ahead: By year-end, we see the NZ economy slowing, the RBNZ easing in December, and the Fed tightening the same month. We target 0.62. The main risk to this bearish view is the Fed delays its tightening cycle beyond December. A secondary risk is the RBNZ doesn’t cut in December.

1 year ahead: Our 1 year ahead forecast is 0.62, based partly on the OCR being cut to 2.0%.”
For more information, read our latest forex news.

GBP/USD: Bulls face exhaustion near hourly 50-SMA

FXStreet (Mumbai) - The overnight recovery in GBP/USD stalled and ran through fresh offers near the hourly 50-SMA located at 1.5119, with the price now wavering around 1.51 handle.

GBP/USD keeps range around daily pivot at 1.5096

The GBP/USD pair gains 0.12% and trades at 1.5100, re-attempting recovery from hourly 10-SMA at 1.5092 levels. The bulls appear to face exhaustion after recovering more than 50-pips from two-week lows and struggles to extend gains beyond 1.51 handle.

The GBP/USD recovery appears short-lived as the recent dovish and downbeat comments from the UK’s Treasury select committee on the economic and policy outlook will continue to weigh on investors’ minds.

While the greenback may halt its corrective mode ahead of the release of a batch US economic data amid thin markets as the US markets enter a holiday-break on account of Thanksgiving Day.

Later in the day, no macro data is due to be reported from the UK data, although the UK’s autumn forecasts statement to be released later in the European session will keep the GBP traders busy.

GBP/USD Levels to consider

The pair has an immediate resistance at 1.5119 (1h 50-SMA), above which 1.5159 (Nov 24 High) would be tested. On the flip side, support is seen at 1.5051 (Nov 24 Low) below which it could extend losses to 1.5038 (Nov 9 Low).
For more information, read our latest forex news.

Japanese economy: Exiting from negative gear growth – Nomura

FXStreet (Delhi) – Research Team at Nomura, suggests that the even though the Japan’s real GDP growth for 2015 Q3 came in at -0.8% q-q annualized, representing the second consecutive quarter of negative growth, the economic downturn is not as bad as suggested by the reported figures because final demand minus inventories has been picking up.

Key Quotes

“We see little risk of sustained large-scale inventory corrections and also see good prospects for a recovery in industrial production, with which real GDP exhibits a strong degree of correlation. We think the economy could well return to growth in Q4.

Exports likely to increase modestly despite overseas economic slowdown: Exports have remained on an upward trajectory and we have yet to see any strong signals of downside risk. Overall, we think that overseas economies will continue to expand modestly despite the ongoing slowdown in China. We see little risk of the Japanese economy being tripped up by falling external demand.

Improving profitability a structural factor supporting capex: Capex has fallen for two straight quarters. This has prompted widespread disappointment, especially because the BOJ Tankan has revealed bullish capex projections. However, it would be premature to conclude that there has been any major decline in capex enthusiasm in the corporate sector. We think capex will not buckle easily because it is supported by the structural factor of improving profitability.

Consumer spending boosted by improvements in consumer sentiment and income and employment conditions: Consumer spending has been recovering, albeit still slowly. Rising inflation expectations have partially dented consumer sentiment, but this factor may disappear in due course. Consumer spending may also receive a boost from sustained improvement in income and employment conditions owing to tighter supply-demand conditions in the labor market.

We still expect additional monetary easing in April 2016: We think the BOJ will engage in an additional round of monetary easing in April 2016 because (1) it will need to further boost inflation expectations in order to achieve its 2% inflation target and (2) JGB supply constraints mean it will probably announce that it is thinking about tapering JGB purchases around the same time, increasing the need for policies to counteract the impact of potentially unwelcome developments for the markets. We think the BOJ could well end up with some kind of de facto yield curve target.”
For more information, read our latest forex news.

Risk-off extends into Asia, a host of US data eyed

FXStreet (Mumbai) - Risk-off sentiment weighed across the financial markets in Asia amid heightening geopolitical risks surrounding Middle-East and global terrorism threats. Investors therefore gave up riskier assets such as the equities and flocked to traditional safe-havens – gold, the yen, euro and Swiss franc.

Key headlines in Asia

Japan to grow by 0.5%-1.5% in 2016 - Moody's

BOJ minutes: Economy likely to grow at slower pace in FY 2017

AUD/USD: M&A flows possibly supportive today - Westpac

Dominating themes in Asia - centered on JPY, AUD, NZD

The US dollar extended weakness for the second straight session, with no major catalyst behind the downside bias other than a technical correction. However, mixed US macro data released on Monday added to the ongoing USD retreat. Moreover, markets preferred to park their funds into safe-havens and hence gave up the risk-currency, the greenback. The US dollar index drops -0.10% to 99.58.

In response to the rising demand for safe-haven assets, the yen was strongly bid against the US dollar and rose to fresh weekly highs at 122.26, before easing slightly to 122.40 levels, where it now wavers. The EUR/USD pair also benefited from the renewed risk-aversion wave and trades around 1.0655, recording a 0.13% gain so far. While gold was the best performer among the safe-havens, rising 0.26% to $ 1078.

The Antipodeans shrugged off the risk-off markets and climbed higher in Asia, extending its recovery from multi-month lows. The commodity-currencies rejoiced the rebound in the commodity prices, with gold prices reverting to $ 1080 while the US oil gains 0.62% and nears $43. Copper prices recover to $ 2.06 on Comex. The Aussie ignored the downbeat construction data and now trades near monthly highs at 0.7265 levels. While the Kiwi advances 0.29% to 0.6575.

The Asian stocks extended previous losses, with Japan’s benchmark, the Nikkei now losing -0.38% to 19,849. While mainland China’s benchmark, the Shanghai Composite steadies around 3,620 points. Australia’s S&P ASX index drops -0.40% to 5,204. While Hong Kong’s Hang Seng declines -0.41% to 22,494.

Heading into Europe & the US

There is nothing much to report in term of economic data in the upcoming European session, except for the second-tier data in the UK BBA mortgage approvals.

Besides, RBA Assistant Governor Debelle will be on wires, speaking at FX Week Europe's annual conference, in London. While the UK Chancellor George Osborne will present Autumn Forecasts Statement later today in Westminster, with markets expecting amid concerns the Treasury to miss its 2015-16 fiscal targets.

