DAILY MARKET COMMENTARY
5 January 2010
Tuesday
Fundamental Outlook at 1500 GMT (EDT + 0500)
€
The euro depreciated vis-à-vis the U.S. dollar on Thursday as the single currency tested bids around the US$ 1.4345 level and was capped around the $1.4485 level. U.S. equity markets were underwater today and the common currency failed to notch sustainable gains on weaker-than-expected U.S. November pending home sales that failed to meet expectations. Data evidenced a 16.0% m/m contraction, a sharp reversal from the revised +3.9% print in October, and were up 19.3% y/y, down from a revised 28.7% y/y. On a positive note, November factory orders came in stronger-than-expected, up 1.1% - an expansion from October's +0.8% print. Bond giant PIMCO reported interest rate markets have gotten ahead of themselves by pricing in rate hikes by the Fed this year. PIMCO is currently forecasting the fed funds target rate will remain lodged at its 0% to 0.25% range until late 2010 or early 2011. Kansas City Fed President Hoenig spoke today and was criticial of the "too big to fail" story regarding U.S. banks, saying the idea "needs to be addressed" and that large banks tht become insolvent "should be dismantled in an orderly way." In eurozone news, data released in Germany saw the December unemployment total decline by 3,000 to 3.42 million, the sixth consecutive monthly decline. Notably, German GDP expanded 0.7% in Q3 2009 and there is a growing view that Germany could outpace other eurozone countries this year. Also, EMU-16 flash consumer price inflation for December was up 0.9% y/y, an increase from the prior print of 0.5% m/m. Most dealers believe the European Central Bank will keep rates steady in Q1. Euro bids are cited around the US$ 1.3885 level.
¥/ CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥91.25 level and was capped around the ¥92.55 level. The Japanese media reported the government and Bank of Japan have now purchased a combined ¥491.7 billion in bank-owned stocks through the end of 2009 to support banks' balance sheets and equities prices. Conspiracy theorists are wagging about news that finance minister Fujii is ill with some Japan-watchers believing he could step down if his doctor requests so. Some dealers believe the late-2009 rally in the greenback may have simply been traders covering dollar shorts and booking profits. Notably, U.S. mutual funds reduced foreign holdings to 25.8% of total holdings in November from about 26% in October, a level that matched the record established in May 2008. A further reduction in foreign holdings could increase demand for the U.S. dollar. Japan's gross domestic product fell to an annualized ¥471 trillion in the third quarter of 2009, the lowest level since 1991. The finance ministry is now predicting Japan's tax revenue will decline to at least a 25-year low in 2010. Dealers are also paying very close attention to plans for the government's budget in 2010 that does little to reduce record deficits. Japan's Aa2 credit rating may be imperiled if fiscal conditions do not improve. Japan currently has about US$ 8.96 trillion in Japanese government bonds outstanding, outweighing the U.S.'s US$ 8.78 trillion in federal debt. Current forecasts suggest Japan's fiscal deficit would remain as high as 8% of GDP in 2014, a sharp contrast to a 6.7% forecast for the U.S. and talk of a balanced budget in Germany. Notably, Japan's GDP is estimated to reach 246% of gross domestic product in 2010, compared to about 108% for the U.S. and 89% for Germany. The Nikkei 225 stock index climbed 0.34% to close at ¥10,681.83. U.S. dollar offers are cited around the ¥94.75 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥131.45 level and was capped around the ¥133.45 level. The British pound moved lower vis-à-vis the yen as sterling tested offers around the ¥146.10 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥88.40 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8272 in the over-the-counter market, down from CNY 6.8273. People's Bank of China Governor Zhou again warned that investments in industries with extra capacity and in "redundant infrastructure" could threaten the quality of banks' loans. China is again telling banks to "control the pace of lending." Some traders believe there will be huge inflows related to speculation on further yuan appreciation.
