Soft China Inflation Worries, EUR And JPY volatile
Ipek Ozkardeskaya | Dec 10, 2014 05:40AM ET
High trading volumes squeezed EUR and JPY at the New York trading session yesterday. USD/JPY sharply dropped to 117.95 (slightly below the 21-dma) after clearing stop-loss sell orders in 119.20/50 area. The MACD stepped in red zone, steep Nov-Dec uptrend channel and 9-day Ichimoku conversion line have both been broken on the downside, suggesting the beginning of short-term bearish reversal pattern. We stand ready for high market vols in JPY-crosses before December 14th snap elections. Yet given the market remains solidly long in USD, the downside correction in USD/JPY is expected to remain limited. The key short term support stands at 117.24 (Nov 27th low). EUR/JPY tumbled down to 146.80, more weakness should be envisaged with buoyant EUR sentiment.
In the Euro-zone the Greek yield curve inverted on political unrest, the Greece 3-year notes spiked to 8.275%, 10-year yields advanced above 8%. Widening core/periphery yields pushed EUR/USD higher, the 40-day rolling correlation reached 60%, EUR/USD advanced to 1.2448. Tomorrow is an important day for the EUR. The second round of TLTRO lending, if remains soft, should increase QE expectations and push EUR/USD back to its bear market. We remain seller on rallies on light option bids trailing above 1.2400+ for today expiry. The option market is skewed on the downside below 1.25 from tomorrow.
In China, the consumer prices accelerated at the slower-than-expected pace of 1.4% in year to November (vs. 1.6% exp. & last), the producer prices decelerated at faster-than-expected -2.7% y/y (vs. -2.4% exp. & -2.2% last). It has been a volatile trading session for China. USD/CNY sold-off from 6.1988 to 6.1681, back in its weekly Ichimoku cloud cover (6.1533/6.1940) as expected. The soft inflation figures will certainly keep the PBoC-doves alert and keep USD/CNY well bid above 6.1500/33 (psychological level / Fibonacci 50% on January-April rally).
AUD/USD rebounded to 0.8338 lifted by the plunging AUD/JPY. Trend and momentum indicators remain comfortably bearish before tomorrow’s jobs data. In New Zealand, the RBNZ gives policy verdict later today and is expected to maintain its official cash rate unchanged at 3.50% and talk down the Kiwi. NZD/USD sits on the bottom line of October-December downtrend channel. The key support stands at 0.7457 (23th May/1st June 2012 double bottom).
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Else, the BCB signals the end of its swap program to sustain the BRL, pushing the USD/BRL back in the bull trend. The Russian Central Bank will give policy verdict on Thursday and is expected to lift its key rate by 50 basis points to 10%. USD/RUB trades close to 55-resistance. The potential rate action should trigger some downside correction and generate interesting entry opportunities for USD/RUB long positions.
Today, traders are focused on French 3Q (Final) Nonfarm Payrolls, French October Industrial and Manufacturing Production, Norwegian November CPI and PPI m/m & y/y, UK October Trade Balance, US December 5th MBA Mortgage Applications, US November Monthly Budget Statement.
Swissquote SQORE Trade Idea: G10 Currency Trend Model: Buy USD/NOK at 7.11588.
Currency Tech
EURUSD
R 2: 1.2532
R 1: 1.2456
CURRENT: 1.2357
S 1: 1.2280
S 2: 1.2248
GBP/USD
R 2: 1.5826
R 1: 1.5763
CURRENT: 1.5683
S 1: 1.5590
S 2: 1.5542
USD/JPY
R 2: 121.85
R 1: 121.00
CURRENT: 119.14
S 1: 117.95
S 2: 117.24
USD/CHF
R 2: 0.9839
R 1: 0.9780
CURRENT: 0.9710
S 1: 0.9650
S 2: 0.9595
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