Looking ahead, today’s US calendar is fuller, wrapping up the holiday-shortened week. The US traders will be away on a Thanksgiving Day-break from tomorrow until Monday. The US durable goods data will kick-off a fuller US calendar followed by Core PCE index, personal spending, new home sales and finally revised consumer sentiment will bring an end to the swarm of data releases.

The macro data from the US are expected to have negligible impact on the US dollar as a Dec Fed rate hike is a done deal now. Only on a horribly weak durable goods order print could raise concerns over the Fed rate hike options. However, the NFP report next week is likely to hold greater significance and determine the chances of a Dec rate rise, as the Fed remains more concerned about the US labor market conditions.

EUR/USD Technicals

Valeria Bednarik, Chief Analyst at FXStreet noted, “The technical picture is still neutral-to-bearish according to the 4 hours chart, as the price remains unable to advance beyond a mild bearish 20 SMA, whilst the technical indicators have recovered from near oversold levels, but remain below their mid-lines.”

“In the 1 hour chart, the price advances above a bullish 20 SMA, but has met sellers around its 100 SMA, while the technical indicators aim higher above their mid-lines. Some follow through beyond 1.0690 could see the pair advancing up to 1.0760, where the dominant bearish trend is expected to resume. “
For more information, read our latest forex news.

US: Deep impact of NFP on asset prices - BofAML

FXStreet (Delhi) – Research Team at BofAML, suggests that with the much-anticipated 16 December FOMC meeting around the corner, the 4 December US non-farm payrolls (NFP) is one of the most important remaining data points and the significance of recent NFP surprises in driving asset prices has been increasing since summer 2014 and is near historical highs.

Key Quotes

“During the previous hiking cycle the importance of NFP surprises rose ahead of the first hike and continued to rise until the end of the hiking cycle. Despite high anticipation for the next Fed hike, the importance of the employment report could remain elevated even after the initial liftoff. This relationship is particularly pronounced now as the Fed has adopted a data-dependent stance, and each NFP report will likely continue to play a key role in informing the path of subsequent Fed policy decisions.

Equity divergence from rates and FX: In past hiking cycles, financial assets all became more correlated to NFP surprises heading into the initial hike as the market began anticipating Fed policy changes. Currently, the importance of NFP surprises is elevated for USD pairs and rates, but low for equities. This is an important divergence from the previous hiking cycle when all three asset classes exhibited consistent reactions to NFP surprises.

As a contrarian trade, we favor buying a EURUSD 3m 1.10 call with a 16Dec window at 1.1050 as a hedge against a potential Fed policy mistake.

US rates strongly correlated to NFP: Treasury yields have historically been more correlated to NFP surprises than either FX or equities. Perhaps this is because bond investors are more sensitive to potential changes to Fed policy and therefore react faster. However, the current sensitivity for FX currently rivals that of bonds, which highlights the FX market focus on central bank divergence.”
For more information, read our latest forex news.

Pricing for Fed’s December move on the rise – Westpac

FXStreet (Delhi) – Sean Callow, Research Analyst at Westpac, suggests that pricing for a Fed’s Dec move has risen above 70% and robust job creation points to ongoing tightening in 2016 but this is not translating to faster wages growth so inflation still argues for a cautious approach.

Key Quotes

“The FOMC held steady in Sep, seemingly spooked by the Aug CNY devaluation and steep slides in China’s stock market which spilled over to Wall St.”

“But the recovery in EM and US equities in October produced a virtual “all clear” from the FOMC on 28 Oct. The statement’s reference to a potential rate increase at the “next meeting” has since been reinforced by commentary from many officials.”
For more information, read our latest forex news.

JPY: PM Abe plans minimum wage hike of 3% - Nomura

FXStreet (Delhi) – Research Team at Nomura, notes that the Japanese PM Abe has planned to implement minimum wage hike of 3% in an emergency response measure which are proposed for realizing strong economy.

Key Quotes

“The measures, part of an effort to attain nominal GDP of ¥600trn by around 2020, fell into one of five categories, including promotion of investment and realization of productivity reforms, and stimulation of spending through an increase in wages/minimum wages.”

“We think the proposals generally lacked detail. In the area of corporation tax reform, there is a proposal to set the stage for the tax rate to be revised below 30% as soon as possible, but no target date for attaining this is included. On wage increases, the proposal only says wage increases are hoped for in view of record-high corporate earnings.”

Prime Minister Abe reveals policy of targeting minimum wage CAGR of 3%: According to Nikkei Quick News, Prime Minister Shinzo Abe said at the council meeting that minimum wages need to be raised at an annual rate of about 3%, and he wants the nationwide weighted average minimum hourly wage to be raised to ¥1,000. A 3% increase in the current nationwide weighted-average hourly wage of ¥798 comes to an increase of just under ¥24.”

“Of the 56.7mn employees, 4% are affected by an increase in the minimum wage. If we assume they work an average of 7.7 hours a day and 226 days a year, the boost to total employee income comes to just under ¥100bn a year. This is less than 0.1% of annual household disposable income of more than ¥280trn and is unlikely to have much of a macroeconomic effect. If minimum wages were to continue rising 3% a year, the percentage of workers affected by the increase would grow over time, and the effect on consumer spending could become more noticeable.”

“If the minimum wage were to be raised 3% a year, a minimum wage of ¥1,000 would be attained in 2023, over which time the government would have to exert its influence in negotiating the minimum wage. The government's stance reflects its dissatisfaction with wage increases and capex in the corporate sector despite record-high earnings. The government used its influence to negotiate an ¥18 increase in the minimum wage this year, the largest increase since 2002. Minimum wage is generally determined in negotiations between labor unions and management, and we are not sure if the government's target will be attainable, but we will be looking for upside risk to wages.”
For more information, read our latest forex news.

RBA cash rate: market pricing - Westpac

FXStreet (Delhi) – Sean Callow, Research Analyst at Westpac, expects RBA to keep rates on hold at 2% through 2016.

Key Quotes

“The RBA held the cash rate at 2.0% in November for the fifth straight month. The downside surprise on Q3 CPI did not produce the rate cut a minority had expected but the RBA did say that “the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand.”

