China: Poor trade data may overstate underlying dynamics ABN AMRO
According to Han de Jong, chief economist of ABN AMRO, Chinese trade data took a decisive turn for the worse in December as the value of Chinese impor...
According to Han de Jong, chief economist of ABN AMRO, Chinese trade data took a decisive turn for the worse in December as the value of Chinese imports in USD was down 7.6% yoy in December, the first negative number since mid-2016.
“It must be borne in mind, this data is about values, so the drop in oil and other commodity prices plays a role here. There may also be base effects and currency effects. In addition, Chinese importers may have tried to beat tariffs imposed on US products, which may have boosted the numbers when that happened, but which inevitably leads to a drop when it is over. The point is, however, that such a drop is temporary and overstates the underlying dynamics.”
“Another point to make is that a big chunk of Chinese imports are inputs to export products. So any slowdown of exports will translate in slower imports and is not necessarily a reflection of slower growth of the domestic economy.”
“Regardless of all these qualifications, the December data was weak and must be at least partly reflection either of slowing growth in China or resulting from the trade war. It is probably a bit of both. Having said that, the longer I look at this data, the more I am inclined to think they must be exaggerating the downturn.”
“The growth rate of the value of imports has collapsed from +20.3% yoy in October to -7.6% in December. It simply is unlikely that actual activity would have fallen off a cliff in such a dramatic way. Therefore, I am inclined to think that there is at least a glimmer of hope. Given that so many commentators are currently pessimistic, I think chances of positive surprises are increasing rapidly.”
GBP/USD in a bearish consolidation phase near 1.2870, focus on Brexit, UK jobs
TheGBP/USDpair extended Fridays corrective slide into Mondays Asian trading and hit fresh two-day lows of 1.2848, before entering a phase of downs...
Weighed down by a lack of progress on Irish backstop and broad-based USD strength.
But hopes of Article 50 extension, softer Brexit keeps the GBP supported.
Focus on options for Brexit - plan B and UK jobs for fresh direction.
The GBP/USD pair extended Friday’s corrective slide into Monday’s Asian trading and hit fresh two-day lows of 1.2848, before entering a phase of downside consolidation near 1.2870 region.
The pound faced fresh selling pressure in early traders, as the Asian desks reacted negatively to the renewed jitters over Brexit after the latest reports suggested that the UK PM May and the Cabinet made no further progress on the Irish backstop over the weekend, with the focus now shifting to May’s Plan B to be announced on Monday. PM May is likely to announce amendments to the Good Friday agreement later today, in a bid to steer Britain out of the EU with a deal.
Kathy Lien at BK Asset Management noted: “Taking a look at the options for plan B, May really has no choice but to ask the EU for more time, which is why by Monday, Article 50 should be extended. May will need to decide what course to take in the coming months - either a Norway style model or a permanent customs union or relent to a second referendum - all of which should be positive for GBP.”
Meanwhile, the US dollar remains broadly bid near two-week tops after the 10-year Treasury yields rallied to three-week tops on Friday amid risk-on action in equities, in the wake of the US-China trade optimism. However, the US government shutdown could start affecting the US economy, which could keep the upside in the greenback limited.
Calendar-wise, the UK docket remains data-empty while the US markets remain closed in observance of Martin Luther King Jr. Day. Hence, the Cable will remain at the mercy of the Brexit-related headlines and the broader market sentiment, as attention turns towards the UK labor market report due tomorrow at 0930 GMT.
Japan s recession risk has risen from 3 months ago - Reuters poll
The probability of Japan slipping into a recession in the fiscal year April 2019-March 2020 has increased in the last three months, a Reuters poll of ...
The probability of Japan slipping into a recession in the fiscal year April 2019-March 2020 has increased in the last three months, a Reuters poll of economists found.
Key points (Source: Reuters)
Japan will probably manage to avoid a recession in the year starting in April, growing 0.8 percent, the outlook is shaky.
At least 80 percent chance that the government will raise the sales tax to 10 percent in Oct as scheduled, said 27 of 39 economists.
Japan FY2018 GDP forecast +0.7 percent, FY2019 +0.8 percent (vs +0.9 percent, +0.8 percent in Dec poll)
Japan FY2018 core CPI forecast +0.8 percent, FY2019 +0.6 percent excluding the effects from the planned sales tax hike (vs +0.9 percent, +0.7 percent in Dec poll.
China: Another dip in the GDP growth Nordea Markets
Amy Yuan Zhuang, analyst at Nordea Markets, explains that the Chinese growth is at a decade-low due to the trade dispute with the US as Q4 GDP growth ...
Amy Yuan Zhuang, analyst at Nordea Markets, explains that the Chinese growth is at a decade-low due to the trade dispute with the US as Q4 GDP growth fell to 6.4% y/y from 6.5% in Q3.
“This is in line with consensus expectation and better than our forecast of 6.2%. China has not seen its quarterly GDP growth rate this low since Q1 2009, when the Lehman crisis brought a shock to the global economy. The full-year growth for 2018 was thus 6.6%, the lowest since 1990.”
“The monthly data released simultaneously with the GDP figures have either improved or stayed unchanged in December. Retail sales grew by 8.2% y/y, industrial production by 5.7% and fixed assets investments by 5.9%. However, this does not change the grim picture painted by some other indicators. Exports plunged in December. The PMI surveys for manufacturing dropped to below 50 for the first time in more than two years.”
