Sample Category Title

USDJPY has turned more bearish in the near term after the break below the key 112 level and 200-day moving average yesterday to reach its lowest level in six weeks. Momentum is weak and the daily RSI is indicating a bearish bias after dipping below 50. Risk remains skewed to the downside until prices make a sustained move back above 112.

USDJPY is making a modest bounce in early trading today but there is scope for further weakness if there is a rejection at the 112 level, which is now seen as firm resistance. However, further downside may be limited as long as support holds at the key 111 level. A deeper decline would see prices target 108.

Since late September the pair has been trading in a range mostly between 111 and 114. In the bigger picture, the market does not have any clear direction and this lack of trend is indicated by the horizontal 50-day and 200-day moving averages. This could change if USDJPY breaks below 111 in the next few sessions.

During yesterday's trading session headlines broke that China would reduce or halt its purchase of US Treasuries. This set off moves in Currencies, Commodities, Bonds and Stock. Gold reached a high of 1327.5, the US 10-Year got to a high of 2.59%, SPX 500 fell to 2736.50, while USDJPY fell to 111.285. GBPUSD jumped up to 1.35617, EURUSD rose to 1.20176, while even pairs that would seem to be unaffected by such a move, like EURGBP, rose to 0.88720. Overnight a Chinese government source corrected the situation by saying the report could have been based on wrong information. The source said that ‘China has been diversifying its FX reserves investments, and China's investments in US Treasuries is market-driven.' Much of the moves following the initial headline have been reversed or partially reversed, with the US 10-Year, for example, now at 2.531%.

UK Industrial Production (MoM) (Nov) was released with the number coming in at 0.4% v an expected reading of 0.3%, from a prior of 0.0% that was revised to 0.3%. Industrial Production (YoY) (Nov) was 2.5% v a consensus reading of 1.8%, with a prior of 3.6% that was revised up to 4.3%. Manufacturing Production (MoM) (Nov) was 0.4% v an expected 0.3%, with a previous reading of 0.1% that was revised up to 0.3%. Manufacturing Production (YoY) (Nov) was 3.5% v an expected 2.8%, from a prior of 3.9% that was revised up to 4.7%. Traders of GBP pairs will be watching these data points closely. GBPUSD sold off to 1.34814 after this data was released.

UK NIESR GDP Estimate (3M) (Dec) data was released at 0.6% v 0.5% expected. The previous data came in at 0.5% but was revised up to 0.6%. GBPUSD moved higher after the data was published, rising to 1.35391.

US 10-Year Note Auction. The rate was 2.59% from previous auction's interest rate of 2.384%. US FOMC Member Bullard spoke in St Louis, stating that the US economy looks good for 2018. The FED's inflation miss is starting to look persistent and he doesn't believe there is a high chance of a US recession.

EURUSD is down -0.09% overnight, trading around 1.19380.

USDJPY is up 0.38% in early session trading at around 111.847.

GBPUSD is down -0.10% to trade around 1.34905.

USDCAD is up 0.05%, trading around 1.25511.

Gold is up 0.10% in early morning trading at around $1,317.90.

WTI is down -0.06%, trading around $63.37.

Major data releases for today:

At 09:30 GMT, UK BOE Credit Conditions Survey will be released. GBP pairs will be influenced by this data point.

At 10:00 GMT, Eurozone Industrial Production w.d.a. (YoY) (Nov) will be released, with the consensus pointing to a value of 3.0%, from a prior of 3.7%. Industrial Production s.a. (MoM) (Nov) is expected at 0.8% from 0.2% previously. The EUR may be moved by this data.

At 12:30 GMT, Eurozone ECB Monetary Policy Meeting Accounts will be published. EUR crosses could react to this data.

At 13:30 GMT, US Continuing Jobless Claims (Dec 29) is expected at 1.915M, from a previous number of 1.914M. Initial Jobless Claims (Jan 5) is expected to come in at 245K, from a prior reading of 250K. USD crosses could see increased volatility around this data release.

At 19:00 GMT, US Monthly Budget Statement (Dec) which came in previously at $-139B.