“The RBA’s Nov Statement on Monetary Policy included a forecast of 3% y/y growth by Dec 2016. So long as this is the RBA’s view, they should be content with a 2% cash rate. The main risk to the outlook seems to be from the terms of trade.”
For more information, read our latest forex news.

Japan: Manufacturing PMI posts second straight monthly gain in November - Nomura

FXStreet (Delhi) – Research Team at Nomura, notes that the Japanese manufacturing PMI for November came in at 52.8, rising 0.4pt from October's 52.4, marking the second straight monthly rise after October's 1.4pt, suggesting ongoing improvement in manufacturing activity and further indicating that the economy is firming in FY15 H2.

Key Quotes

“PMI data a mixed bag, but export orders index up for second straight month: Among the five component indices, there were positive contributions to the headline PMI from the output index (+1.5pt, from 52.4 in October to 53.9 in November), the supplier delivery times index (-0.6pt, from 49.8 to 49.2; a fall in this index pushes up the headline PMI), and the employment index (+0.3pt, from 52.4 to 52.7), and negative contributions from the new orders index (-0.2pt, from 54.2 to 54.0) and the stock of items purchased index (-0.7pt, from 50.4 to 49.7). All of that adds up to a mixed bag. The decline in the new orders index points to a possible deceleration in manufacturing activity, through the data is only for a single month.

However, the new export orders index—which is not included in the headline PMI calculations—rose for the second straight month, by 1.0pt (from 52.2 in October to 53.2), which we see as showing the strength of overseas demand, which has a major influence on manufacturing activity.

No increase in stock of completed items; product price index rises: Among other subindices, the order backlog index fell 0.5pt m-m (from 49.8 in October to 49.3 in November), the stock of completed items index fell 1.7pt (from 49.5 to 47.8), the purchasing volume index rose 1.3pt (from 51.8 to 53.1), the purchasing price index rose 0.5pt (from 50.7 to 51.2), and the product price index rose 2.0pt (from 48.5 to 50.5). We think the continued absence of an increase in the stock of completed items along with the rise in the product price index in November suggests manufacturing activity is well balanced.

Further indication of ongoing firming in economy in FY15 H2: The second consecutive quarter of negative growth in Japan's real GDP in Jul-Sep reflected largely a decline in inventories; final demand does not appear to have deteriorated that much. We expect Japan's economy to get back on an expansionary track in Oct-Dec supported by growth in key demand items. The survey of production forecasts also points to companies expecting production to firm. We see the October and November Japanese manufacturing PMI statistics as consistent with this view.”
For more information, read our latest forex news.

Heading towards NFP next week - Key insights - BAML

FXStreet (Mumbai) - Analysts at BAML enlist few observations potentially useful for trading future NFP events based on regression analysis.

Key Quotes:

“The market consensus estimate for NFP tends to have an optimistic bias. Since 1997 when estimates started being collected, the consensus has averaged +100k while the initial release has averaged +86k.”

“Furthermore, the release disappoints expectations 56% of the time. Taken together, investors should temper their expectations somewhat for the upcoming report.”

“Our regression analysis also quantifies the expected reaction to different levels of NFP surprises and generates a few observations potentially useful for trading future events.”

“Since 2012: Among liquid G10 pairs EURUSD and USDJPY exhibit consistent reactions to NFP surprises, tending to move 0.7% in favor of the USD for a +100k surprise. Somewhat surprisingly, AUDUSD is the least consistent among G10 USD pairs.”

“USDZAR and gold tend to be the most sensitive overall.”

“Oil and equities have R-squared near zero, suggesting the market is concerned about the growth implications of a December hike. In previous hiking cycles, positive NFP surprises were beneficial for oil and equities as they signaled economic expansion.”

“This time, the concern of higher rates deterring global growth is causing a break from the historical relationship.”

“10y Treasury yields tend to sell off 8bp on +100k surprises.”
For more information, read our latest forex news.

AUD/USD sits at monthly highs, 0.7300 in sight

FXStreet (Mumbai) - AUD/USD extends its bullish momentum into the mid-Asian trades, and trades near monthly highs, as rebounding commodity prices continue to underpin the resource-linked Aussie.

AUD/USD trades above all major DMAs

Currently, the AUD/USD pair trades 0.17% higher at 0.7268, testing fresh four-week highs recorded at 0.7275 on Tuesday. The Aussie extends its recovery from hourly 200-SMA into a second day and now looks for a test of 0.73 barrier amid broad based USD weakness and solid recovery in the commodity prices. Gold prices reverted to $ 1080 while the US oil gains 0.51% and nears $43. Copper prices recover to $ 2.06 on Comex.

However, the Aussie struggles to extend further to the upside amid persisting risk-off trades on rising geo-political worries, with Australia’s benchmark S&P/ASX index losing -0.33% to 5,209.

In the day, ahead, the commodity-currency will continue to track the performance across the commodity space ahead of a flurry of US dataflow, which may bring fresh incentives for the greenback.

AUD/USD Levels to watch

The pair has an immediate resistance at 0.7300 (round number), above which gains could be extended to 0.7330/41 (daily R2/ Oct 16 High) levels. On the flip side, support is seen at 0.7236 (5-DMA) from here it to 0.7203 (1h 100-SMA).
For more information, read our latest forex news.

USD/JPY heading towards key support at 122.20

FXStreet (Mumbai) - The rising threats to global security paired with heightening geopolitical risks kept the demand for safe-havens intact, thereby driving the Japanese yen to fresh one-week high on 122 handle.

USD/JPY fails near hourly 20-SMA and retreats

Currently, the USD/JPY pair drops -0.18 to 122.30, hovering close to fresh weekly lows posted at 122.26 in last hours. The Japanese currency continues to push higher versus its American rival, extending gains for the second straight session, as investors scramble for safety assets amid persisting risk-off markets on escalating geo-political risks surrounding the Middle-East after Turkey shot down a Russian jet on Air-space violation issues.

Further, the USD/JPY pair remains under pressure as the greenback extends its technical correction across the board while lower US treasury yields also add to the downside. The USD index loses -0.21% to 99.48, miring near session lows.