“Although we expect uncertainty from the trade war will continue dragging down growth this year, we think the increased monetary and fiscal stimulus will prevent a disorderly slowdown in China. A soft landing is the most likely scenario.”
EUR/USD: upside favored on slightly stronger China data
The EUR/USD pair fell to 1.1353 on Friday, a level last seen on Jan. 4, and closed convincingly below the 50-day moving average (MA) for the first tim...
EUR hit two-week lows and closed below 50-day MA on Friday, opening the doors to 1.13.
1.13, however, may remain elusive if the equities cheer a slightly upbeat China data, sending the EUR higher.
The EUR/USD pair fell to 1.1353 on Friday, a level last seen on Jan. 4, and closed convincingly below the 50-day moving average (MA) for the first time Jan. 3.
A close below the key MA is backed by the bearish crossover between the 5- and 10-day MAs. Further, the 14-day relative strength index (RSI) has slipped into bearish territory below 30.00.
So, it could be argued that the path of least resistance is to the downside. The crucial support at 1.1306 (Jan. 3 low), however, may not come into play today, as the markets may buy euros on evidence that the economic slowdown in China is not as bad as expected by many.
Indeed, China's annualized growth rate slowed to 6.4 percent in the fourth quarter of 2018; the lowest level since early 2009. That, however, was expected and price-in. Further, industrial production expanded 5.7 percent in December, beating the estimated figure of 5.3 percent by a big margin.
That could keep the equities and the EUR better bid. Hence, the psychological resistance of 1.14 could be put to test, although further gains may remain elusive, courtesy of Sino-US trade tensions. The US Treasury has reportedly informed lawmakers about the lack of progress in the intellectual property (IP) dispute, which has been a major sticking point in the Sino-US trade negotiations.
The EUR could also take cues from Brexit news and the EUR/GBP flows.
US-China trade conflict showing signs of hope ABN AMRO
According to Han de Jong is Chief Economist of ABN AMRO, the recent announcement from China that their vice PM will lead their delegation at the next ...
According to Han de Jong is Chief Economist of ABN AMRO, the recent announcement from China that their vice PM will lead their delegation at the next round of trade talks must be a good sign for the ongoing US-China trade conflict.
“The more senior people tend only to come if their underlings have made sufficient progress. I also think both sides are aware of the risk of doing significant damage to their own economies by escalating the conflict. US president Trump will be starting to think of next year’s elections.”
“The last thing he needs is an economy in trouble or an extended bear market in equities. The best way for him to reduce such risks is to do a trade deal. He is a master at selling any deal as a victory, so it really doesn’t matter what the deal includes. The Wall Street Journal article claiming that US Treasury Secretary Steve Mnuchin would favour rolling back the tariffs imposed on imports from China (not confirmed) may also be a positive signal.”
China: GDP grew 6.4%YoY in 4Q18 ING
Iris Pang, economist at ING, notes that Chinas 4Q18 GDP report shows stable 6.4%YoY growth and 6.6% for full-year 2018, but the details point towards...
Iris Pang, economist at ING, notes that China’s 4Q18 GDP report shows stable 6.4%YoY growth and 6.6% for full-year 2018, but the details point towards weakness underneath.
“Fixed asset investment grew 8.7%YoY in December. But this was thanks to infrastructure investments which themselves rose 3.8%YoY (from 3.7%YoY), and brought growth in metal products of 15.4%YoY (used in the production of metro lines, projects being led by local governments).”
“Industrial production grew faster at 5.7%YoY in December from 5.4%YoY. However, again, when we look at the details, we find that CAPEX related items are shrinking, not growing.”
“Retail sales tell a story of a cautious consumer, one that is not keen to spend on luxury items. For example, automobile sales fell 8.5%YoY in December.”
“Our baseline forecast assumes that the trade war will continue in 2019. GDP will be 6.3% as fiscal stimulus of CNY 4 trillion and 3 more RRR (required reserve ratio) cuts will support the economy in terms of funding and liquidity. We expect USD/CNY reaching 7.30 by end of 2019.”
NZ: December quarter inflation likely to be flat - TDS
Annette Beacher, chief Asia-Pacific macro strategist at TD Securities, expects no change to overall prices of NZ economy in Wednesday's Dec qtr CPI re...
Annette Beacher, chief Asia-Pacific macro strategist at TD Securities, expects no change to overall prices of NZ economy in Wednesday's Dec qtr CPI report, which should lower the annual inflation rate to 1.8%/y.
“The RBNZ’s November projection assumed inflation would lift from 1.9% to 2.0%/y, but fuel prices turned out to be much weaker.”
“The market median is also for a flat print, although there are more analysts at +0.1%/q.”
“All forecasts are below the RBNZ's November forecasts, but underneath the declines in Food and fuel prices, we expect a steady "core" of rising prices, particularly in the services industry.”
Brent oil rises to $63.00 on upbeat China factory data
Brent oil is currently trading at $63.00 per barrel, having clocked a low of $62.25 earlier today.
Prices had dipped in early Asia on fears that the...
Brent is trading in the green, currently chipping away at the psychological hurdle of $63.00.
An above-forecast China factory data signaled the economic slowdown is likely not as steep as expected by many.
Brent oil is currently trading at $63.00 per barrel, having clocked a low of $62.25 earlier today.
Prices had dipped in early Asia on fears that the world's second-largest economy may have suffered a deeper economic slowdown in the fourth quarter of 2018.
