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Netherlands, The Unemployment Rate s.a (3M) remains unchanged at 4.4% in December
The outcome of the latest Reuters poll on the BoJ?s monetary policy programme for this year, a majority of the economists polled see the BoJ keeping i

The outcome of the latest Reuters poll on the BoJ’s monetary policy programme for this year, a majority of the economists polled see the BoJ keeping its long-term interest rate target unchanged this year.

Key Findings:

“Around 40 percent predicted the BOJ would raise the target this year, but the rest either projected it would remain at zero in 2018 or left some future quarters blank, saying their outlook depended on who would be the new BOJ governor after Haruhiko Kuroda’s term ends in early April.

Many economists didn’t foresee the Bank of Japan unwinding its massive stimulus this year, but 16 did.

Two thought the central bank could begin cutting back in April, two said September, eight predicted October and four predicted December.

Seventeen expected the wind down would begin in 2019 or later.

Economists also largely thought the BOJ would continue - in its policy statements at least - to target an annual increase in its bond holdings of 80 trillion yen.

13 of 36 economists said Japan Govt could declare victory over deflation by end-2018.    

Economists see North Korea tensions, China's economic outlook posing top risk factors for Japan.”

Forex today remained in a wait-and-see mode, with most majors consolidating the overnight moves while awaiting the Chinese macro releases. The Aussie

Forex today remained in a wait-and-see mode, with most majors consolidating the overnight moves while awaiting the Chinese macro releases. The Aussie nursed losses amid mixed Aus jobs data. The Yen traded better offered, as the US extended rebound across the board.

Amongst the commodities, oil prices traded firmer on bullish API crude inventory report while gold prices kept losses below $ 1330 levels amid higher Treasury yields and positive Asian equities.

Main topics in Asia

Australia December employment change beats estimates, jobless rate ticks higher

The data released by Australia Bureau of Statistics (ABS) showed the economy added 34.7K jobs in December vs. forecast of 9K. 

BoJ officials reported as saying current stimulus is needed for now

Bloomberg quoted an unnamed Bank of Japan (BoJ) official as saying that the current is needed for now while adding that the market is getting ahead of itself.

White House Official: Congress will pass a stopgap bill to keep government funded

According to the White House Chief of Staff Kelly, the US Congress will pass a stopgap bill to avert a government shutdown, Reuters reports.

China's holdings of US treasuries fell to 4-month low in November

China’s holdings of US Treasuries fell to $1.176 trillion in November, its lowest in four months.

South Korean regulator considering shutting down all virtual currency exchanges

Reuters reports the latest headlines, citing that the South Korean regulator is said to consider shutting down all virtual currency exchanges.

Key Focus ahead

We have all-important China’s Q4 GDP release accompanied by the country’s industrial production and retail sales data, which will be reported at 0700 GMT (delayed by the source) while the EUR calendar remains data-empty. Hence, most majors will closely track the USD dynamics and risk trends ahead of the US building permits, housing starts, unemployment claims and Philly Fed manufacturing Index, all of which are due on the cards at 1330 GMT. Also in focus remains the German Bundesbank Chief Weidmann’s speech and EIA crude oil inventories data.

EUR/USD: Will buyers regain control above 1.2200?

The EUR/USD pair staged a solid comeback in Asia, having reversed from four-day lows of 1.2165. However, sellers continued to lurk just ahead of the 1.22 handle, leaving the rates in a consolidative phase below the last.

GBP/USD - Rising risk reversals contradict widening 10Y US-UK yield spread

Currently, GBP/USD trades at 1.3812 - down more than 100 pips from the previous day's high of 1.3943. The long upper shadow of yesterday's candle could be read as a sign of bull market exhaustion.

When is China Q4 GDP and how could it affect the AUD/USD?

China is set to publish the gross domestic product (GDP) for the fourth quarter at 07:00 GMT. 

China: Key economic events today - Barclays

The Barclays Research Team is out with a brief preview of their expectations on the upcoming Chinese macro releases due to be reported at 7GMT today.