Amid lack of economic news this session, attention now shifts towards a host of key US macro releases due later today. The US durable goods data will kick-off a fuller US calendar followed by Core PCE index, personal spending, new home sales and finally revised consumer sentiment will wrap up the week. US markets remain closed tomorrow in observance of Thanksgiving Day.

USD/JPY Technical levels to watch

The prices trade near session lows and finds immediate support at 122.20 (Nov 16 Low) below which 121.70 (200-DMA) would be tested. To the topside, the immediate resistance is located at 122.47 (1h 20-SMA). A break above the last, the major could test 122.70 (5 & 20-DMA).
For more information, read our latest forex news.

Asian stocks slide amid rising geo-political tensions

FXStreet (Mumbai) - The stocks on the Asian bourses extend losses from the previous session, shrugging off a positive close on the Wall Street overnight, as investors fretted over escalating geo-political tension in the Middle-East after a Russian fighter jet was shot down by Turkey near the Syrian border on Tuesday.

Adding to the negative sentiment, worldwide travel alerts were issued by the US over potential increase in terrorism threats.

Nikkei faces double whammy

The Japanese markets extended weakness into a second day and received double blow after renewed risk-aversion wave hit markets while a stronger yen versus the greenback hurt the exporters’ stocks. USD/JPY drops -0.20% to 122.27 while the Nikkei loses -0.52% to trade at 19,822.

The Australian benchmark, the S&P/ASX came under renewed selling and drops -0.52% to 5,198 points, weighed down by heavy losses in banking and airline stocks. However, capping the downside in the index, the resource stocks are trading higher on the back of the ongoing recovery in commodity prices.

While the Chinese indices also follow suit and keep losses, with Shanghai Composite (SSEC) muted around 3,615. China’s A50 index declines -0.60% to 10,574 points. Hong Kong’s Hang Seng loses -0.46% to 22,483.
For more information, read our latest forex news.

US Dollar under pressure across the board

FXStreet (Bali) - Today's US Dollar performance during Asia is a re-play of what we witnessed during the same time last Tuesday, with broad-based weakness in the currency dominant ahead of US Thanksgiving on Thursday, with weakness not being attributed to any particular fundamental drivers.

USD pressured in Asia

EUR/USD has surged all the way to 1.0675, after a successful buying campaign originated sub 1.0650 as Tokyo traders came online. Meanwhile, USD/JPY is in the midst of breaking a key support area at 122.30, while the Aussie is re-testing recent session highs at 0.7275.

Aussie underpinned by base metals

As per inter-correlated markets, gold has taken-off towards 1,080.00, threatening a re-test of yesterday's high at 1081.50. Copper is consolidating recent solid gains circa 2.067. The metal-base performance continues to support the upside in the Aussie.

Plenty of US data today

Looking ahead, the next US session is packed with data ahead of the Thanksgiving break. As David Fritz, FX Strategist at Nomura, notes: "Durable goods, personal income and spending, PCE deflator, University of Michigan consumer sentiment, and new home sales will all be released on Wednesday. Previously reported data on manufacturing and production suggest that manufacturing activity could stabilize soon, and, given the data, our economists expect durable goods orders to have risen by 1.6% in October. Personal income likely grew at a strong pace in October, based on NFP growth during the month, with our economists looking for a 0.6% rise."
For more information, read our latest forex news.

Japan to grow by 0.5%-1.5% in 2016 - Moody's

FXStreet (Bali) - Moody's expects 0.5%-1.5% GDP growth in Japan in 2016, noting that muted domestic and global GDP growth will support broadly stable earnings for Japan's (A1 stable) non-financial corporates in 2016.
For more information, read our latest forex news.

AUD/USD: pressing higher - ANZ

FXStreet (Guatemala) - Analysts at ANZ noted that AUD/USD pushed back above USD0.72 as global sentiment continued to improve.

Key Quotes:

"The rise mirrored a more positive session for stocks, and a strong rally in industrial commodities. That said, the move was not driven by fundamentals. RBA Governor Stevens delivered a speech on the long term which had a relatively dour tone, while iron ore prices continued to slide, bucking the broader commodity trend. The CAPEX survey later this week remains the key domestic event."
For more information, read our latest forex news.

EUR/USD: watch dowside below 1.0580

FXStreet (Guatemala) - EUR/USD is consolidated on the hourly chart and capped by the 100 SMA while recovery attempts are shallow and lack conviction. There were however a number of data releases that may have an impact further down the line when it comes to decision making.

In Germany, the final Q3 GDP reading came in line with expectations, as the economy grew 0.3. The IFO survey showed that local business confidence increased to 109.0 in November, from 108.2 in October vs last month's drop.

For the US, the trade deficit in October was an improvement and there was also an upward revision of the Q3 GDP at 2.1% vs the first estimate of 1.5%. However, worse-than-expected November consumer confidence that down to 90.4 from a previous 99.1 wasn't supportive and left markets awaiting the Durable Goods orders tomorrow instead ahead of the Thanksgiving holidays and thin markets.

EUR/USD levels

Technically, analysts at UOB Group explained, that the sudden reversal last Friday clearly indicates that the recent short-term upward momentum has fizzled out. "While the current weakness could extend lower, we prefer to see a daily closing below 1.0580 before adopting a bearish stance. That said, only a move back above 1.0660 would indicate that the immediate downward pressure has eased."
For more information, read our latest forex news.

Tuesday, November 24, 2015

EUR/JPY drops to lows at 130.40

FXStreet (Edinburgh) - The Japanese yen is now regaining ground lost to the euro during the Asian trading hours, taking EUR/JPY to session lows in the 130.40 region.

EUR/JPY attention to IFO, BoJ

The cross is extending its weekly leg lower, already trading at shouting distance from Monday’s multi-month lows around 130.30, while the selling pressure around EUR remains unabated.

In the data space, German IFO indicator is due later, while the BoJ minutes will take centre stage in Japan early tomorrow.

EUR/JPY significant levels

The cross is losing 0.13% at 130.41 and a break below 130.29 (low Nov.23) would expose 130.12 (low Jan.26) and finally 130.00 (psychological level). On the flip side, he next resistance lines up at 133.23 (high Nov.6) followed by 134.25 (200-day sma) and finally 134.94 (100-day sma).
For more information, read our latest forex news.