The data, however, showed that the annualized fourth-quarter growth rate slowed to 6.4 percent, as expected. More importantly, industrial production in December rose 5.7 percent year-on-year, beating the estimate of 5.3 percent by a big margin, signaling markets that the economic situation isn't as bad as forecasted by many.
Consequently, oil picked up a bid and jumped to a session high of $63.00.
Looking forward, oil may remain bid on growing speculation that the output cuts initiated by OPEC will soon push the market back into supply deficit.
Also, the US oil output could slowdown in the near future. The Baker Hughes data released on Friday showed energy firms cut 21 oil rigs in the seven days to Jan. 18, taking the total count down to 852, the lowest since May 2018, according to Reuters.
Sterling could be the best-performing G-10 in 2019 - Goldman Sachs
The British Pound could turn out to be the best-performing G-10 currency of this year, as the recent developments are pointing toward a softer Brexit,...
The British Pound could turn out to be the best-performing G-10 currency of this year, as the recent developments are pointing toward a softer Brexit, Zach Pandl, co-head of global currency and emerging-market strategy at Goldman Sachs told Bloomberg.
We would read the developments over the last week as pointing toward a later, softer Brexit or potentially no Brexit at all.
We think it'll be the highest-performing G-10 exchange rate this year.
China s NBS: Inappropriate to say that China is in deflation
The head of China's National Bureau of Statistics (NBS) on Monday said that it is inappropriate to say that the world's second-largest economy is in d...
The head of China's National Bureau of Statistics (NBS) on Monday said that it is inappropriate to say that the world's second-largest economy is in deflation, as the decline in the producer price index (PPI) or factory-gate prices was mainly due to the drop in global commodity prices.
The Producer Price Index rose 0.9 percent in December from a year ago, lower than the 1.6 percent economists were expecting in a Reuters poll.
Will cut more taxes and fees, and increase special bond quotas.
Moody s questions the efficacy of China s stimulus
The ratings agency Moody's is out on the wires questioning the efficacy of China's future stimulus programs in buttressing the economic growth.
The ratings agency Moody's is out on the wires questioning the efficacy of China's future stimulus programs in buttressing the economic growth.
It's not the question of China being able to provide for the stimulus, but really the effectiveness of it.
The government will try to use as much selective stimulus to keep the economy on a good trade. They could cut the reserve requirement ratio again and implement tax cuts.
The challnge lies in ramping up consumer spending, given the high levels of household debts. Corporate debt load is also high.
Local governments are strapped with debt.
Australia HIA New Home Sales (MoM) declined to -6.7% in December from previous 3.6%
Australia HIA New Home Sales (MoM) declined to -6.7% in December from previous 3.6%...
China NBS Chief Ning: China-US dispute had some economic effect, but is manageable
Reuters reports the latest comments by Chinas National Bureau of Statistics (NBS) Chief Ning, with the key headlines found below.
China faced a lot ...
Reuters reports the latest comments by China’s National Bureau of Statistics (NBS) Chief Ning, with the key headlines found below.
China faced a lot of uncertainties in 2018.
Contributed nearly 30 pct to global growth in 2018.
China has confidence, the capability to achieve reasonable growth in 2019.
China-US dispute had some economic effect but is manageable.
China's economy has overcome challenges and forges ahead.
AUD/JPY Technical Analysis: lacks direction after china data, focus on today s close
The AUD/JPY pair is trading largely unchanged on the day at 78.60, having recovered from the session low of 78.28 a few minutes before press time, pos...
The AUD/JPY pair is trading largely unchanged on the day at 78.60, having recovered from the session low of 78.28 a few minutes before press time, possibly on the back of an above-forecast China industrial production number.
The daily chart, however, shows the pair lacks a clear direction, having created a doji candle on Friday.
A close today above 79.11 (high of Friday's doji) would confirm bull doji continuation or continuation of the rally from recent lows below 72.00 and open up upside toward 80.00.
A close below 78.38 (Friday's low), however, would imply bearish doji reversal.
China NBS: China sees complicated international and domestic economic conditions
Comments are crossing the wires by the spokesman for Chinas National Bureau of Statistics(NBS) following the release of the countrys key economic d...
Comments are crossing the wires by the spokesman for China’s National Bureau of Statistics (NBS) following the release of the country’s key economic data.
China sees complicated international and domestic economic conditions.
Macro leverage ratio stabilised in 2018.
The size of China's tax cuts is above expectations.
AUD/USD jumps 23 pips on better-than-expected China industrial production figure
The AUD/USD pair jumped 23 pips to 0.7177 soon before press time, courtesy of a better-than-expected China data.
China's industrial production rose t...
AUD/USD jumped 23 pips from session lows, possibly on the back of an above-forecast China industrial production data.
The recovery could be short-lived, as China's Q4 GDP printed at the lowest level since early 2009.
The AUD/USD pair jumped 23 pips to 0.7177 soon before press time, courtesy of a better-than-expected China data.
China's industrial production rose to 5.7 percent year-on-year in December, beating the forecast of 5.3 percent by a big margin. The above-forecast reading could be taken a sign the global demand may not be as weak as previously thought. Meanwhile, retail sales ticked higher to 8.2 percent in December as expected.
Still, the AUD risks falling back to session lows near 0.7150 as China's growth rate in the fourth quarter slowed to 6.4 percent year-on-year - the lowest since early 2009 - more so because both the PBOC and the Chinese government are unlikely to introduce a flood-like stimulus to support the ailing economy.
