US stocks surged overnight as boosted by strong corporate earnings as led by tech and finance. There was additional support on news that president Donald Trump signed two executive orders with the construction of Keystone XL and Dakota Access oil pipelines. The orders were seen as rolling back Obama administration’s environmental actions. S&P 500 closed up 14.87 pts, or 0.66%, at 2280.07, as record high. NASDAQ gained 48.02 pts, or 0.86%, to close at 5600.96, also a record high. DJIA also rose 112.86 pts, or 0.57% to close at 19912.71, heading to 20000 handle again. Treasury yield also rose with 10 year yield up 0.068 at 2.471. 30 year yield rose 0.065 to 3.056, back above 3.000 handle. But both TNX and TYX are stuck in recent range. Dollar index is still trying to defend 100 handle for the moment and probably need range breakout in yield to give it some sustainable momentum.

Released in Australia, CPI rose 0.5% qoq and 1.5% yoy in Q4, below expectation of 0.7% qoq and 1.6% qoq. Down from prior month’s 0.7% qoq and 1.3% yoy. RBA trimmed mean CPI rose 0.4% qoq, 1.6% yoy, compares to expectation of 0.5% qoq, 1.6% yoy. RBA weighted mean CPI rose 0.4% qoq, 1.5% yoy, compares to expectation of 0.5% qoq, 1.4% yoy. AUD/USD bottomed at 0.6826 in Feb 2016 and engaged in range trading for nearly a year. While US Dollar was strong, Aussie stayed relatively resilient on fading expectation of more RBA rate cut. But some economists pointed out that today’s data are highlighting the downside risks to the country and could prompt RBA to rethink the need to more policy accommodation later in the year. Also from Australia, Westpac leading index rose 0.4% mom in December.

In Japan, trade surplus narrowed to JPY 0.36T in December, above expectation of JPY 0.22T. Looking ahead, German Ifo business climate is the main focus in European session today. Swiss will release UBS consumption indicator and ZEW expectation. UK will release CBI trends total orders. US will release house price index later today.

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AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7553; (P) 0.7580; (R1) 0.7608; More…

AUD/USD continues to lose upside momentum as seen in bearish divergence condition in 4 hour MACD. With 0.7448 minor support intact, there is no confirmation of topping yet. But in case of another rise, we’d expect upside to be limited by 0.7777/7833 resistance zone to bring near term reversal. On the downside, break of 0.7448 will indicate that rebound from 0.7158 is completed and turn bias back to the downside for 0.7144 key support level.

In the bigger picture, AUD/USD is staying inside long term falling channel and it’s likely that the down trend from 1.1079 is still in progress. Break of 0.6826 low will confirm this bearish case. We’ll be looking for bottoming sign again as it approaches 0.6008 key support level. Meanwhile, sustained break of 0.7833 resistance will be a strong sign of medium term reversal.

AUD/USD 4 Hours Chart

AUD/USD Daily Chart

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised
23:30 AUD Westpac Leading Index M/M Dec 0.40% 0.02% 0.30%
23:50 JPY Trade Balance (JPY) Dec 0.36T 0.22T 0.54T 0.47T
0:30 AUD CPI Q/Q Q4 0.50% 0.70% 0.70%
0:30 AUD CPI Y/Y Q4 1.50% 1.60% 1.30%
0:30 AUD CPI RBA Trimmed Mean Q/Q Q4 0.40% 0.50% 0.40%
0:30 AUD CPI RBA Trimmed Mean Y/Y Q4 1.60% 1.60% 1.70%
0:30 AUD CPI RBA Weighted Median Q/Q Q4 0.40% 0.50% 0.30% 0.40%
0:30 AUD CPI RBA Weighted Median Y/Y Q4 1.50% 1.40% 1.30%
7:00 CHF UBS Consumption Indicator Dec 1.43
9:00 EUR German IFO – Business Climate Jan 111.3 111
9:00 EUR German IFO – Expectations Jan 105.8 105.6
9:00 EUR German IFO – Current Assessment Jan 116.9 116.6
9:00 CHF ZEW Survey (Expectations) Jan 12.9
11:00 GBP CBI Trends Total Orders Jan 2 0
14:00 USD House Price Index M/M Nov 0.30% 0.40%
15:30 USD Crude Oil Inventories 2.3M

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