 

EUR/GBP fell below the 200-day MA yesterday, seemingly due technical failure at the 100-day MA. The pair spent the better part of the last week battl
  • Technical failure triggers sell-off.
  • UK-German 10-yr spread favors EUR.

EUR/GBP fell below the 200-day MA yesterday, seemingly due technical failure at the 100-day MA.

The pair spent the better part of the last week battling offers around the 100-day MA, then positioned around 0.89 levels. However, the moving average proved a tough nut to crack. The repeated rejection at the key technical hurdle finally made way for the bears.

The currency pair closed yesterday at 0.8808 and was last seen trading at 0.8825 levels. Despite being mildly bid, the cross is still below the 200-day MA level of 0.8832.

That said, the drop does not look sustainable if we take into account the recent drop in 10Y UK-German yield spread (from 82.5 basis points to 73.6 basis points). The spot may recover above the 200-day MA if the spread drops further in the EUR positive manner.

EUR/GBP Technical Levels

A break below 0.88 (zero levels) would open doors for 0.8761 (Dec. 14, Dec. 15 low), under which a major support is seen at 0.8689 (Dec. 8 low). On the higher side, breach of resistance at 0.8832 (200-day MA) would expose the 100-day MA of 0.8887 and 0.89 (zero levels).

 

Comments from South Korean central bank are crossing the wires via Reuters- GDP growth is seen at 2.9 percent in 2019. Inflation is seen at 2 perc

Comments from South Korean central bank are crossing the wires via Reuters-

  • GDP growth is seen at 2.9 percent in 2019.
  • Inflation is seen at 2 percent in 2019.
  • Robust exports and expanded consumption to fuel growth in 2018.

 

China Q4 GDP overview: China is set to publish the gross domestic product (GDP) for the fourth quarter at 07:00 GMT. The economy is seen expanding 1.

China Q4 GDP overview:

China is set to publish the gross domestic product (GDP) for the fourth quarter at 07:00 GMT. The economy is seen expanding 1.6 percent quarter-on-quarter (q/q) and 6.7 percent year-on-year (y/y). The slight slowdown will most likely be due to the cooling property sector, China's crackdown on debt risks and factory pollution. Also, the growth rate would still be above China's annual growth target of around 6.5 percent. Also scheduled for release are industrial production (expected 6.0 percent y/y) and retail sales (expected 10.1% y/y).

How could the data affect the AUD/USD?

A better-than-expected China Q4 GDP could put a bid under the Aussie dollar. However, the AUD bulls look tired as the pair failed to cut through 0.80 in Asia despite upbeat Aussie data. So, a sustained move above 0.80 could be seen only if the forward-looking retail sales indicator betters estimates. Also, the uptick in factory output could boost the Aussie dollar.

On the other hand, a weaker-than-expected data could yield a much needed technical correction in the AUD/USD pair.          

China: Key economic events today - Barclays

About Chinese GDP

The Gross Domestic Product (GDP) released by the National Bureau of Statistics of China studies the gross value of all goods and services produced by China. The indicator presents the pace at which the Chinese economy is growing or decreasing. As the Chinese economy has an influence on the global economy, this economic event would have an impact on the Forex market. Generally speaking, a high reading is seen as positive (or bullish) for the CNY and AUD, while a low reading is seen as negative (or Bearish).

Japan Industrial Production (YoY) above expectations (1.9%) in November: Actual (3.6%)
Japan Capacity Utilization registered at 0%, below expectations (0.1%) in November
Japan Industrial Production (MoM) below forecasts (0.6%) in November: Actual (0.5%)
The NZD/USD pair is seen consolidating the recovery seen so far this session, as the bulls await the Chinese economic releases for the next push highe
  • DXY rebound caps upside?
  • All eyes on China data dump.

The NZD/USD pair is seen consolidating the recovery seen so far this session, as the bulls await the Chinese economic releases for the next push higher.

NZD/USD finds support near 10-DMA of 0.7240

The Kiwi fails to extend its recovery further beyond the daily pivot located at 0.7285, as broad-based US dollar rebound regains poise amid higher Treasury yields and better US industrial figures. The USD index rises +0.11% to hit daily tops of 90.77, fast approaching the 91 handle.

