Tue, Jan 26, 2021 @ 08:28 GMT

Bitcoin rejected by 4H 55 EMA, extending triangle pattern with last leg

    Bitcoin rebounded to as high as 34899 but was rejected by 4 hour 55 EMA and reversed. Break of 31741 minor support suggests that such rebound is completed. Corrective pattern from 41964 should be still in progress. It’s now likely a five-wave defending triangle pattern, in the last leg.

    Bitcoin should now have another take on 30k handle, and will likely overcome it for a while. Ideally, it should breach lower trend line (now at 28541) briefly and complete the triangle pattern there and rebound. We’ll see how it goes.

    UK unemployment rate ticked up to 5% in Nov, claimant count rose only 7k in Dec

      In the three months to November, UK unemployment rate rose to 5.0%, below expectation of 5.1%. That was 1.2% higher than a year ago, and 0.6% higher than the previous quarter. 5% was also the highest level since early 2016.

      Though, totally hours worked showed continued signs of recovery, up 89m, or 10%, to 979.9m hours. Average earnings excluding bonus rose 3.6% 3moy, versus expectation of 3.0% 3moy. Average earnings including bonus rose 3.6% 3moy, also above expectation of 2.8% 3moy.

      UK claimant count rose just 7k in December, must lower than expectation of 47.5k. Still, at 2.6m, the total is 113.2%, or 1.4m, above March 2020’s level.

      Full release here.

       

      South Korea GDP grew 1.1% qoq in Q4, supported by strong exports

        South Korea’s GDP grew 1.1% qoq in Q4, above expectation of 0.7% qoq. Momentum of the recovered was dampened, comparing to Q3’s 2.1% qoq, by second wave of coronavirus pandemic. Though, strong exports, which grew at 26-month high of 12.6% yoy in December, offset some weakness in private consumption. For the whole year, GDP contraction was limited to just -1%.

        Analysts are also expecting a solid year for South Korea in 2021. Vaccination roll-outs to be started in February should reduce the need for restrictions and stimulate local demand. Return of global growth and 5G deployment would also support exports from Q2 onwards. Economists are expectation around 3% GDP growth this year.

        BoJ minutes: Developments in FX and other markets continued to warrant attention

          Minutes of BoJ’s December 17-18 meeting showed some discussions on the topic of exchange rates. Some members noted that “U.S. dollar continued to depreciate moderately against the yen as part of its depreciation trend against a wide range of currencies, and that developments in the foreign exchange and other financial markets continued to warrant attention.”

          One of these members added “recent improvement in market sentiment had been partly driven by expectations for vaccines” and the member was closely monitoring stocks market developments. One member noted ” future developments in the U.S. credit market warranted attention, since market participants had been actively conducting risk-taking activities.”

          On policy, “members agreed that the Bank would closely monitor the impact of COVID-19 and not hesitate to take additional easing measures if necessary.” Most members shared the view that, “as for policy rates, it would expect short- and long-term interest rates to remain at their present or lower levels.”

          Full minutes here.

          US 10 year yield dived on stimulus concern, heading back to channel support

            US 10-year yield dropped sharply overnight as concerns surfaced over the passage of President Joe Biden’s USD 1.9T pandemic relief proposal in Congress. Senate majority Leader Chuck Schumer would try to push through some measures in early February. But a comprehensive deal may be four to six weeks away. But he admitted, “will it be easy in the Senate? No”.

            Democrats only have slim 50-50 control in the Senate thanks to Vice President Kamala Harris’ tie-breaking vote. Opposition to the bill was voiced by some moderate Republicans and some Democrats.

            10-year yield closed down -0.051 to 1.040. The rejection by near term channel resistance is now clear. TNX will likely pull back to wards channel support, which is close to 55 day EMA at 0.9581. Nevertheless, there is no threat to the up trend yet as long as the channel holds. Another rise towards 1.266 resistance is still in favor at a later stage.

            ECB Lane: Standard Poole analysis calls for a two-sided and flexible PEPP approach

              ECB Chief Economist Philip Lane said in a speech there is “considerable uncertainty about pandemic dynamics. Recent intensification in some countries represents a “significant downside risk” and requires “prolongation of various fiscal support measures”.