US and Eurozone data releases for the day – Danske Bank

FXStreet (Delhi) – Research Team at Danske Bank, lists down the key economic releases for the day from Eurozone and US.

Key Quotes

“Q3 GDP growth in the US is estimated to have been revised up from 1.5% q/q AR to around 2.0% q/q AR as data have been better than expected since the first release, indicating that growth was not that bad in Q3 after all.”

“German GDP components are due, which are expected to show that Q3 growth in Germany was driven by strong growth in private consumption. The data for the decomposition could still attract some attention as it will reveal the degree of weakness in exports and investments.”

“We expect German IFO expectations to have improved slightly in November supported by signs of stabilisation in China, the weaker euro and less financial stress.”

“The conference board consumer confidence index in the US is expected to have risen, signalling that US consumers are still optimistic.”

“BoE members Carney, Haldane, Forbes and Vlieghe testify for the UK Treasury Committee and ECB's Mersch also speaks today. We will listen carefully to what they have to say on monetary policy.”
For more information, read our latest forex news.

US Q3 GDP second reading to be the highlight of the day - TDS

FXStreet (Delhi) – Research Team at TDS, suggests that it will be a fairly busy day for mid and lower-tier data, with the second reading of Q3 GDP standing out as the likely highlight.

Key Quotes

“Nearly all of the forecasting community is looking for an upward revision in growth, and the consensus estimate is for an increase from +1.5% to +2.1% Q/Q (annualized). We are slightly more conservative than the rest of the market, but are still looking for a modest increase to +1.8% Q/Q.”

“The Fed is far more concerned with future growth prospects than they are historical revisions, though they will nonetheless welcome any improvement in the Q2 data. To that end, the advance goods trade balance is probably the most important report scheduled for release. We are looking for declines in both import and export activity, which should see the goods trade balance remain relatively stable at -$59.3B (previous: -$59.1B) versus a consensus forecast of -$60.1B.”

“Other notable releases include the S&P/Case-Shiller house price index for September (TD: +0.7% m/m, consensus: +0.3% m/m) and the conference board consumer confidence index for November (TD: 96.2, consensus: 99.5).”
For more information, read our latest forex news.

GBP/USD strengthens in Asia, Eyes Carney testimony

FXStreet (Mumbai) - The GBP/USD pair ticked higher in Asia to near 1.5140 after having suffered sharp losses in the previous two trading days.

Focus on inflation report hearings

Bank of England Governor (BOE) Mark Carney is scheduled to testify to UK legislators on the Treasury Committee about the central bank's latest Inflation report. Comments on inflation and on the timing of the BOE liftoff could influence Sterling pairs.

Across the pond, the US Q3 GDP figure would hit the wires later today, which will be followed by the US consumer confidence and the regional manufacturing index.

GBP/USD Technical Levels

At 1.5133, the immediate resistance is seen at 1.5185 (23.6% of July 2014-April 2015 plunge), above which the gains could be extended to 1.5248 (50% of Apr-Jun rally). On the other side, support is seen at 1.087 (61.8% of Apr-Jun), under which the losses could be extended to 1.5027 (Nov 6 low).
For more information, read our latest forex news.

FX Option expiries for today's NY cut

FXStreet (Bali) - Find below the FX Option expiries for today's NY cut at 10
ET, via DTCC.

- EUR/USD: 1.0560(E337mn), 1.0570(E320mn), 1.0600(E851mn), 1.0650(E537mn), 1.0695-700(E517mn), 10730(E311mn)

- USD/JPY: 123.15-25($535mn), 124.00($311mn)

- USD/CHF: 1.0040-50($486mn), 1.0100($296mn), 1.0210($220mn)

- AUD/USD: 0.7100(A$376mn)

- USD/CAD: 1.3330($232mn), 1.3500($651mn)
For more information, read our latest forex news.

Keep your eyes on Euro area money and credit data – Goldman Sachs

FXStreet (Delhi) – Matteo Leombroni, Research Analyst at Goldman Sachs, suggests that money and credit data for the Euro area will be released on Thursday, including M3 growth and lending to household and non-financial corporations (NFCs) in October.

Key Quotes

“In September, M3 growth remained steady at +4.9%yoy, while bank lending to NFCs fell by €17bn, the weakest monthly reading since mid-2013. This was mainly driven by the €12.3bn contraction in bank lending to NFCs in Netherlands. Spain and Italy saw small declines of -€1.0bn and -€0.5bn, respectively, while lending in France was flat on the month. Germany saw a slight strengthening of bank lending to NFCs of +€0.5bn. Lending to households was more robust and rose slightly to +€11bn in September.”

“The easing of the supply of credit to the periphery remains one of the key drivers of resilient growth in the Euro area. However, the improvement in credit supply to the periphery has been reflected far more obviously in interest rate data and the ECB bank lending survey, than in the loan flows that will be reported on Thursday.”
For more information, read our latest forex news.

EUR/GBP off highs, returns to 0.7020

FXStreet (Edinburgh) - After climbing to session highs above 0.7030 overnight, EUR/GBP has now returned to the 0.7020 area, or daily lows.

EUR/GBP focus on German data

The European cross is now surrendering part of yesterday’s advance, although it remains in a narrow range and trading in multi-month levels in the low-0.7000s amidst a heavy tone around the single currency.

Ahead in the session, German data will be in the limelight via the publication of Q3 GDP figures and the IFO indicator. Across the Channel, Inflation Report Hearings and the CBI’s Distributive Trades Survey will also be released.

EUR/GBP important levels

As of writing the cross is down 0.17% at 0.7020 facing the next hurdle at 0.7101 (23.6% Fibo of 0.7496-0.6979) ahead of 0.7195 (100-day sma) and finally 0.7239 (55-day sma). On the other hand, a break below 0.6985 (low Nov.17) would open the door to 0.6948 (low Aug.5) and then 0.6934 (2015 low Jul.17).
For more information, read our latest forex news.

Eurozone: Important events for the day - TDS

FXStreet (Delhi) – Research Team at TDS, notes down the important forthcoming events of the day.