The recovery in the spot remains capped, as it tracks the losses seen in its OZ counterpart Aussie after AUD was hit by mixed Australian jobs data. Australia December employment change beats estimates, jobless rate ticks higher

The major witnessed good two-way businesses a day before, initially having dipped to 0.7235 levels before staging a solid recovery in a bid to clinch fresh four-month tops of 0.7332. However, the bulls failed to sustain the upmove and lost control in the overnight trades.

Markets now eagerly await the Chinese Q4 GDP, industrial production and retail sales figures for fresh near-term trading opportunities.

NZD/USD Technicals

The pair finds next resistances at 0.7315 (4-month tops), at 0.7350 (psychological levels), 0.7391 (classic R3). Meanwhile, the supports are located at 0.7240 (10-DMA), 0.7200 (zero figure) and 0.7174/53 (20 & 200-DMA).

As per US Energy Information Administration (EIA), the shale oil output is likely to rise by 1.8 million barrels per day (bpd) over the next year, mat

As per US Energy Information Administration (EIA), the shale oil output is likely to rise by 1.8 million barrels per day (bpd) over the next year, matching the volume of production cuts sustained by the OPEC, Russia and other major oil producing nations. 

Also, the shale output in January is seen rising to 6.438 million barrels per day, which is 24,000 bpd higher than December levels.

Currently, GBP/USD trades at 1.3812 - down more than 100 pips from the previous day's high of 1.3943. The long upper shadow of yesterday's candle coul
  • GBP/USD risk reversals show GBP calls are in demand.
  • 10Y US-UK yield spread hits 9-month highs, favors USD.

Currently, GBP/USD trades at 1.3812 - down more than 100 pips from the previous day's high of 1.3943. The long upper shadow of yesterday's candle could be read as a sign of bull market exhaustion.

However, one-month 25 delta risk reversals gauge rose to a four-month high of 0.30 yesterday, which indicates the dealers are still adding a premium for GBP calls.

While the risk reversals highlight the bullish sentiment on the underlying (GBP), the yield differential tells a different story. The spread between the yield on the 10-year US treasury and its UK counterpart rose in the USD-positive manner to 127 basis points; the highest level since mid-April. Clearly, the rally in GBP/USD looks unjustified considering the widening US-UK yield differential.

That said, the British Pound may continue to defy the unfavorable yield differential if the talk of the second Brexit referendum gathers pace.  

GBP/USD Technical Levels

FXStreet Chief Analyst Valeria Bednarik writes, " The short-term picture for the pair is bullish, as in the 4 hours chart, the price bounced sharply after struggling with a bullish 20 SMA, holding near the mentioned high by the end of the US session. Technical indicators in the mentioned chart, are also supporting additional gains ahead with the RSI indicator heading higher within overbought territory and the Momentum also regaining the upside bouncing from its 100 level. Speculative interest seems determinate to test the 1.4000 threshold a possible bullish target for the upcoming session, should the greenback remain under pressure."

Support levels: 1.3835 1.3800 1.3770 

Resistance levels: 1.3895 1.3920 1.3960

More comments crossing the wires from the Chinese fx regulator, the Safe Administration of Foreign Exchange (SAFE), are found below. China's invest

More comments crossing the wires from the Chinese fx regulator, the Safe Administration of Foreign Exchange (SAFE), are found below.

China's investments in the US treasury bonds are market driven.

Recent Yuan appreciation driven by China's improving economy, weaker dollar.

Two-way Yuan fluctuations will become a new normal.

China will deepen forex reform, enhance Yuan flexibility.

The EUR/USD pair staged a solid comeback in Asia, having reversed from four-day lows of 1.2165. However, sellers continued to lurk just ahead of the 1
  • DXY rebound falters in Asia.
  • German politics, ECB jawboning to keep upside limited.
  • Eyes US macro news for fresh incentives.

The EUR/USD pair staged a solid comeback in Asia, having reversed from four-day lows of 1.2165. However, sellers continued to lurk just ahead of the 1.22 handle, leaving the rates in a consolidative phase below the last.