              But, “the launch of vaccination campaigns is a milestone in the eventual resolution of the pandemic health crisis, even if there is only cloudy visibility of the calendar towards sufficient immunity to enable the restoration of normal economic activity,” he added.

              Under these conditions, standard Poole analysis calls for a “two-sided and flexible approach” to the total scale of PEPP. “If favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full. Equally, the envelope can be recalibrated if required to maintain favourable financing conditions to help counter the negative pandemic shock to the path of inflation.”

              Full speech here.

              ECB Lagarde and Panetta discussed climate-related monetary policy

                ECB President Christine Lagarde said the central bank was creating a team of around 10 staff, reporting directly to her, to set the agenda on climate-related topics. “Climate change can create short-term volatility in output and inflation through extreme weather events, and if left unaddressed can have long-lasting effects on growth and inflation,” Lagarde noted.

                Executive Board member Fabio Panetta also said, ECB has already taken steps on contributing to environmental policies in the implementation of monetary policy. For example, “sustainable finance instruments – the sustainability-linked bonds – among the collateral that can be used in refinancing operations” were included.

                Additionally, “the ECB has to protect its balance sheet from the financial risks caused by climate change that are not correctly priced by the markets,” Panetta added. “By performing its own analysis of these risks on the basis of rigorous methodologies, the ECB can contribute to the accurate valuation of these climate-related risks and promote awareness among investors, thereby helping to combat climate change. These issues are currently being considered as part of our monetary policy strategy review.

                German Ifo business climate dropped to 90.1, second wave brought recovery to a halt

                  Germany Ifo business climate dropped to 90.1 in January, down from 92.2, below expectation of 92.0. Current assessment index dropped to 89.2, down from 91.3, missed expectation of 90.7. Expectations index dropped to 91.1, down from 93.0, below expectation of 93.2.

                  Looking at the sectors, manufacturing index dropped from 9.1. to 8.8, first decline after eight straight rises. Services dropped from -0.4 to -4.4. Trade nose-dived sharply from 0.3 to -17.2, steepest fall since April 2020. Construction dropped from -0.8 to -5.1.

                  Clemens Fuest, President of the ifo Institute: “The second wave of coronavirus has brought the recovery of the German economy to a halt for now.”

                  Full release here.

                  BoJ Kuroda: Most important policy now is to avoid unemployment and corporate failures

                    BoJ Governor Haruhiko Kuroda said at a WEF virtual meeting “”the resurgence of COVID-19 and the state of emergency declaration by the government just a few weeks ago would tend to dampen economic recovery” of Japan. “In this kind of situation, the most important policy is to … avoid unemployment and corporate failures and so forth,” he added.

                    The government has “already implemented huge amount of fiscal support”. At the same time, BoJ provided liquidity to the banking sector and tried to “stabilize the financial markets”. Both policies have been “fairly successful in stabilizing the markets, avoiding corporate failures, maintaining employment”.

                    But, “we have to overcome, contain this pandemic”, through vaccination and creation of immunity. That is the “challenge still faced by Japan”.

                    Gold struggles in range after recovery capped by 55 D EMA

                      Gold’s rebound from 1810.07 lost momentum at 1874.88, after hitting 55 day EMA. But subsequent retreat is kept above 1832.40 minor support holds. The corrective rise could still extend higher. Above 1874.88 will target 61.8% retracement of 1959.16 to 1810.07 at 1902.20. But upside should be limited there. .

                      Overall, we’re seeing fall from 1959.16 as the third leg of the corrective pattern from 2075.18. Hence, another decline is expected after current recovery from 1810.07 completes. Break of 1832.40 will likely send gold through 1810.07 to 1764.31 support and below.

                      Bitcoin completed three wave correction, eye EMA resistance for confirmation

                        Bitcoin’s correction from 41964 extended to as low as 28989 but quickly rebounded back above 30k handle. It’s now even trading above 33k. The development argues that such correction might have completed with a three wave structure, with bullish convergence condition in hourly MACD.