Key Quotes

“Mirroring Monday’s healthy PMI data, we expect the German IFO survey to confirm a pick-up in activity in November. We are slightly more optimistic than consensus, and expect small ticks up to both the Current Assessment (TD: 112.8 vs Consensus: 112.4) and Expectations (TD: 104.1 vs Consensus: 104.0) indexes.

NOK: The decline in oil prices is clearly having an adverse effect on the Norwegian economy. The 15Q4 oil investment survey will update energy companies’ planned spending in both 2015 and 2016. With oil prices now lower than at the time of the August survey, it’s likely 2015’s estimate will be revised down slightly from NOK 193nb, but the more significant risk is to 2016, where we could see a much bigger downward revision from the currently-expected 2% decline. We’ve already seen evidence of this kind of revision in other countries: energy companies in Canada have recently revised their spending plans for 2016 to a 20% decline for the year.”
For more information, read our latest forex news.

What the global Central bankers are saying? - RBS

FXStreet (Delhi) – Paul Robson, Senior Trading Desk FX Strategist at RBS, lists down the views and comments of global central bankers in the recent past.

Key Quotes

“We learned that ECB Executive Board Member Peter Praet is worried about ECB credibility loss as it permanently misses its own target for returning inflation to 2%. Bank of Japan Governor Kuroda said the spring wage round is ‘very important’, implying BoJ won’t be considering any more easing until April. Swiss National Bank’s Maechler thinks the franc is still seriously overvalued.”

“Reserve Bank of India Governor Rajan indulged in some gentle verbal intervention against INR strength. Bank of England’s Broadbent pushed back against notions that the MPC’s November Inflation Report somehow endorsed very dovish market pricing of monetary policy intentions. South African Reserve Bank raised interest rates by 25 bp, partly to counter risks to inflation expectations from earlier FX depreciation.”
For more information, read our latest forex news.

ECB ready to act to meet its inflation target – Goldman Sachs

FXStreet (Delhi) – Matteo Leombroni, Research Analyst at Goldman Sachs, notes that Mr. Draghi has signalled that the ECB is prepared to act in order to see inflation return to target.

Key Quotes

“At a speech in Frankfurt this morning, Mr Draghi struck a dovish tone, stating that ‘if we conclude that the balance of risks to our medium-term price stability objective is skewed to the downside, we will act by using all the instruments available within our mandate’. The ECB president went on to mention the scope of the ECB to use both the Asset Purchase Program (APP) and the deposit rate to return inflation to target ‘as quickly as possible’.”

“We expect the ECB to cut the deposit rate by 10bp and to extend the APP (by an extra €500bn compared to the program ending in Q3 2016) at the December meeting.”
For more information, read our latest forex news.

ECB gearing up for action - RBS

FXStreet (Delhi) – David Simmonds, Research Analyst at RBS, notes that the ECB heavyweights have stepped up coordinated, dovish rhetoric ahead of the December 3 meeting, suggesting that the further action is in store in its forthcoming meet.

Key Quotes

“Chief Economist Praet is prominent, stressing again the importance of inflation expectations: ECB regards any decline in inflation expectations (and rise in real rates) as something fiercely to resist.”

“What ECB badly needs is lower real rates. ECB is worried too about credibility risks around its inability to return inflation to 2% target. A strategy of constantly rolling that ‘return to target’ forecast perennially into the future is reaching the end of the credibility road.”

“Rarely has a central bank signalled pending policy easing more clearly. Some of this is already seen and discounted. Still, we think Draghi can still ‘out-dove’ a market which no longer knows where the lower bound is on (more negative) Euro policy rates. In the global currency fracas, the ECB needs EUR to fall further and intends to make sure it does. Its credibility is at stake. It says so itself.”
For more information, read our latest forex news.

USD/JPY: Yen retains gains in Asia, near 122.70

FXStreet (Mumbai) - The Japanese yen keeps its upbeat momentum intact and trades nearly weekly highs against its US counterpart in late-Asia/early Europe, with USD/JPY miring near lows below 5-DMA.

USD/JPY heading towards 20-DMA at 122.64?

Currently, the USD/JPY pair trades -0.11% lower at 122.72, hovering close to session lows struck at 122.67 earlier on the day. The JPY remains bid this session on the back of poor sentiment on the Asian equities and upbeat Japan’s manufacturing data, thereby dragging USD/JPY lower.

The Nikkei-Markit Flash Japan Manufacturing PMI rose from 52.4 in October to a 52.8 in Nov, reaching the highest level since March 2014.

More so, the US dollar continues to correct lower against its six major peers, after reaching three figures on Monday, as the sentiment was badly hit after the US manufacturing gauge negatively surprised markets.

The latest US preliminary manufacturing PMI reading from Markit came in at 52.6 in Nov, compared to the 54.1 seen in October. Markets had predicted the gauge to hit 54.0.

Looking ahead, the major will be influenced by the sentiment on the European markets while the upcoming US GDP report will also have significant impact on the pair.

USD/JPY Technical levels to watch

The prices trade below 5-DMA and finds immediate support at 122.64 (20-DMA) below which 122.44 (daily S2) would be tested. To the topside, the immediate resistance is located at 122.96 (10-DMA). A break above the last, the major could test 123.28 (Nov 23 High).
For more information, read our latest forex news.

Eurozone: Q3 GDP second releases in focus – Goldman Sachs

FXStreet (Delhi) – Matteo Leombroni, Research Analyst at Goldman Sachs, suggests that the focus area in Eurozone this week would be the second releases of Q3 German and Spanish GDP which will be published on Tuesday and Thursday respectively next week, with the UK second release being published on Friday.

Key Quotes

“These will include a formal expenditure breakdown of GDP growth in the third quarter. According to the first release, German GDP grew +0.3%qoq in Q3, Spanish GDP expanded by +0.8%qoq, and UK output rose by +0.5%qoq. The first releases only included a narrative breakdown, which for Germany and Spain showed a positive contribution of domestic demand, partly offset by a contraction in net trade.”
For more information, read our latest forex news.

EUR/USD: Rejected at hourly 50-SMA, drops to NY low

FXStreet (Mumbai) - EUR/USD halted its recovery from below 1.06 handle and reverted to NY low near 1.0620 region in the late-Asian trades, as the greenback reversed losses and peaked into the green against its major peers.