The spot is seen trying hard to retain the bids over the last hours, as upbeat US data-led rebound in the US dollar from multi-year lows versus its main peers loses steam. Expectations of higher global interest rates, as most major central banks are likely to join the Fed in normalizing their monetary policy this, continues to dampen the sentiment around the greenback

On Wednesday, the main currency pair corrected sharply from its best levels since Dec 2014 at 1.2323, after markets used the excuse of the ECB officials’ jawboning the currency to book profits on their EUR longs, as attention now turns towards the ECB monetary policy decision due next week.

ECB’s Nowotny: Euro exchange rate must be observed

ECB’s Constancio: Worried about Euro moves that don't reflect fundamentals

Meanwhile, the major showed limited reaction to the Eurozone final CPI numbers, which confirmed the flash estimate of 1.4% on an annualized basis. In the day ahead, markets eagerly await a fresh batch of macro news from the US docket for fresh impetus, as the EUR calendar remains data-dry. However, the speech by the German Bundesbank President Weidmann will be eyed in the European session.

EUR/USD Technical Levels

FXStreet’s Chief Analyst, Valeria Bednarik, writes: “The 4 hours chart present some minor divergences, as the price is recovering after struggling around a bullish 20 SMA, but the Momentum indicator keeps heading lower around its 100 level, mostly due to the price being below its previous highs. Any possible upcoming decline should be considered corrective after the pair added roughly 400 pips pretty much straight, yet renewed buying interest above 1.2280 is now required to revert the short-term negative tone and consider higher highs ahead. Support levels:  1.2190 1.2155 1.2110. Resistance levels: 1.2280 1.2320 1.2350.”

USD/JPY remains bid in Asia but lacks the vigor to cut through 111.41 (38.2% Fib R of Jan. 1 high - Jan. 17 low) despite widening yield differential.
  • USD/JPY recovery stalls at 111.41 - 38.2% Fib.
  • 10Y US-Jap spread hits at one-month high, favors upside in USD.

USD/JPY remains bid in Asia but lacks the vigor to cut through 111.41 (38.2% Fib R of Jan. 1 high - Jan. 17 low) despite widening yield differential.

The 10-year US-Japan yield spread rose to 266 basis points today; the highest level since Dec. 21. Also, previous day's bullish outside day candle indicates the pair has likely made a short-term bottom at 110.19.

Further, the Bank of Japan (BOJ) officials believe the ultra-easy monetary policy is needed for now and are of the opinion that the markets have run ahead of themselves. Thus, unwinding of Yen longs may gather pace.

Meanwhile, the USD could remain well bid as the Fed's Beige book (released yesterday) is said to have opened doors for a March rate hike.  Kathy Lien from BK Asset Management expects the USD/JPY to extend the rally to 112.00 regardless of today's housing reports and Philadelphia Fed index.

USD/JPY Technical Levels

A move above 111.41 (38.2% Fib R of Jan. 8 high - Jan. 17 low) would expose 111.79 (50% Fib R) and 112.00 (zero levels). On the downside, breach of support at 110.95 (23.6% Fib R) could yield a sell-off to 110.19 (yesterday's low) and 110.00 (psychological support).

 

Bloomberg quoted an unnamed Bank of Japan (BoJ) official as saying that the current is needed for now while adding that the market is getting ahead of

Bloomberg quoted an unnamed Bank of Japan (BoJ) official as saying that the current is needed for now while adding that the market is getting ahead of itself.

Some BoJ officials see the need for future normalization talks

Key Quotes:

“A small shift is taking place in internal discussions among Bank of Japan policymakers, with a minority raising the need to eventually start discussing policy normalization, even though they agree the current stimulus program must continue unchanged for some time.”

The BoJ two-day monetary policy meeting begins next week on Jan 22nd, with the policy verdict out on Jan 23rd.