At 20:30 GMT, US FED's William Dudley will be speaking at the Securities Industry and Financial Markets Association in New York. The speech may affect USD crosses, stocks, commodities and bonds.

At 21:45 GMT, New Zealand Building Permits s.a. (MoM) (Nov) will be released. The previous reading was -9.6%. NZD pairs could be moved by this data.

At 23:50 GMT, Japanese Foreign Investment in Japan stocks (Jan 5) will be released, with a previous number of ¥76.2B. Foreign Bond Investment (Jan 5) will also be released, with a prior number of ¥434.2B.

Sunrise Market Commentary

• Rates: Fake news causes volatility
  'Fake news' caused quite some volatility in the US Note future yesterday. All intraday losses were eventually whipped out following a strong 10-yr Note auction and as Chinese officials denied rumours about halting/stopping buying US T's. Today's focus turns to US producer prices and German wage negotiations. Positive outcomes have most market-moving potential.
• Currencies: Dollar rebounds as Chinese rumours on US Treasuries are dismissed
  The dollar came temporary under pressure yesterday on headlines that China was considering holding less US Treasuries. The dollar regains ground this morning as the headlines were dismissed by Chinese officials. Today's focus for USD trading is on US PPI data. Strong price data might propel US yields and the dollar.

The Sunrise Headlines

• US stock markets partially recovered from a difficult start yesterday, ending with (tiny) losses for the first time this year. Asian bourses lose slightly ground as well overnight with Japan underperforming (-0.5%).
• The China State Administration of Foreign Exchange says a media report on China's purchase of US treasuries might have quoted a 'wrong source', or it might be 'fake news', according to a statement on the administration's website.
• Australian November retail sales rose by 1.2% M/M (Black Friday), significantly beating 0.4% M/M consensus and printing at the strongest level since 2013. The Aussie dollar profited, pushing AUD/USD to the highest level since October.
• Polish interest rates will 'probably' stay at current level by end of this year, central bank Governor Glapinski said. He doesn't expect any discussion on rate increase within MPC rate-setting panel and such situation may extend for 2019.
• China's Premier Li Keqiang said the world's second-biggest economy is expected to have grown around 6.9% last year, the official Xinhua news agency reported, accelerating from a 26-year low in 2016 (6.7%).
• Both the White House and Canadian officials shot down a report that Canada is increasingly convinced that President Donald Trump will shortly announce the US is pulling out of Nafta. The loonie and Mexican peso trimmed losses.
• Today's eco calendar contains US producer prices, weekly jobless claims, EMU industrial production and Minutes of the previous ECB meeting. Italy and the US tap the market. NY Fed Dudley speaks on the US economic outlook

Currencies: Dollar Rebounds As Chinese Rumours On US Treasuries Are Dismissed

Modest USD damage from Chinese headlines

Markets were spooked by headlines that China considered holding less US Treasuries. Treasuries, equities and the USD were sold even as interest rate differentials widened in favour of USD. Investors feared that China could reduce the USD share in its reserves. The story initially weighed also on US markets but Treasuries, equities and the dollar rebounded off the intraday lows. EUR/USD spiked temporary above 1.20, but closed the day at 1.1948. USD/JPY remained in the defensive and finished the day with a substantial losses at 114.44.

Overnight, Asian markets remain in a modest risk-off modus, but trading still develops orderly. Chinese officials indicated that yesterday's headlines ‘might have cited wrong sources or may be fake news', easing tensions further. Especially USD/JPY (currently 111.80) regains part of yesterday's decline. EUR/USD hovers in the mid 1.19 area. The Aussie dollar (AUD/USD 0.7875) profits from strong domestic retail sales. The Canadian dollar (USD/CAD 1.2550) stays in the defensive even if comments from Canadian officials that president Trump might leave NAFTA were afterwards also denied/labelled 'fake news'.

