Australian Dollar rises broadly in Asian session today following much stronger than expected job data. Expectation for RBA tightening is increasing with calls for a hike as soon as in August. Canadian Dollar is also firm together with bullish strength in oil prices. As China’s rate cut is lifting sentiment, Yen and Dollar are turning softer. Euro is also weak in particular against other European majors.
Technically, while Euro is one of the worst performers for the week, sellers are not too committed yet. EUR/GBP is leading the way down by breaking 0.8322 temporary low. We’ll now first see when EUR/CHF would break through 1.0324 low to resume medium term down trend. Also, break of 1.1284 support in EUR/USD would very likely resume the medium term down trend through 1.1185 low too. These two developments, if happen together, would be rather bearish for Euro.
In Asia, at the time of writing, Nikkei is trading up 1.48%. Hong Kong HSI is up 2.57%. China Shanghai SSE is up 0.25%. Singapore Strait Times is up 0.26%. Japan 10-year JGB yield is up 0.0036 at 0.140. Overnight, DOW dropped -0.96%. S&P 500 dropped -0.97%. NASDAQ dropped -1.15%. 10-year yield dropped -0.038 to 1.827.
Australia unemployment rate dropped to 4.2%, lowest since 2008
Australia employment grew 64.8k in December to 13.242m, well above expectation of 30.0k. Full time jobs rose 41.5k while part-time jobs rose 23.3k. Unemployment rate dropped from 4.6% to 4.2%, better than expectation of 4.5%. That’s also the lowest rate since August 2008. Participation rate was unchanged at 66.1%. Hours worked rose 1.0% or 18.2m hours.
Bjorn Jarvis, head of labour statistics at the ABS, said: “The latest data shows further recovery in employment following the large 366,000 increase in November. This provides an indication of the state of the labour market in the first two weeks of December, before the large increase in COVID cases later in the month.”
“This is the lowest unemployment rate since August 2008, just before the start of the Global Financial Crisis and Lehman Brothers collapse, when it was 4.0 per cent. This is also close to the lowest unemployment rate in the monthly series – February 2008 – and for a rate below 4.0 we need to look back to the 1970’s when the survey was quarterly,” Javis added.
AUD/NZD soars, setting up long term up trend?
AUD/NZD soars in response to much better than expected Australia job data, and heightened expectation of RBA rate hike this year. The strong break of 100% projection of 1.0278 to 1.0610 from 1.0314 at 1.0646 is seen as a sign of upside acceleration. Further rally is now expected as long as 1.0583 support holds. Next target is 161.8% projection at 1.0851.
The bigger question now is whether the medium term fall from 1.1042 has completed as a corrective pattern, with three waves down to 1.0278. Break above above mentioned 1.0851 resistance will add credence to this bullish case. That would also argue that rise from 1.2078 is developing into a long term up trend, resuming the move from 2019 low at 0.9992 through 1.1042.
HK HSI jumps after PBoC rate cut, heading back to 26k
China’s PBoC cut the one year loan prime rate by 10 bps to 3.70%. The second rate cut since April 2020 following December’s. Five-year loan prime rate was lowered by 5bps to 4.60%, first cut since April 2020. Along with the rate cuts, PBoC also injected more liquidity to the markets by offering CNY 700B of one-year loans, exceeding the CNY 500B maturing.
Hong Kong HSI responds positively to the news and it’s trading up 2.5% at the time of writing. Resumption of the rise from 22655.25 after notably support from 55 day EMA is a bullish sign, along with bullish convergence condition in daily MACD. Current rise should at least be correcting the down trend from 31183.35, with prospect of even reversing it. Further rally is now in favor back to 38.2% retracement of 31183.35 to 22665.25 at 25919.16, which is close to 26k handle.
Japan export rose 17.5% yoy in Dec, imports rose 41.1% yoy
Japan’s export rose 17.5% yoy to record JPY 7881B in December, slowing from November’s 20.5% yoy, but beat expectation of 15.9% yoy. Exports to China grew 10.8% yoy while shipments to US rose 22.1% yoy.
Imports rose 41.1% yoy to record JPY 8463B, the second month with rate above 40% following November’s 43.8% yoy, but missed expectation of 42.8% yoy. Trade deficit came in at JPY -582B.
In seasonally adjusted term, exports dropped -0.2% mom to JPY 7363B while imports dropped -0.7% mom to JPY 7799B. Trade deficit narrowed to JPY -435B.
Germany PPI and Eurozone CPI final will be released in European session. ECB will publish monetary meeting accounts. Later in the day, US will release jobless claims, Philly Fed survey and existing home sales.
AUD/USD Daily Report
Daily Pivots: (S1) 0.7180; (P) 0.7209; (R1) 0.7241; More…
AUD/USD recovers ahead of near term channel support, but stays well below 0.7313 resistance. Intraday bias remains neutral first. We’re still slightly favoring the case that correction from 0.8006 is complete after defending 0.6991. Above 0.7313 will extend the rise from 0.6992 to 0.7555 resistance. However, break of 0.7128 support will dampen this bullish case and bring retest of 0.6991/2 instead.
In the bigger picture, strong rebound from 0.6991 key structural support will retain medium term bullishness. That is, whole up trend from 0.5506 is still in progress. Firm break of 0.7555 resistance will target 0.8006 high and above. However, sustained break of 0.6991 will argue that the whole up trend from 0.5506 might be finished at 0.8006, after rejection by 0.8135 long term resistance. Deeper decline would then be seen back to 61.8% retracement of 0.5506 to 0.8006 at 0.6461.
Economic Indicators Update
|23:50||JPY||Trade Balance (JPY) Dec||-0.44T||-0.73T||-0.49T||-0.47T|
|00:00||AUD||Consumer Inflation Expectations Jan||4.40%||4.80%|
|00:01||GBP||RICS Housing Price Balance Dec||69%||69%||71%|
|00:30||AUD||Employment Change Dec||64.8K||30.0K||366.1K|
|00:30||AUD||Unemployment Rate Dec||4.20%||4.50%||4.60%|
|07:00||EUR||Germany PPI M/M Dec||0.90%||0.80%|
|07:00||EUR||Germany PPI Y/Y Dec||19.40%||19.20%|
|10:00||EUR||Eurozone CPI Y/Y Dec F||5.00%||5.00%|
|10:00||EUR||Eurozone CPI Core Y/Y Dec F||2.60%||2.60%|
|12:30||EUR||ECB Monetary Policy Meeting Accounts|
|13:30||USD||Initial Jobless Claims (Jan 14)||215K||230K|
|13:30||USD||Philadelphia Fed Manufacturing Jan||19.9||15.4|
|15:00||USD||Existing Home Sales Dec||6.49M||6.46M|
|15:30||USD||Natural Gas Storage||-190B||-179B|
|16:00||USD||Crude Oil Inventories||-2.1M||-4.6M|