The EUR/USD 1-month 25 delta risk reversals gauge rose to a 6-month high of 0.575 yesterday, indicating rising demand for EUR calls. The EUR/USD rose

The EUR/USD 1-month 25 delta risk reversals gauge rose to a 6-month high of 0.575 yesterday, indicating rising demand for EUR calls.

The EUR/USD rose to a 3-year high of 1.2323 in Asia yesterday before the rally came to an abrupt end. The spot fell to 1.2177 yesterday. The bearish outside day candle indicates an increased risk of a deeper correction to 1.2092 -- 38.2% retrace of the 1.1718 to 1.2323 (December to January) rise.

However, the uptick in the risk reversals shows investors expect EUR/USD to make a quick recovery from the technical pullback. Only a close below 1.20 could revive the demand for the EUR puts.

Risk reversals

 

According to the results of the latest Reuters poll of 75 economists, all of them see the BOE keeping rates on-hold, when it meets next week to decide

According to the results of the latest Reuters poll of 75 economists, all of them see the BOE keeping rates on-hold, when it meets next week to decide on its monetary policy.

Key Findings:

All 75 economists polled expect BOE to leave bank rate at 0.50 pct.

Next rate move expected in q4 2018, a 25 basis point hike (same as December poll).

Median 15 pct chance of the UK recession this year (20 pct in December poll).

The UK economy to grow 1.4 pct in 2018; 1.5 pct in 2019 (1.3; 1.5 in December poll).

Median 20 pct chance of disorderly Brexit (25 pct in December poll).

 

Headlines crossed the wires (via Reuters) from China?s fx regulator, the Safe Administration of Foreign Exchange (SAFE), citing: Commercial Banks Pur

Headlines crossed the wires (via Reuters) from China’s fx regulator, the Safe Administration of Foreign Exchange (SAFE), citing:

Commercial Banks Purchase Net $6Bln Of Forex In Dec Vs Net Sale Of $7.5Bln In Nov.

Commercial Banks Sell Net $111.6Bln Of Forex In 2017.

Australia HIA New Home Sales (MoM) increased to 0.7% in October from previous -6.1%
The Barclays Research Team is out with a brief preview of their expectations on the upcoming Chinese macro releases due to be reported at 7GMT today.

The Barclays Research Team is out with a brief preview of their expectations on the upcoming Chinese macro releases due to be reported at 7GMT today.

Key Quotes:

“We expect industrial production growth to remain broadly stable, at 6.1%, in December, as signaled by solid manufacturing PMIs.

We forecast fixed asset investment growth will moderate to 7.1% in December, with recovering manufacturing investment partially offsetting an expected slowdown in infrastructure and real estate investment.

Growth in retail sales is likely to remain above 10% despite some moderation in auto sales.

We view strong exports, robust consumption, and slow but solid investment growth as presenting upside risks to our GDP growth forecast of 6.3% q/q saar (or 6.7% y/y) for Q4 17.”

According to the White House Chief of Staff Kelly, the US Congress will pass a stopgap bill to avert a government shutdown, Reuters reports.

According to the White House Chief of Staff Kelly, the US Congress will pass a stopgap bill to avert a government shutdown, Reuters reports.

China?s holdings of US Treasuries fell to $1.176 trillion in November, its lowest in four months. The world's largest holder of US treasuries had adde

China’s holdings of US Treasuries fell to $1.176 trillion in November, its lowest in four months. The world's largest holder of US treasuries had added $1.189 trillion in October, showed the Treasury's latest capital flows data. 

Also, Japan, the second largest holder of US Treasuries, also cut its holdings by 9.9 billion dollars to 1.0841 trillion dollars. 

The drop in the treasury holds supports the notion that foreign central banks are looking to cut back their dollar exposure. 

However. China's State Administration of Foreign Exchange (SAFE), recently dismissed reports that China was considering slowing down or even halting its purchase of U.S. securities.

Reuters reports the latest headlines, citing that the South Korean regulator is said to consider shutting down all virtual currency exchanges. No fur

Reuters reports the latest headlines, citing that the South Korean regulator is said to consider shutting down all virtual currency exchanges.