EMU production data and the Minutes of the ECB December meeting will be published today. Markets will look for ‘alternative views' on the soft policy approach of president Draghi. US PPI data might get more attention than usual as markets are growing more sensitive to indications of higher inflation. Headline PPI is expected at 0.2% M/M and 3.0% Y/Y (from 3.1%). An upward surprise might be slightly USD supportive, but tomorrow's CPI is more important. Yesterday, the USD was temporary hit by the China headlines but USD/EUR stayed resilient. The USD/JPY sell-off slows this morning. EUR/USD reversed most of yesterday's up-tick. So, the day-today momentum looks not too bad for the dollar. The topside in EUR/USD remains probably rather well protected and a sustained break beyond 1.2092 is not evident unless US price data really undershoot expectations

Yesterday, sterling trading was mainly driven by the moves in EUR and USD. EUR/GBP rose in line with EUR/USD. Some sterling softness was also at work, probably as markets were disappointed by the government reshuffle. There are no important UK data today. UK Fin Min Hammond and Brexit minister Davis tried to seek common ground with Germany on a Brexit deal. There are no indications of a big step forward. We keep a neutral bias on EUR/GBP short-term. We keep a EUR/GBP buy-on-dips in case of return action to 0.87.

EUR/USD stays off range top despite Chinese comments

Download entire Sunrise Market Commentary

The outstanding performance for equities which sent many major indices to record highs may have just paused.

Asian stocks were trading broadly lower on Thursday after Wall Street notched its first daily decline in 2018. It was neither economic data nor earnings thatprompted the declines, but rather the selloff in U.S. Treasuries which sent 10-year yields to a 10-month high. The jump in government yields was triggered by reports that China is recommending slowing or haltingthe accumulation of Treasuries. Although China has reduced U.S. debt holding in the past, we haven’t seen an announcement of this nature. However, China’s foreign exchange regulator stated on Thursday that the report could be based on erroneous information.

So far, it seems that the news from China is politically driven and an indirect message to President Trump who iscontemplating trade sanctions against China as a response to the massivetrade deficit. Given that the U.S. is poised to boost its debt in 2018 to fund the deficit widened by tax reforms,the result of China selling off a considerable share of its Treasury holdings, would likely precipitate the beginning of a bond bear market.

Treasuries steadied in Asia trade and 10 year yields declined six basis points from highs of 2.60%. Whether we’ll see another test of this critical level will likely depend on tomorrow’s U.S. CPI report. If the data surprises to the upside, market participants will have to adjust their expectations of Fed tightening. Although interest rate projections have so far impacted only the short end of the yield curve, inflation expectations will drive the longerend, thus, the inflation report tomorrow should be of great importance.

With the Cboe’s VIX trading below 10, investors seem unfased about the spike in yields. However, another sharp spike in interest rates will bring equity valuations into question which may trigger a long-awaited correction in stocks.

Although higher long-term yields ought to be good news for the U.S. dollar, this is only true when they are moving for good reasons, such as economic expansion and the return of inflation. If news breaks that China slows or halts the purchase of Treasuries, expect the dollar to continue selling off, particularly against the Yen.

It’s a sad day for the Crypto world. Bitcoin, Ethereum, and Ripple all fell double digits on Thursday. After the Legendary investor Warren Buffett warned that cryptocurrencies would come to a bad ending, South Korea’s justice minister said the government was working on a bill to ban cryptocurrency trading. If the bill is passed by the country’s parliament, expect to see further selloff as more regulators are likely to join the clampdown on digital currencies.

Market movers today

The ECB minutes from the December meeting are the highlight in the euro area this week. The meeting carried new staff projections and no batch of measures such as those at the October meeting. Hence, we intend to look primarily for nuances in the assessment of the new staff project ions (including 2020), in particular on inflation. Following the decisions taken at the October meeing, the ECB has had no need to change its position just yet . We expect the next change in guidance to come only towards the summer.

German GDP growth for the year 2017 is due to be released and expected at 2.3%. It would be the highest German growth since 2011.

Other data due today includes euro industrial product ion, US jobless claims and US PPI.

In Scandies, Sweden will release average house prices (SCB).

Selected market news

Overnight , China's St at e Administration of Foreign Exchange (SAFE) dismissed the story that China may cut back on US Treasury buying, saying that it may have been due to wrong sources or ‘fake' news. Also out of China, Premier Listated that the economy grew 6.9% in 2017.

