Equity Markets Mixed, Global Uncertainty Persists
Swissquote Bank Ltd | Jan 21, 2016 07:04AM ET
Market Brief
Crude oil showed no sign of recovery during the US session yesterday as WTI fell to below $27 a barrel, testing lows from May 2003. However, in Asia the price bounced back and consolidated above the $28 threshold. Given the huge amount of short positions, relief will be only temporary and we expect crude oil prices to test new lows.
Yesterday the inflation report from the US was a disappointment as expected (see our Daily Market Brief from yesterday). Headline CPI printed at -0.1%m/m in December, below estimates and the previous month reading of 0.0%. While the core measure, which excludes food and energy, came in at 0.1%m/m versus 0.2% expected and previous read. However, in spite of these poor numbers, the US dollar held its ground as market participants stay focused on crude oil putting the entire US inflation/rate hike story on the backburner. EUR/USD paired gains in Tokyo and is currently trading at 1.0915 dollar for 1 euro. On the medium-term, the pair remains in its uptrend channel and will try, for the third time since the beginning of the year, to break the 1.10 resistance to the upside.
On Wednesday, the Canadian central bank decided to maintain its key interest rate at 0.50% and delivered an upbeat message about global growth. Governor Poloz and his colleagues believe that the planned increase in federal infrastructure spending and a global recovery make a rate cut unnecessary for now. Moreover, the weakness of the Canadian dollar will remain of great help in supporting competitiveness of its exports. USD/CAD tested 1.4690 in the London session before easing around 1.45 in Asia.
In the equity market, sellers have not yet grown tired as they continue to push Asian shares deeper into negative territory. The Japanese Nikkei 225 fell 2.43% and reached 16,017, the lowest level since October 2014. In Hong Kong, the Hang Seng fell 1.67%, while in Mainland China both the Shenzhen and Shanghai Composite plummeted more than 3%. Elsewhere, the STI was down 1.06%, in South Korea the KOSPIedged down 0.27% while in Taiwan shares fell 0.46%.
After a tough start to the week, the pound sterling is taking a breather as traders digest the latest speech from Governor Carney. GBP/USD is treading water between 1.4125 and 1.4220. EUR/GBP is also consolidating earlier gains at around 0.7685. On the upside, a resistance can be found at 0.7874 (high from January last year), while on the downside an hourly support lies at 0.7313 (low from January 5th). The bias remains on the upside.
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Today traders will be watching ECB rate decision; gold and forex reserve from Russia; Philadelphia Fed business outlook and initial jobless claims from the US; consumer confidence index from Germany.
Currency Tech
EUR/USD
R 2: 1.1387
R 1: 1.1095
CURRENT: 1.0898
S 1: 1.0458
S 2: 1.0000
GBP/USD
R 2: 1.5242
R 1: 1.4969
CURRENT: 1.4165
S 1: 1.3657
S 2: 1.3503
USD/JPY
R 2: 125.86
R 1: 123.76
CURRENT: 117.01
S 1: 115.57
S 2: 105.23
USD/CHF
R 2: 1.0676
R 1: 1.0328
CURRENT: 1.0042
S 1: 0.9786
S 2: 0.9476
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