15 Jan: US$ sold heavily despite strong data. Stocks, commodities higher. US long w/e today.

By | January 15, 2018


Strong US data failed to help the US$ on Friday as the Euro rallied to more than three-year highs in the wake of last Thursdays’ hawkish minutes, taking the other EU majors with it and putting the dollar under heavy pressure, with the DXY reaching a 3 year low.  The ECB’s Weidmann underpinned the Euro early on Friday by saying that an end date for the current QE programme is justifiable, while further gains were seen after news of a breakthrough in political negotiations between Angela Merkel and her potential coalition partners. Sterling joined in the move, roaring up to near 2 year highs after a report that Spain and Holland are seeking a plan for a soft Brexit. This was later denied but had little effect on the enthusiasm to sell the dollar. In other markets, stocks rallied strongly, once again reaching all-time highs on the back of the strong US data, while commodities and the commodity bloc currencies headed higher, underpinned by the soft dollar. In terms of data, the US core CPI rose a strong 0.3%mm (expected 0.2%mm) pushing the annual rate up to 1.8%yy vs consensus of 1.7%yy.  US retail sales were slightly weaker for December (control group 0.3% vs 0.4%) but both November and October were revised up (Nov 1.4% vs 0.8%, October 0.5% vs 0.4%) pushing Q4 GDP tracking up by 0.6% to 2.8%.

Looking ahead, Monday is a US long weekend (ML King Birthday) so it may be a quiet start to the week, with little major data to be seen elsewhere (NZ Business Confidence, Australian TD Inflation, EU Trade Balance), in what will be a generally fairly quiet week for data. Tuesday will focus on the German and UK CPI, and Wednesday, the EU CPI. Thursday will be busy, with the Australian Unemployment and China Q4 GDP and Retail Sales in focus ahead of the US Housing Starts, Building Permits and weekly Jobless Claims later in the day. Friday will look to the German PPI, EU Current Account and the BOE Monetary Policy Statement. The main event of the week will be the BOC (Canada) interest rate decision on Wednesday, where a rate hike is pretty much written in following some recent strong data. If so, the Aud and Kiwi are both likely to receive a further boost.

I am busy with overseas visitors until Wednesday. Normal Services will resume on Thursday

EURUSD: 1.2205
Res  1.2220  1.2250  1.2270
Sup  1.2190  1.2175  1.2160
USDJPY: 111.01
Res  111.25  111.50  111.70
Sup  110.90  110.75  110.50
GBPUSD: 1.3729
Res  1.3745  1.3775  1.3800
Sup  1.3715  1.3700  1.3685
USDCHF: 0.9671
Res  0.9690  0.9715  0.9735
Sup  0.9660  0.9640  0.9600
AUDUSD: 0.7914
Res  0.7925  0.7945  0.7970
Sup  0.7895  0.7875  0.7850
NZDUSD: 0.7254
Res  0.7275  0.7285  0.7300
Sup  0.7245  0.7225  0.7200
S&P: 2789
Res  2790  2800  2810
Sup  2780  2770  2760
DJI: 25804
Res  25810  25900  26000
Sup  25705  25620  25570
ASX SPI: 6046
Res  6050  6070  6090
Sup  6030  6015  6000
XAUUSD: 1338
Res  1340  1345  1350
Sup  1330  1325  1320
XAGUSD: 17.22
Res  17.30  17.40  17.50
Sup  17.10  17.00  16.85
WTI: 64.36
Res  64.50  64.75  65.00
Sup  64.00  63.50  63.00