                        Focus is now on 4 hour 55 EMA (now at 34334). Sustained break there will affirm this bullish view and bring stronger rise back to 40000/41964 resistance zone. However, break of 31741 minor support will extend the correction with another fall through 28989.0 before completion.

                        AUD/NZD in correction downwards, but no change in bullish trend

                          AUD/NZD formed a short term top at 1.0840 on overbought condition and turn into corrective fall. While some more downside is likely in the cross, we’re not expecting a complete reversal in fortune. Downside of pull back should be contained by 38.2% retracement of 1.0415 to 1.0840 at 1.0678, which is close to 55 day EMA (now at 1.0688). Above 1.0788 minor resistance will bring retest of 1.0840 resistance first.

                          However, firm break of 1.0678 would bring deeper fall to 61.8% retracement at 1.0577. Overall, the depth of the correction could eventually determine how far the rise from 1.0415 would extend to.

                          Australia goods exports jumped 16% in Dec, imports dropped -9%

                            According to preliminary data, Australia’s export of goods rose 16% mom to AUD 34.9B. Imports of goods dropped -9% mom to AUD 26.0B. There was a goods trade surplus of AUD 9.0B.

                            Exports to China jumped 21% to AUD 2312m, to Japan rose 24% to AUD 864m, to US rose 58% to AUSD 678m, to India rose 35% to AUD 339m, to South Korea dropped -14% to AUD 317m.

                            Imports from China dropped -7% to AUD 641m, from US dropped -33% to AUD 1274m, from Germany dropped -10% to AUD 127m, from Japan rose 6% to 95m, from Thailand rose 8% to AUD 101m.

                            “Imports have fallen following a November spike to be more in line with recent history”, said ABS Head of International Statistics, Katie Hutt, “while exports of metalliferous ores and cereals are the strongest in history, resulting in the fourth highest goods trade surplus on record”.

                            Full release here.

                            Canada retail sales rose 1.3% in Nov, up in 7 of 11 subsectors

                              Canada retail sales rose 1.3% mom to CAD 55.2B in November, well above expectation of 0.0% mom/ That’s the seventh consecutive monthly gain, led by sales at food and beverage stores, along with an uptick in e-commerce sales. Ex-auto sales rose 2.1% mom, above expectation of 0.3% mom.

                              Sales were up in 7 of 11 subsectors, representing 53.4% of retail trade. In volume terms, retail sales rose 1.2% in November.

                              Full release here.

                              UK PMI composite dropped to 40.6 in Jan, sharp contraction in Q1

                                UK PMI manufacturing dropped sharply to 52.9 in January, down from 57, missed expectation of 53.0, a 7-month low. PMI Services dropped to 38.8, down from 49.4, missed expectation of 45.3, an 8-month low. PMI Composite dropped to 40.6, down from 50.4, an 8-month low.

                                Chris Williamson, Chief Business Economist at IHS Markit, said:

                                “A steep slump in business activity in January puts the locked-down UK economy on course to contract sharply in the first quarter of 2021, meaning a double-dip recession is on the cards. Services have once again been especially hard hit, but manufacturing has seen growth almost stall, blamed on a cocktail of COVID-19 and Brexit, which has led to increasingly widespread supply delays, rising costs and falling exports.

                                “Worryingly, January also saw companies reduce headcounts at an increased rate again – albeit less so than seen between March and November. The steepest loss of jobs was recorded in the hotels, restaurants, travel and leisure sectors, reflecting the new lockdown measures.

                                “Encouragingly, the current downturn looks far less severe than that seen during the first national lockdown, and businesses have become increasingly optimistic about the outlook, thanks mainly to progress in rolling out COVID-19 vaccines. Business hopes for the year ahead have risen the highest for over six-and-a-half years, boding well for the economy to return to solid growth once virus restrictions ease.”

                                Full release here.