Technical Outlook at 1330 GMT (EDT + 0500)
(Bid Price) (Today's Intraday Range)
EUR/ USD 1.4366 1.4483, 1.4345
USD/ JPY 91.68 92.54, 91.24
GBP/ USD 1.5993 1.6152, 1.5964
USD/ CHF 1.0334 1.0359, 1.0250
AUD/USD 0.9115 0.9173, 0.9091
USD/CAD 1.0390 1.0418, 1.0335
NZD/USD 0.7341 0.7389, 0.7315
EUR/ JPY 131.73 133.46, 131.44
EUR/ GBP 0.8980 0.9014, 0.8944
GBP/ JPY 146.69 149.14, 146.12
CHF/ JPY 88.72 89.89, 88.42
Support Resistance Support Resistance
EUR/ USD USD/ JPY
L1. 1.4470 1.4915 88.60 93.30
L2. 1.4355 1.5140 87.10 95.50
L3. 1.4175 1.5360 86.10 98.85
GBP/ USD USD/ CHF
L1. 1.6115 1.6685 1.0275 1.0580
L2. 1.5720 1.6830 1.0040 1.0695
L3. 1.5405 1.7040 0.9750 1.0885
AUD/ USD USD/ CAD
L1. 0.8450 0.8830 1.0535 1.0945
L2. 0.8300 0.9050 1.0365 1.1125
L3. 0.8070 0.9120 1.0155 1.1355
NZD/ USD EUR/ JPY
L1. 0.6880 0.7125 131.45 135.75
L2. 0.6750 0.7260 129.75 136.90
L3. 0.6535 0.7395 127.00 138.75
EUR/ GBP EUR/ CHF
L1. 0.8795 0.8995 1.5110 1.5380
L2. 0.8675 0.9105 1.4905 1.5580
L3. 0.8320 0.9225 1.4670 1.5880
GBP/ JPY CHF/ JPY
L1. 146.10 152.50 86.30 88.65
L2. 142.05 157.75 85.40 90.10
L3. 135.70 161.70 81.55 91.60
SCHEDULE
Tuesday, 5 January 2010
all times GMT
(last release in parentheses)
N/A Germany November retail sales (0.0% m/m)
N/A Germany November retail sales (-1.7% y/y)
0000 Australia November HIA new home sales (-6.0% m/m)
0745 France December consumer confidence (-30.0)
0855 Germany December unemployment change (-7,000)
0855 Germany December unemployment rate (8.1%)
0930 UK December PMI, construction (47.0)
1000 Eurozone December consumer price index, estimate (0.6% y/y)
1230 Canada November industrial product prices (-0.3% m/m)
1230 Canada November raw materials price index (2.5% m/m)
1300 US Federal Reserve Bank of Kansas City President Hoenig speaks
1500 US November pending home sales (3.7% m/m)
1500 US November pending home sales (28.6% y/y)
1500 US November factory orders (0.6%)
Wednesday, 6 January 2010
all times GMT
(last release in parentheses)
0001 UK December Nationwide consumer confidence (73.0)
0001 UK December BRC shop price index (0.2%)
0030 Australia November retail sales (0.3% m/m)
0030 Australia November building approvals (-0.6% m/m)
0030 Australia November building approvals (11.7% y/y)
0850 France December PMI, services (60.9)
0855 Germany December PMI, services (53.1)
0900 Eurozone December PMI, services (53.0)
0900 Eurozone December PMI, composite (53.7)
0930 UK December PMI, services (56.6)
1000 Eurozone November producer price index (0.2% m/m)
1000 Eurozone November producer price index (-6.7% y/y)
1000 Eurozone October industrial new orders (1.7% m/m)
1000 Eurozone October industrial new orders (-16.4% y/y)
1200 US MBA mortgage applications
1230 US December Challenger job cuts (-72.3% y/y)
1315 US December ADP employment change (-169,000)
1500 US December ISM, non-manufacturing composite (48.7)
1900 US Federal Open Market Committee meeting minutes
1905 Australia November trade balance (-A$ 2.379 billion)
2145 NZ November trade balance (-NZ$ 487 million)
Thursday, 7 January 2010
all times GMT
(last release in parentheses)
N/A UK December Halifax house prices (1.4% m/m)
0000 Japan December official reserve assets (US$ 1.073 trillion)
0500 US Federal Reserve Bank of St. Louis President Bullard speaks
0815 CH December consumer price index (0.2% m/m)
0815 CH December consumer price index (0.0% y/y)
1000 Eurozone November retail sales (0.0% m/m)
1000 Eurozone November retail sales (-1.9% y/y)
1000 Eurozone December economic confidence (88.8)
1000 Eurozone December consumer confidence (-17.0)
1000 Eurozone December business climate indicator (-1.56)
1000 Eurozone December industrial confidence (-19.0)
1000 Eurozone December services confidence (-4.0)
1100 Germany November factory orders (-2.1% m/m)
1100 Germany November factory orders (-8.5% y/y)
1200 UK Bank of England MPC interest rate decision
1200 UK Bank of England asset purchase program
1330 US Weekly initial jobless claims
1330 US Continuing jobless claims
1500 Canada December Ivey purchasing managers index (55.9)
1800 US Federal Reserve Bank of Kansas City President Hoenig speaks
Friday, 8 January 2010
all times GMT
(last release in parentheses)
0000 Australia Q3 quarterly wage agreements
0500 Japan November leading index (89.4)
0500 Japan November coincident index (94.3)
0500 China Federal Reserve Bank of St. Louis President Bullard speaks
0545 CH December unemployment rate (4.1%)
0700 Germany November trade balance (€13.6 billion)
0700 Germany November current account (€11.0 billion)
0745 France November trade balance (-€4.4 billion)
0930 UK December PPI, input (0.1% m/m)
0930 UK December PPI, input (4.0% y/y)
0930 UK December PPI, output (0.2% m/m)
0930 UK December PPI, output (2.9% y/y)
0930 UK December PPI, output core (-0.1% m/m)
0930 UK December PPI, output core (2.0% y/y)
1000 Eurozone November unemployment rate (9.8%)
1100 Germany November industrial production (-1.8% m/m)
1100 Germany November industrial production (-12.4% y/y)
1230 Canada December employment, net change (79,100)
1230 Canada December unemployment rate (8.5%)
1300 US December non-farm payrolls, net change (-11,000)
1330 US December unemployment rate (10.0%)
1330 US December average hourly earnings (0.1% m/m)
1330 US December average hourly earnings (2.2% y/y)
1330 US December average weekly hours (33.2)
1500 US November wholesale inventories (0.3%)
1835 US Federal Reserve Bank of Richmond President Lacker speaks
2000 US November consumer credit (-US$ 3.5 billion)
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