EUR/USD capped below 1.0650

Currently, the EUR/USD pair trades -0.11 lower at 1.0627, languishing near fresh session lows struck at 1.0621 over the last minutes. The main currency pair halted its recovery from below 1.06 handle at hourly 50-SMA - 1.0646, and drifted lower to test NY lows printed at 1.0622.

The US dollar appears to bring a pause to its corrective slide and resume its ongoing bullish momentum, keeping EUR/USD undermined. The euro also remains pressured as markets already price-in a Dec QE expansion/ deposit rate cut by the ECB in a bid to combat deflation, as repeatedly noted by ECB policymakers. While the Fed keeps the Dec rate rise hope alive following Yellen’s response to the open letter by American savers overnight.

Looking ahead, the German Ifo surveys and a slew of ECB officials’ speeches will keep the EUR, GBP traders busy. While US GDP data is expected to hog the limelight in the US session.

EUR/USD Technical Levels

The pair trades above 1.06 handle, with the immediate support seen at 1.0600/1.0593 (round number/ Nov 23 Low). Selling pressure will intensify below the last, dragging the pair towards 1.0519 (April lows). While to the upside the next hurdle in sight is located at 1.0646 (daily high/ 1h 50-SMA) and from there to 1.0674 (10-DMA).
For more information, read our latest forex news.

BoE in danger of losing the currency war - RBS

FXStreet (Delhi) – Paul Robson, Senior Trading Desk FX Strategist at RBS, suggests that the BoE may ultimately have to accept that the exchange rate has become a more important, persistent driver of the inflation outlook.

Key Quotes

“Bank of England Governor Carney and other MPC members have recently made a few references to dis-inflationary effects of low import prices. That could be important in making the link between the MPC’s inflation outlook and the strength of the currency.”

“However, the MPC has generally steered clear of currency ‘war games’ - highlighted again last week by Deputy Governor Broadbent’s mildly 'hawkish' comments. Broadbent is an MPC thought-leader and swing-voter and his comments come despite GBP continuing to grind higher in real trade weighted terms.”

“Last week’s retail sales data chipped away at the UK cyclical resilience story. Sluggish cash spend suggests the economy is growing sub trend pace. While EUR/GBP could test the post-financial crisis lows, the downside is limited by the fragility of the UK recovery.”

“We could see a move down to 0.67 before the BoE starts changing its tone. For now, we stay short EUR/GBP but the trade is aging.”
For more information, read our latest forex news.

GBP/USD treads water around 1h 20-SMA

FXStreet (Mumbai) - Having failed near 5-DMA in the US last session, the GBP/USD pair resumed its downslide, only to find fresh bids near 1.5110 region in Asia and jumped off towards hourly 20-SMA at 1.5133, where it now wavers.

The UK’s inflation report hearings – In focus

The GBP/USD pair trades 0.05% higher at 1.5131, unable to take out the daily pivot placed at 1.5142. The cable is seen oscillating in a 20-pips slim range ever since Tokyo open as markets remain cautious and refrain from placing big bets ahead of BOE Governor Mark Carney testimony to the UK legislators on the Treasury Committee about the central bank's latest Inflation report.

While the US dollar started the session on the back foot against its major competitors after the latest manufacturing report from the US disappointed markets. Attention now turns towards the US prelim GDP report due later in the NY session for further signs of strength in the US economic recovery.

GBP/USD Levels to consider

The pair has an immediate resistance at 1.5186 (5-DMA), above which 1.5197/1.5200 (Nov 23 High/ round umber) would be tested. On the flip side, support is seen at 1.5104 (Nov 23 Low) below which it could extend losses to 1.5087 (daily S1).
For more information, read our latest forex news.

Broad dollar theme is back in G10 – Deutsche Bank

FXStreet (Delhi) – Research Team at Deutsche Bank, suggests that cross-correlations between currency pairs have risen in the past fortnight as the broad dollar theme as re-established itself.

Key Quotes

“The prospect of further ECB easing has weighed on EUR as well as CHF and SEK. Expected changes in policy rates have been the dominant driver over the past months, but currency performance has also been aligned with the levels of policy rates. Macro drivers remain in the backseat. Indeed the continental European currencies have underperformed the dollar bloc as well as the US dollar despite boasting stronger growth momentum and current account surpluses.”

EM: Contrary to G10, trendiness in the EM FX universe has not improved and volatility remains at high levels. There has been a decrease in uniformity over the last two weeks, but overall EM currencies continue to be highly correlated.

Equity performance has become highly correlated with FX movements, and the relationship is broad-based. This contrasts with other drivers that explain outlier performances of individual currencies. RUB, for instance, continues to do well with the improvement in Russia’s sovereign credit risk. The macro environment, by contrast, has had little systematic bearing on EM currencies in the past three months.”
For more information, read our latest forex news.

Downward pressure on oil prices is here to stay - RBS

FXStreet (Delhi) – Nick Mannion, Research Analyst at RBS, notes that persistent oversupply, weak demand and increasing expectations of December Fed rate hike are keeping downward pressure on oil prices.

Key Quotes

“This week marks one year since OPEC ministers first shocked global markets by maintaining output in spite of falling prices, precipitating a further 40% decline.”

“WTI crude oil is currently sitting at key long-term technical support at $40bbl just as we approach OPEC’s critical next meeting on December 4. With Iran’s likely return to global export markets looming, Saudi Arabia is unlikely to risk market share by cutting production.”

“We expect further declines in oil and renewed pressure on oil-dependent FX. Similarly, we expect more pressure on currencies where central banks are most worried about a de-anchoring of inflation expectations: Long USD vs. MYR, NOK and EUR.”
For more information, read our latest forex news.

USD bulls take a breather in Asia, Ifo, BOE Carney - Key

FXStreet (Mumbai) - The calm was spread across Asia after a volatile previous session, with lack of fresh fundamental triggers. The greenback eased-off multi-month highs and corrected lower, and thus, weighed on the USD/JPY pair. While Antipodes attempted minor recovery after the commodity rout-backed sell-off.