As of writing, the AUD/USD is trading at 0.7166. Thursday's low of 0.7147 is the level to beat for the bears. On the higher side, 0.7235 (Jan. 11 high) is the key resistance.
China GDP eases to 6.4% y/y in Q4 2018, meets estimates
China's YoY GDP figures for the fourth quarter of 2018 came at +6.4% vs +6.4% exp and 6.5% previous, with the QoQ reading for Q2 coming in at +1.5% vs...
China's YoY GDP figures for the fourth quarter of 2018 came at +6.4% vs +6.4% exp and 6.5% previous, with the QoQ reading for Q2 coming in at +1.5% vs +1.5% exp and +1.6% last.
With regards to retail sales YoY, the number was in +8.2% vs 8.2% exp and 8.1% last, with industrial output YoY at 5.7% and 5.3% exp and 5.4% last. Meanwhile, urban investment YoY stood at +5.9% vs 6.0% expected and 5.9% last.
China Gross Domestic Product (YoY) meets expectations (6.4%) in 4Q
China Gross Domestic Product (YoY) meets expectations (6.4%) in 4Q...
China Gross Domestic Product (QoQ) meets forecasts (1.5%) in 4Q
China Gross Domestic Product (QoQ) meets forecasts (1.5%) in 4Q...
China Industrial Production (YoY) above expectations (5.3%) in December: Actual (5.7%)
China Industrial Production (YoY) above expectations (5.3%) in December: Actual (5.7%)...
China Retail Sales (YoY) meets forecasts (8.2%) in December
China Retail Sales (YoY) meets forecasts (8.2%) in December...
The USD/JPY pair is currently trading at 109.56 - down 0.18 percent on the day - and could drop further toward the ascending (bullish) 5-day moving av...
The USD/JPY pair is currently trading at 109.56 - down 0.18 percent on the day - and could drop further toward the ascending (bullish) 5-day moving average (MA), currently at 109.26, courtesy of the bearish divergence of the 14-hour relative strength index (RSI).
The RSI is threatening to drop below 50.00 (in the bearish territory), having charted on Friday a lower high as opposed to a higher high on price.
The major averages (50, 100 and 200) are trending north and located one above the other, signaling that the path of least resistance is on the higher side.
The dollar, therefore, could find bids at the ascending 5-day MA of 109.26.
Australian economic growth to be slowed by headwinds - Reuters poll
According to the latest Reuters poll published on Monday, economists are seen slashing the projections for 2018 Australian GDP growth amid disappointi...
According to the latest Reuters poll published on Monday, economists are seen slashing the projections for 2018 Australian GDP growth amid disappointing fundamentals.
“Economists polled by Reuters forecast Australia’s A$1.87 trillion ($1.34 trillion) of annual gross domestic product (GDP) expanded by 3.0 percent in 2018, down from 3.2 percent in an October poll.
The economy is then seen running around 2.7 percent through 2019 and 2020, further extending the country’s 26-year stretch without a recession.
That was a slight mark-down from 2.8 percent in the previous poll, but would be a decent outcome given the headwinds gathering at home and abroad.
The latest poll showed analysts expected the headline measure of consumer price inflation to run at 2.1 percent for this year, rising marginally to 2.3 percent in 2020.”
EUR/JPY: Eyes on stocks and fundamentals, technically losing bullish conviction
EUR/JPY is tracking price action in global stocks and risk appetite with the greenback taking the lead, pressuring the euro as investors move away fro...
EUR/JPY is enroute for a break of key support at 124.45/50 as the consolidation of recent correction wears thin.
EUR/JPY is currently trading at 124.50, from a high of 124.88 and up from a low of 124.45.
EUR/JPY is tracking price action in global stocks and risk appetite with the greenback taking the lead, pressuring the euro as investors move away from risk associated with German's poor run of economic performance of late and warnings from the ECB.
We have the ECB this week, which will likely do nothing although as Europe edges closer to a recession and the risks of a hard Brexit on the horizon should be detailed and worth a listen. "Inflation lies sharply below the ECB's implied December forecast and growth in the final quarter of 2018 likely came in at half the ECB's projected pace. However, we expect the ECB to look through lower energy prices and treat recent activity disruptions as temporary, and therefore leave both the balance of risks and its forward guidance unchanged from December," analysts at TD Securities explained.
US government shutdown and Sino/US trade risks
Elsewhere, the US government shutdown is going to become more of a concern as it moves into the 29th day on Tuesday after Martin Luther King Jr. Day and s expected to hinder US growth by 0.1% every two weeks that the shutdown continues. This should start to impact US stocks and potentially support the yen. Another supporting factor could be the prolonged dispute between Beijing and the US over trade. With no concrete progress being reported, and so long as headlines remain conflicting, the yen can also collect a safe haven bid when stocks correct lower until a breakthrough is sighted. However, for the meantime, investors are clutching at straws and remain optimistic about promising headlines, despite their lack of credibility. For instance, markets rallied on reports that U.S. Treasury Secretary Steven Mnuchin discussed lifting some or all tariffs imposed on Chinese imports and suggested offering a tariff rollback during trade discussions scheduled for Jan. 30.
However, the news was met with conflicting headlines where Trade Representative Robert Lighthizer had resisted the idea, one which had reportedly not yet been introduced to President Donald Trump. U.S. stocks advanced on the news even as a Treasury spokesman working with the administration's trade team denied the report: "Neither Secretary Mnuchin nor Ambassador Lighthizer have made any recommendations to anyone with respect to tariffs or other parts of the negotiation with China," the spokesman said. "This an ongoing process with the Chinese that is nowhere near completion.”