South Korea's Financial Services Commission head Choi Jong-ku noted: "(The government) is considering both shutting down all local virtual currency exchanges or just the ones who have been violating the law".

The EUR/JPY pair has been restricted to a 100-pip range (135.00-136.00) comprised of spinning top-like candles, suggesting the rally from the Jan. 11
  • EUR/JPY stuck in a 100-pip range (135.00 to 136.00).
  • A high probability of a downside break as indicated by spinning top-like candles.

The EUR/JPY pair has been restricted to a 100-pip range (135.00-136.00) comprised of spinning top-like candles, suggesting the rally from the Jan. 11 low of 133.02 may have run out of steam.

The EUR bulls failed to take out 136.00 in a convincing manner in the last three trading days seemingly due to comments from ECB officials this week, highlighting concerns regarding the speed of the rise in the EUR.

Meanwhile, the downside has been capped around 135.00 levels, largely due to persistent demand in the USD/JPY pair around/below 111.00 levels.

As of writing, the currency pair is trading at 135.70. The spinning top-like candles indicate bulls are losing interest, given the pattern is found at the top of the uptrend. Hence, downside break of the 100-pip range is more likely.

The struggle for direction may come to an end later today following the release of the Japanese industrial production data. Also, Bundesbank President Weidmann speech could influence EUR pairs.

EUR/JPY Technical levels

An upside break of the trading range (135.00-136.00) would open doors for 136.64 (Jan. 5 high) and 137.00 (target as per the measured height method). On the downside, breach of support at 135.00 could yield a sell-off to 134.00 (target as per the measured height method) and 133.69 (50-day MA).

 

China House Price Index increased to 5.3% in December from previous 5.1%
The People's Bank of China (PBOC) set the Yuan reference rate at 6.4401 vs. 6.4335.

The People's Bank of China (PBOC) set the Yuan reference rate at 6.4401 vs. 6.4335.

South Korea BoK Interest Rate Decision remains unchanged at 1.5% in January
The Australian Bureau of Statistics (ABS) reported better-than-expected December employment change figures, but the Aussie dollar is not impressed. T
  • AUD/JPY offered near 89.00 levels.
  • Fails to hold above 88.690 - 76.4% Fib R of Sep-Nov drop.
  • Aussie Dec employment change beats estimates, jobless rate rises.

The Australian Bureau of Statistics (ABS) reported better-than-expected December employment change figures, but the Aussie dollar is not impressed.

The AUD/JPY ran into offers 88.97 and hit a session low of 88.41 even though the ABS data showed more than 34K jobs were created across Australia last month, beating the estimated growth of 9K by a big margin. Also, the previous month's print was revised higher to 63.6K from 61.6K.

Further, full-time employment change came in at 15.1k versus the upwardly revised 43.6k in November. However, the jobless rate ticked higher to 5.5 percent from 5.4 percent as expected.

Still, the AUD is trading on the back foot. The Aussie 10-year yield has backed off from the session high of 2.81 percent to 2.78 percent. The price action indicates the upbeat jobs number has failed to overshadow the uptick in the jobless rate. Further, a sharp slowdown in the full-time jobs growth could have played a role in pushing the Aussie lower.

AUD/JPY Technical Levels

As of writing, the currency pair is trading at 88.45. A move below 88.41 (session low + Jan. 2 and Jan. 16 high) would expose 88.16 (10-day MA) and 88.03 (61.8% Fib R of Sep-Nov drop). On the higher side, a break above 88.52 (resistance on 1-hour chart) would open doors for re-test of 88.90 (76.4% Fib R) and 89.00 (zero levels).

Analysts at Nomura offered their model's projection for today's USD/CNY fix. Key Quotes: "Our model1 projects the fix to be 60 pips higher than the

Analysts at Nomura offered their model's projection for today's USD/CNY fix.

Key Quotes:

"Our model1 projects the fix to be 60 pips higher than the previous fix (6.4395 from 6.4335) and 70 pips higher than the previous official spot USD/CNY close of 6.4325. The basket implied change is 82 pips higher than the previous official spot USD/CNY close (6.4407 from 6.4325)."

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