                                Eurozone PMI composite dropped to 47.5, double-dip recession increasingly inevitable

                                  Eurozone PMI Manufacturing dropped to 54.7 in January, down from 55.2, missed expectation of 55.0. PMI Services dropped to 45.0, down from 46.4, above expectation of 44.8. PMI Composite dropped to 47.5, down from 49.1.

                                  Chris Williamson, Chief Business Economist at IHS Markit said: “A double-dip recession for the eurozone economy is looking increasingly inevitable as tighter COVID- 19 restrictions took a further toll on businesses in January…. Some encouragement comes from the downturn being less severe than in the spring of last year, reflecting the ongoing relative resilience of manufacturing, rising demand for exported goods and the lockdown measures having been less stringent on average than last year…

                                  “The roll out of vaccines has meanwhile helped sustain a strong degree of confidence about prospects for the year ahead, though the recent rise in virus case numbers has caused some pull-back in optimism. The survey data therefore add to the view that t he eurozone will see a soft start to 2021, but that the economy should pick up momentum again as the vaccine roll out gathers pace.”

                                  Full release here.

                                  Germany PMI manufacturing dropped to 57.0, services down to 46.8

                                    Germany PMI Manufacturing dropped to 57.0 in December, down from 58.3, missed expectation of 58.0. PMI services dropped to 46.8, down from 47.0, above expectation of 46.8. PMI Composite dropped to 50.8, down form 52.0, hitting a 7-month low.

                                    Phil Smith, Associate Director at IHS Markit said: “There were few surprises from January’s flash Germany PMI release, with the manufacturing data remaining strong but showing a slight loss of momentum, while services activity was further depressed by the lockdown measures introduced in the middle of December. All in all, the German economy has made a slow start to the year, and the extension of the current containment measures until at least mid-February means this looks like being the picture for several more weeks to come.”

                                    Full release here.

                                    France PMI composite dropped to 47 in Jan, but return of employment growth a big positive

                                      France PMI Manufacturing rose to 51.5 in January, up from 51.5, a 6-month high and beat expectation of 50.8. PMI services. on the other hand, dropped to 46.5, down from 49.1, missed expectation of 48.3. PMI Composite dropped to 47.0, down from 49.5.

                                      Eliot Kerr, Economist at IHS Markit said: “The French private sector started the new year as it ended the last, with COVID-19 restrictions driving a further decline in business activity. However, there were one big positive to be gleaned from the latest PMI data, and that was the return of employment growth. The fact that firms have returned to recruitment activity points to some confidence in an economic recovery in the second half of this year. That confidence was also evident in the broader expectations figures, which were only slightly off December’s 11-month high.

                                      Full release here.

                                      Japan CPI core dropped to -1% yoy in Dec, worst since 2010

                                        Japan CPI core (all item ex-fresh food) dropped further to -1.0% yoy in December, down from -0.2% yoy, but was above expectation of -1.1% yoy. That’s still the biggest annual decline in core inflation since September 2010. Headline CPI (all items) dropped to -1.2% yoy, down from -0.9% yoy. CPI core-core (all item ex-fresh food and energy) dropped to -0.4% yoy, down from -0.3% yoy.

                                        “I don’t think the risk of Japan sliding back into deflation is high,” BOJ Governor Haruhiko Kuroda insisted yesterday. “But potential growth may be falling so we need to look at the impact (on prices) carefully.”

                                        Full release here.

                                        Japan PMI manufacturing dropped to 49.7 in Jan, short-term activity undoubtedly hampered by rising coronavirus cases

                                          Japan PMI Manufacturing dropped to 49.7 in January, down from 50.0, back in contraction. PMI Services dropped to 45.7, down from 47.7. PMI Composite dropped to 46.7, down from 48.5.

                                          Usamah Bhatti, Economist at IHS Markit, said: “Short-term activity will undoubtedly be hampered by rising coronavirus disease 2019 (COVID-19) cases, as the government declared a state of emergency in Tokyo and introduced further measures to curb rising infection rates. As a result, positive sentiment weakened across the private sector. Firms are still predicting growth over the coming 12 months, although concern remains that the impact of the pandemic will be prolonged.”

                                          Full release here.