A correction of stocks and sentiment could spell havoc for bulls protecting the 200 hr SMA which guards a breakdown to S3 at 123.72 and before the 23.6% fino retracement located at 123.09.. Analysts at Commerzbank explained that EUR/JPY faces tough resistance offered by a double Fibo at 125.50 and we would allow for some further near term weakness:
"The market recently saw a major spike lower that eroded the 2012-2019 support line at 119.31 – the low was 117.845. The move looks exhaustive but should struggle at tougher resistance at 124.91/25.50, the August low and double Fibo. We favour near term failure and some near term consolidation. We suspect that price action here will prove pivotal and while capped here a negative bias will remain."
Gold: Recovery losing steam ahead of Chinese data
Gold (futures on Comex) stalled its minor recovery from weekly lows of 1280.10 levels and now trades flat near 1282 levels, as the bulls await the Chi...
Firmer Treasury yields, US dollar keeping the recovery capped
Awaits China macro data for fresh trading impetus.
Gold (futures on Comex) stalled its minor recovery from weekly lows of 1280.10 levels and now trades flat near 1282 levels, as the bulls await the Chinese GDP release for further trading impetus.
The yellow metal attempted recovery in early trades in anticipation that disappointing Chinese growth numbers would re-ignite China slowdown concerns and eventually risk-aversion across the markets, boosting the safe-haven bids for gold.
However, the recent gains in the US Treasury yields combined with broad-based US dollar strength keeps a check on the renewed upside. On Friday, gold prices fell sharply after the US equities and the greenback was lifted by improved risk appetite amid hopes for a resolution in the China-US trade war.
The immediate focus now remains on the Chinese GDP, retail sales and industrial production data for fresh trading incentives while the risk trend will continue to remain the main driver amid holiday-thinned trading.
USD/JPY: Bears in charge testing key support
Bulls picked up the baton in NY and took the price off the aforementioned highs before drifting into a North American close of 109.69.With mixed earn...
USD/JPY was finding resistance at 109.88 highs last week and spent the last phase of the closing session drifting lower despite a well-bid greenback.
There remains an air of caution over rallies in risk apatite which leaves USD/JPY vulnerable. However, Friday's price action was mostly bid, with a rise from 109.06 to 109.59 into The New York open.
Bulls picked up the baton in NY and took the price off the aforementioned highs before drifting into a North American close of 109.69. With mixed earnings reports, the stock markets took bullish cues from geopolitical and domestic political news instead. The U.S. government’s partial shutdown was in its 28th day on Friday and investors are fretting over the ramifications for the US economy that a prolonged political standoff could damage.
"The partial federal government shutdown enters its fourth week, the longest on record in modern times, with no end in sight. The adverse effects on the US economy grow geometrically with the length of the shutdown; the CEA estimates the GDP growth drag is now 0.13pp per week. At this point, the earliest Dec PCE inflation or Q4 GDP growth will be released is well into February," analysts at TD Securities noted.
Sino/US trade dispute
However, there was some optimism over a potential bilateral deal along with glimmers of hopes of a resolution soon to the Sino/Chinese trade dispute which helped to offset worries over the prolonged partial government shutdown and mixed corporate results which supported US stocks and risk appetite, weighing on USD/JPY - (The Dow Jones Industrial Average, DJIA, climbed 336.25 points, or 1.4%, to close at 24,706.35 for a weekly gain of 3%. the S&P 500 index added 34.75 points or 1.3% and the Nasdaq Composite added 1%).
The upbeat expectations on trade were reinforced by the Bloomberg report that Chinese officials have offered to increase imports from the U.S. by $1 trillion over the next six years, leading the stock market to close higher on Friday, extending its winning streak to a fourth session.
For the week ahead, eyes will stay on the US government shutdown, Sino/US relations as well as the World Economic Forum in Davos and Chinese growth with Q4 Chinese GDP.
"Activity data for Oct/Nov and Dec qtr PMIs were weak, all pointing to slower GDP. Composite manufacturing PMIs slipped to 49.9 while services PMIs were elevated at 53.3. Retail sales/IP momentum points to GDP easing from 6.5% to 6.4%/y. Trade is supportive for growth as the slump in imports (-10%/q in nominal terms) outpaced the 2.5%/q fall in exports. Mkt range 6.2%-6.4%,"
analysts at TD Securities explained.
Support levels: 109.40 109.05 108.65
Resistance levels: 110.00 110.45 110.90
Valeria Bednarik, Chief Analyst at FXStreet explained, the pair is poised to extend its advance according to technical readings in the daily chart, as technical indicators entered bullish territory, maintaining their strong upward slope:
"The pair has also surpassed the 61.8% retracement of its 111.41/105.16 decline at 109.05, which opens doors for a test of the upper end of the range. Moving averages in this chart, however, remain above 111.50, putting at doubt a longer-term advance. In the 4 hours chart, technical indicators have lost directional strength at their weekly highs, with the RSI consolidating in overbought territory. The 100 SMA converges with the mentioned Fibonacci support, reinforcing the 109.00 region as support."
When is China GDP release and how could it affect AUD/USD?
China's National Bureau of Statistics will publish the fourth quarter gross domestic product (GDP) at 02:00 GMT along with the retail sales, industria...