Key headlines in Asia

Japan Nikkei Manufacturing PMI above expectations (52.1) in November: Actual (52.8)

US GDP forecast of 2.5% in 2015 - S&P

Dominating themes in Asia - centered on JPY, AUD, NZD

The US dollar was broadly sold-off after markets were left unimpressed by the US factories data and a non-event Fed decision on the discount rates. The recent US preliminary manufacturing PMI reading from Markit came in at 52.6 in Nov, compared to the 54.1 seen in October. Markets had predicted the gauge to hit 54.0.

As a result, USD/JPY suffered this session, extending the decline from 123 handle to 122.75 levels, where it now wavers. More so, the Japanese yen regained lost control and trades near weekly highs after the sentiment soured on the Asian equities on lower commodity prices. While upbeat Japan’s manufacturing data also aided the recovery in the yen. The Nikkei-Markit Flash Japan Manufacturing PMI rose from 52.4 in October to a 52.8 in Nov, reaching the highest level since March 2014.

On the flip side, both Antipodeans reversed yesterday’s heavy sell-off and attempted tepid-bounce in Asia. However, the recovery appears short-lived as unfavourable risk-sentiment and ongoing weakness in the commodity prices continue to weigh on investors’ moods. The Kiwi trades modestly flat at 0.6515, while the Aussie hovers below 0.7200 levels, with the bulls struggling to extend gains beyond the last.

The Asian stocks trade mostly lower, with Japan’s benchmark, the Nikkei now reversing the losses and inching slightly higher near 19,920. While mainland China’s benchmark, the Shanghai Composite keeps the red, down -0.76% at 3,583 points. Australia’s S&P ASX index extends losses towards close and drops -0.75% to 5,236. While Hong Kong’s Hang Seng declines -0.75% to 22,497.

Heading into Europe & the US

A busy European session ahead, with the German Ifo business climate survey and inflation report hearing from the UK to emerge the main market movers.

The closely watched Ifo Business Climate Index in Germany is expected to edge down to 108.0 in November, from the 108.2 booked last month. The Current Assessment sub-index is seen at 112.2 from the 112.6 booked a month ago. The Ifo Expectations Index - indicating firms' projections for the next six months - is expected to remain at the same level as 103.8 registered in October.

Germany will report final GDP growth figures for Q3, expected to show 0.3% growth, quarter-on-quarter, and 1.8% on an annual basis.

Bank of England Governor (BOE) Mark Carney is scheduled to testify to UK legislators on the Treasury Committee about the central bank's latest Inflation report.

ECB Banking Supervision Chair Daniele Nouy and ECB board member Yves Mersch are due to speak at their respective events while RBA Chief Stevens’ will also deliver a speech about issues in economic policy at the Australian Business Economists Annual Dinner, in Sydney.

Looking towards the NA session, the main risk event is expected to be the prelim US GDP figures. While US goods trade balance and consumer confidence data will also garner some attention. Markets are predicting a 2% annualized increase in the GDP will be reported.

BAML Research Team noted, "Instead of a 1.4 percentage point drag on Q3 growth, inventories will likely have a negative contribution closer to 0.8 percentage point."

EUR/USD Technicals

Valeria Bednarik, Chief Analyst at FXStreet noted, “The 1 hour chart showing that the price is being contained by a bearish 20 SMA, whilst the Momentum indicator is hovering around its 100 level and the RSI indicator turned back south after a limited upward correction. In the 4 hours chart, the price has extended its decline further below a flat 20 SMA, while the Momentum indicator maintains a strong bearish slope below its 100 level, while the RSI remains around 35, in line with further declines for this Tuesday. Support levels: 1.0590 1.0550 1.0510 Resistance levels: 1.0650 1.0690 1.0730.”
For more information, read our latest forex news.

JPY: Japan's economic update: November 2015 - NAB

FXStreet (Delhi) – Research Team at NAB, lists down the Japan’s economic updates for November 2015.

Key Quotes

• “Gross Domestic Product (GDP) fell for the second consecutive time in the September quarter. While this is often considered to indicate a country is in recession, this is not a meaningful guide for a country like Japan whose population is falling. Other indicators, in particular for the labour market, but also business surveys, trade and consumption indicators do not indicate an economy in recession. Moreover, the decline in September quarter GDP was largely driven by an inventory correction and domestic demand was stronger.

• Labour market conditions remain tight with the unemployment rate at 3.4%; wage growth though remains restrained.

• Nevertheless, it is clear that the economy has struggled to regain any strong momentum post the increase in the VAT in 2014. This weakness is disappointing particularly in the light of the strong growth (by Japanese standards) in gross national income.

• Japanese corporations have enjoyed record profit growth, which has swelled their cash and deposit holdings. For the success of ‘Abenomics’ it is critical for businesses to boost wages and investment, thereby setting off a ‘virtuous circle’ of higher activity and prices. A concern has been that the high level of corporate profits has not translated into commensurate increases in investment. However, indicators point to some possible improvement in business investment in the near term.

• While exports of goods and services grew in the September quarter by 2.6% on the previous quarter, the annual growth rate has been decelerating, and total exports have actually declined over the last six months. The large depreciation of the Yen since late 2012 has provided a large boost to the competitiveness of the Japanese tradeables sector. However, several factors have acted to hold back export growth.

• Inflation remains modest, with the core (ex fresh food) CPI measure declining by -0.1% over the year to September. The Bank of Japan (BOJ) has pushed back its forecast for Japan achieving the 2% inflation target to the second half of fiscal 2016.

• There have been record tourist arrivals – particularly from China – which has improved the current account position in 2015. Besides, a high level of FX reserves and a strong net international investment position, suggests a very strong external situation.

• The Yen has depreciated 16% over the year to November, 2015 against the greenback. However, there has been a recent surge in USD funding premiums, which will likely raise costs of Japanese banks and corporations with overseas operations.

• The BOJ maintained its policy stance at its most recent (November 19th meeting). The current low level of JGB yields will likely limit the effectiveness of further easing.

• There is a tension between the desire to use fiscal policy to support the economy and the need to improve the Government’s finances. Even though fiscal policy has turned into a headwind, the government is struggling to meet its fiscal targets.”
For more information, read our latest forex news.