The Week That Was…
Markets end the holiday thinned week focused on the deflation theme the USD is broadly supported across the board, while AUD and CAD continue to feel the pain of yesterday’s OPEC “no-cut” decision and the JPY struggles on the back of soft inflation and retail sales data. The yield on UST 10s has dropped below 2.20% and equivalent Bunds trade just a hair above 70 bps.
Heading into next weeks ECB meeting it is worthing monitoring the extreme positioning and the global macro developments that could prompt a temporary USD pull back into year-end.
EURUSD reaction to the additional comments from ECB President Draghi last Friday in which he stressed the need for the ECB to reach its mandated objective of price stability “as fast as possible” has reinforced the idea of the potential short-term upside risks for EURUSD. The euro did fall notably last Friday in response to the comment but this week EURUSD has been gradually retracing that decline of last Friday. EURUSD appears well supported around current levels and the ability of ECB rhetoric to weaken the euro appears to have been exhausted for now.
- USD traded higher Thursday as OPEC failed to make any meaningful headway on output reduction agreements. Still a little cautious of meaningful upside momentum in the short term as positioning is somewhat crowded as COT records 52 week highs in USD longs.
- EUR Germany’s Nov CPI rose 0.6% YoY, reaching a 4-year low. EURUSD once dropped to 1.2456 level. EURUSD’s short-term resistance is at 1.2610, and support is at 1.2350. Market awaits ECB meeting next week for next directional development.
- GBP UK’s Nov Gfk Consumer Confidence Index arrived at -2, worse than expected. GBPUSD dropped to 1.5717 level. The market is waiting for the result of central bank meeting next week. GBPUSD’s short term resistance is at 1.5940, and support is at 1.5430.
- JPY Japan’s Oct National CPI (ex fresh food) (VAT included) rose 2.9% YoY, worse than last month. USD/JPY once rose to 118.17 level. USD/JPY’s short-term support level at 117 and resistance at 119.
- CAD Oil prices once slid more than 8% on the announcement of unchanged output volume by OPEC. USD/CAD once rose to 1.1355 level. The market is waiting for the result of central bank meeting next week. USDCAD’s support level is at 1.1190 and resistance level is at 1.1470
- AUD RBA kept the cash rate unchanged at 2.5% in November and reiterated the current interest rate is favourable to Australia’s economic growth. It also noted that the currency remains above most estimates of fundamental value.Australia’s Q3 private capital expenditure rose 0.2% QoQ, better than expected.AUDUSD’s short-term support is at 0.8316, and resistance is at 0.8730.
- EURUSD Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish
- GBPUSD: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish
- USDJPY: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bullish
- USDCAD: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bullish
- AUDUSD: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bearish
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