China's National Bureau of Statistics will publish the fourth quarter gross domestic product (GDP) at 02:00 GMT along with the retail sales, industrial production and fixed asset investment numbers for December.
The world's second-largest economy is expected to have grown 6.4 percent year-on-year in the fourth quarter – a level last seen in early 2019 – following a 6.5 percent expansion in the third quarter. The 6.4 percent print could push down 2018 GDP to 6.6 percent; the lowest level since 1990.
Meanwhile, retail sales are forecast to rise 8.2 percent year-on-year in December, having jumped 8.1 percent in November. The December Industrial production is expected to come in at 5.3 percent, following a 5.4 percent reading in November.
Impact on the Aussie dollar
A dismal GDP reading would confirm what markets already know: China is feeling the heat of the Sino-US trade war and the weakening domestic demand. That would further boost China stimulus expectations.
Both PBOC and the Chinese government have pledged more support for the economy this year, but have ruled out "flood-like" stimulus.
Put simply, there is less scope for "bad news is good news"-like action in the Aussie dollar – a proxy for China.
AUD/USD could feel the pull of gravity, having charted a bearish inside-day on Friday, especially if consumption, as represented by retail sales, misses estimates by a big margin. That would validate the message delivered by the slide in December imports that domestic demand (consumption) is unlikely to compensate for the weakness in the international trade.
As of writing, the AUD/USD is trading at 0.7162. Thursday's low of 0.7147 is the level to beat for the bears. On the higher side, 0.7235 (Jan. 11 high) is the key resistance.
What is 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 AUD, while a low reading is seen as negative (or Bearish).
Chances of RBA rate cut in Dec at coin flip levels - AFR
The Australian Financial Review (AFR) carried a fresh report on Monday, citing that the markets are pricing in a 50% chance of an RBA rate cut in Dece...
The Australian Financial Review (AFR) carried a fresh report on Monday, citing that the markets are pricing in a 50% chance of an RBA rate cut in December 2019 while the odds of a rate cut in February stands at 58%.
The rate cut expectations are on account of the following reasons:
“Plunge in consumer confidence by the most in more than three years because of softening expectations about the economy and household finances.
Forecasts of a deeper downturn in residential property prices.
Elevated concerns around household debt.”
AUD/JPY: Bears look for a test of the 77 handle, await Chinese GDP
AUD/JPY has been drifting higher since the recovery of the flash crash that took the pair to the lowest levels since 2010. The cross has been able to ...
AUD/JPY has been capped and rejected with long hourly shadows amid bullish recovery from flash crash lows.
The cross will monitor US stocks for direction amidst US government shutdown risks.
AUD/JPY awaits Chinese data today to kick things off.
AUD/JPY has been drifting higher since the recovery of the flash crash that took the pair to the lowest levels since 2010. The cross has been able to climb on dollar weakness, a bid in commodities, (oil is the hottest its been since 2001, +18%), and renewed investor optimism in the best start to the year for stocks in at least a decade.
AUD/JPY is regarded as the market's risk barometer and the week ahead should be compelling enough when the US returns from Martin Luther King Jr. Day. considering the US government will be in partial shutdown for its 29th day in a row and investors should start to pay more attention considering the number of jobs that are at stake and to the detriment of the US economy, (losing 0.1% every two weeks in GDP).
Meanwhile, today agenda has Chinse GDP Q4 and if this proves that indeed growth has slowed for the quarter, the Aussie will likely come under significant pressure, weighing on the cross, especially if risk-off takes a hold earl on this week, correcting last week's optimistic finish.
China's growth pulse has decelerated through 2018 - Westpac
AUD/JPY is chipping away at the downside, eyeing S1 located at 78.37 with the confluence of the 21 4hr SMA just tucked in below at 78.35. This also meets two 4hr fractals 11th and 16th Jan. On break there, there is support way to 77.75 and then 77.07.
United Kingdom Rightmove House Price Index (MoM) increased to 0.4% in January from previous -1.5%
United Kingdom Rightmove House Price Index (MoM) increased to 0.4% in January from previous -1.5%...
United Kingdom Rightmove House Price Index (YoY) dipped from previous 0.7%to 0.4% in January
United Kingdom Rightmove House Price Index (YoY) dipped from previous 0.7%to 0.4% in January...
Japan manufacturers confidence slips to 2-year low - Reuters Tankan
According to the Reuters monthly pollthat tracks the Bank of Japans (BoJ) closely watched Tankan quarterly survey, confidence among Japanese manufac...
According to the Reuters monthly poll that tracks the Bank of Japan’s (BoJ) closely watched Tankan quarterly survey, confidence among Japanese manufacturers dipped for a third straight month in January to a two-year low amid global growth concerns and looming trade tensions.
“The sentiment index for manufacturers stood at 18, down five points from the previous month, dragged down by declines in sectors such as steel and automobiles, according to the survey conducted Jan. 7-16.
The index is expected to fall further to 17 in April.
Underpinned by retailers, the service-sector index held steady at 31 in January reflecting firmness in private consumption, which accounts for about 60 percent of the economy.
The service-sector index was seen slipping to 27 in April.
In the Reuters poll of 480 large- and mid-sized companies, in which 480 firms responded on condition of anonymity, exporters complained about lack of demand in China and the United States and voiced concerns about the trade war between Japan’s two major trading partners.”
China s growth pulse has decelerated through 2018 - Westpac
Analysts at Westpac offer a sneak peek at what to expect from the key Chinese Q4 2018 GDP data due to be reported on Monday at 0200 GMT.
Analysts at Westpac offer a sneak peek at what to expect from the key Chinese Q4 2018 GDP data due to be reported on Monday at 0200 GMT.
“China's growth pulse has decelerated through 2018.
Seems likely the target of 6.5% growth will still be achieved.
In contrast, quarterly growth is likely to be 1.5% (6.0% annualized) or below, as weak investment weighs.
The focus has already shifted to the year to come.
Most likely to be around 6.0%.
In the months ahead, investment is likely to struggle to accelerate from its current pace. Meanwhile, the strong consumption growth of early-2018 continues to decelerate.”
NZD/USD bears testing 21-D SMA confluence with 25th Nov low
Risk rallied on Friday but so too did the dollar, although it has now reached a strong level of resistance on the DXY, where the price has now met and...
NZD/USD caught in a bearish trend, rejected by 200-hr SMA on breakup failures.
NZD/USD traders will turn to NZ CPI this week.
How long can the dollar hold up in the face of a prolonged US government shutdown?
Risk rallied on Friday but so too did the dollar, although it has now reached a strong level of resistance on the DXY, where the price has now met and been capped by the 50% retracement Fibo of the mid-Dec decline to YTD lows.
With the market's attention on the US government shutdown now entering its 29th day when US government workers return from the holiday honouring Martin Luther King Jr. Day, as well as ongoing noise surrounding the Sino/US trade-spat and against a 'Fed on hold" backdrop of sentiment, it's hard to see strong enough cause to keep long of the greenback at this juncture.
Domestic political risks to the dollar
Weekend reports leave the US government shutdown and Sino/US trade tensions up in the air and still very much uncertainty that can continue to weigh on risk sentiment in general. The fundamentals are therefore neutral for the pair without any new recent domestic data from New Zealand to shift the current thinking hat the RBNZ is on hold for the foreseeable future.
"USD rose into the weekend on excitement about possible trade talk progress, though there’s still a long way to go on that front," analysts at ANZ Bank explained adding, "NZD slid on this cross, but remains in recent ranges. With global concerns still percolating in the background, attention now turns to NZ CPI this week. The mix of inflation matters. But if a zero eventuates as we expect, it could weigh on kiwi, with markets increasingly expecting a more dovish RBNZ"
The price was rejected the 200-hr SMA on two breakup occasions of late and the doji formed on the 14th Jan has played out into a series of lower highs on a daily time frame basis. However, the price is trying to stabilise with a higher low on 17th Jan. However, the price is now testing below the 21-D SMA located at 0.6741 with a confluence of the 25th Nov pivotal low and a break below there will open up 0.6705. A break of the 100-D SMA at 0.6688 with daily closes will sure up the negative bias again, especially on a break back below the 23.6% Fibo.
Germany s Maas: Can t see UK-Ireland talks solving Brexit deadlock - Reuters
Reuters reports the recent comments delivered by the German Foreign Minister Heiko Maas on Brexit when interviewed by ZDF televisionon Sunday.
Reuters reports the recent comments delivered by the German Foreign Minister Heiko Maas on Brexit when interviewed by ZDF television on Sunday.
When asked about media reports on the UK PM May’s possible talks with Ireland, “It seems to be creative but it is not so clear to me how it would work.”
“We have to negotiate and also agree a withdrawal agreement with Britain. It is a bit of a mystery to me what the British government wants to negotiate with Dublin or what sort of an additional agreement it should be. It won’t have any effect on what was agreed with the Commission.”
Moodys: Australia feeling the pressure from the correction in housing market
The US-based rating agency, Moodys Investor Service, is out with its latest report on the Australian housing markets, underscoring the impact of the ...
The US-based rating agency, Moody’s Investor Service, is out with its latest report on the Australian housing markets, underscoring the impact of the recent house price falls.
State governments in Australia are feeling the pressure from the correction in the housing market.
Moody's referring to revenue falls from mandatory charges on house sales as sales slow.
The GST reform has added revenue to states, but not enough to offset the fall in stamp duty.
Brexit saga continues: PM May & Cabinet made no further progress on Irish Backstop
As we get set for a new trading week, albeit with the US out on holiday in honour of Martin Luther King Jr. Day., there are a few noteworthy headlines...
As we get set for a new trading week, albeit with the US out on holiday in honour of Martin Luther King Jr. Day., there are a few noteworthy headlines in the weekend press including, U.S. government shutdown is now a major risk for the US dollar; (DXY capped by 50% Fibo retracement, as well as Brexit.
The saga continues. Following a humiliating defeat last week when UK's Prime Minister May lost the vote on her Brexit deal in The Commons which gave rise to a leadership challenge by the opposition leader, Jeremy Corbyn, of which the Prime Minister subsequently won, he is now moving to Plan B and needs to present the next stage of her plan in a “neutral motion" on Monday as she seeks to steer Britain out of the EU with a deal.
However, there are weekend headlines reporting that there are attempts by fellow MPs to "ambush" her statement on Monday with amendments aimed at stopping a no-deal Brexit, as well as paving the way for “indicative votes” to show whether any proposal can command a parliamentary majority, The Guardian reported. For instance, "Yvette Cooper, chair of the home affairs select committee, is planning to put down a tightly worded amendment to give time for a bill which would give parliament the power to back an extension of article 50."
More from the Guardian's article:
"A No 10 spokesman said there was deep unease at the wider implications of such amendments. “Any attempt to remove the government’s power to meet the legal conditions of an orderly exit at this moment of historic significance is extremely concerning,” he said."
“This news should serve as a reminder to those MPs who want to deliver Brexit that they need to vote for it, otherwise there is a danger that parliament could stop Brexit.”
Good Friday agreement could be the solution
Worryingly, another weekend news, and something that should upset the strength in the pound, especially following the UK's retail sales miss, is that there have been no solutions' to Irish backstop in May's more recent Brexit call with her cabinet. May was reported to have held a conference call with her divided cabinet from the country retreat of Chequers on Sunday evening, but Cabinet sources said there were “no actual solutions” proposed during the call. Indeed, she will need to propose changes to the backstop if she is to try and win over the DUP and Tory rebels and then take the proposals to Brussels. So, could amendments to the Good Friday agreement be the solution?
UK PM Theresa May considering amending Good Friday agreement – Daily Telegraph
AUD/USD turns neutral near 0.7170 ahead of China GDP
Having witnessed some choppiness in the overnight trades, theAUD/USDenters a phase of come in early Asia, trading modestly flat near the 0.7170 reg...
Bulls turn cautious, capped below 0.7200 ahead of China data dump.
Holiday-thinned markets to exaggerate the moves, as US government shutdown remains a major risk for the greenback.
Having witnessed some choppiness in the overnight trades, the AUD/USD enters a phase of come in early Asia, trading modestly flat near the 0.7170 region, with the bias leaning towards the downside heading into the Chinese data flow due on the cards at 0200 GMT.
The Chinese GDP report is likely to show the economic growth to have slowed down to 6.4% in Q4 2018 versus 6.5% previous while the industrial production is also expected to ease a bit to 5.3% versus 5.4% last.
However, the downside appears cushioned so far this session, as the USD bulls take a breather after Friday’s rally, fuelled by higher Treasury yields amid improved risk sentiment. The 10-year Treasury yields hit three-week highs near 2.79% while the US dollar reached two-week tops at 96.39 across its main competitors. At the press time, the USD index consolidates near 96.30/35 levels.
Looking ahead, the Chinese macro data remain a major risk to the Aussie dollar amid looming China slowdown fears while the sentiment around the buck could be weighed down by the US government shutdown, as the holiday-thinned light trading could exaggerate the price movement. The US markets are closed today in observance of Martin Luther King Day.
UK PM Theresa May considering amending Good Friday agreement Daily Telegraph
The UKs Daily Telegraph carries a story, citing that the UK PM Theresa May is considering amending the Good Friday agreement after abandoning attempt...
The UK’s Daily Telegraph carries a story, citing that the UK PM Theresa May is considering amending the Good Friday agreement after abandoning attempts to negotiate a cross-party deal to resolve the Brexit impasse.
“The Prime Minister will on Monday update Parliament on her attempts to draw up a so-called "plan B" for Brexit following cross-party talks in Westminster - and discussions with other EU leaders.
One of the proposals under consideration is rewriting the 1998 accord to assure Ireland that the UK is committed to no hard border on the island after the UK leaves the European Union in March.”
U.S. government shutdown is now a major risk for the US dollar; (DXY capped by 50% Fibo retracement)
The US stock market got optimistic about not only bullish noise over the progress of Sino/US trade solutions but as the U.S. governments partial shut...
As we get set for a new trading week, albeit with the US out on holiday in honour of Martin Luther King Jr. Day., there are a few noteworthy headlines in the weekend press and we start with the US partial shutdown of the government.
The US stock market got optimistic about not only bullish noise over the progress of Sino/US trade solutions but as the U.S. government’s partial shutdown moved in to its 28th day on Friday, ( a prolonged shutdown is estimated to cut U.S. economic output by about 0.1percent every two weeks), investors cheered some signs that indicated that Trump as about to make an offer to the Democrats. However, weekend news reports that Trump's offer was rejected.
Trump's weekend Twitter frenzy
This lead Trump tweeting like crazy on Sunday, ripping into House Speaker Nancy Pelosi in particular, in which he appeared to threaten to increase deportations of undocumented immigrants living in the United States, defending his proposal to end the partial government shutdown. Pelosi said in a Saturday statement that the proposal was "a compilation of several previously rejected initiatives, each of which is unacceptable and in total do not represent a good faith effort to restore certainty to people’s lives." Trump's proposal included giving circa 1 million immigrants three-year protection from deportation in exchange for $5.7 billion in funding for a wall along the U.S. southern border.
The shutdown will now go into its 29th day once markets return after the national holiday on Monday, but it could become a major risk for markets that are already troubled by the trade wars and a doubling of US budget deficit due to Fed policy to date, and investors might not be able to ignore it any of this for much longer; Afterall, there are some 800,000 federal workers missing paychecks and GDP is calculated to drop 0.1percent every two weeks. As much as 0.2 percentage points off the first-quarter GDP could be shaved if this continues into February, according to Gregory Daco, the chief U.S. economist at Oxford Economics.
At this rate, the US dollar is likely to find a tough time finding bullish traction when the market weighs up the risks of a prolonged government shutdown, damaging US economic growth and investor sentiment. When coupled with no foreseen solution to the Sino/US trade dispute and the Federal Reserve tipped to hold for the near future, the 50% Fibo retracement of the mid Dec decline to YTD lows looks to be a hard resistance to overcome in the DXY, located at 96.37, in line with Friday's closing high.
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