Anonymous Canadian government officials indicated yesterday that they see a rising possibility that US President Trump will withdraw the US from the North American Free Trade Agreement (NAFTA). CAD and MXN sold off temporarily on the news. A White House official later said t hat not hing has changed in US P resident Trump's stance on NAFT A. The next round of negotiat ions on NAFTA is set to start on 23 January.

The St . Louis Fed President James Bullard yesterday expressed sympathy for the idea of the Fed adopting price level targeting. In general terms, he advocates a policy that allows inflation to be above 2% for a period and further said that it would be appropriate for the Fed to focus on a single mandate of inflation. Dallas Fed Robert Kaplan supports a policy of three interest rate hikes this year, while also alerting that the Fed will not move so far as to invert the yield curve.

The weekly EIA inventory report posted a 5mb drop in US crude stocks – about half that seen in API data on Tuesday. In addition, the report showed that US crude product ion fell 290kb/d last week. Freezing US winter weather is likely to be an important reason for both the draw on stocks and the drop in output . On a separate note, speculation has started that OPEC may actively cap further price increases with the price on Brent nearing the USD70/bbl mark.

For the 24 hours to 23:00 GMT, the AUD rose 0.28% against the USD and closed at 0.7844.

LME Copper prices rose 0.7% or $48.5/MT to $7140.5/MT. Aluminium prices rose 0.7% or $15.5/MT to $2159.0/MT.

In the Asian session, at GMT0400, the pair is trading at 0.7871, with the AUD trading 0.34% higher against the USD from yesterday's close, following upbeat Australian retail sales numbers.

Data indicated that Australia's seasonally adjusted retail sales accelerated by the most in nearly 5 years, after it jumped 1.2% on a monthly basis in November, driven by a spree on iPhone purchases and Black Friday sales, stirring hopes that robust consumer spending would fuel the nation's economic growth. Retail sales had registered a gain of 0.5% in the prior month, while market had expected for a rise of 0.4%.

The pair is expected to find support at 0.7827, and a fall through could take it to the next support level of 0.7782. The pair is expected to find its first resistance at 0.7899, and a rise through could take it to the next resistance level of 0.7926.

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the EUR rose 0.14% against the USD and closed at 1.1952.

In economic news, industrial production in France retreated 0.5% on a monthly basis in November, meeting market expectations and compared to a revised rise of 1.7% in the previous month.

The greenback declined against a basket of major currencies, on reports that China, the biggest buyer of US sovereign bonds, was ready to slow or halt its purchases of US Treasuries.

Macroeconomic data revealed that mortgage applications in the US rebounded 8.3% in the week ended 05 January, compared to a revised fall of 1.6% in the prior week.

Moreover, the nation's import price index registered a less-than-expected rise of 0.1% on a monthly basis in December, compared to a revised gain of 0.8% in the prior month. On the contrary, the nation's export price index unexpectedly eased 0.1% on a monthly basis in December. In the previous month, the index had climbed 0.5%.

In the Asian session, at GMT0400, the pair is trading at 1.1952, with the EUR trading flat against the USD from yesterday's close.

The pair is expected to find support at 1.1911, and a fall through could take it to the next support level of 1.1869. The pair is expected to find its first resistance at 1.2006, and a rise through could take it to the next resistance level of 1.2059.

Moving ahead, traders would be paying close attention to the minutes of the European Central Bank's (ECB) December meeting, along with the Euro-zone's industrial production data for November, both due to release in a few hours. Further, the US initial jobless claims, producer price index and monthly budget statement, slated to release later in the day, will garner a lot of market attention.

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.

Daily Pivots: (S1) 132.62; (P) 133.58; (R1) 134.10; More....

EUR/JPY's decline from 136.63 is still in progress and intraday bias remains on the downside for 132.04 support. Decisive break there will confirm medium term trend reversal. On the upside, above 134.03 minor resistance will turn intraday bias neutral first. But risk will stay on the downside as long as 136.63 holds.

In the bigger picture, medium term rise from 109.03 (2016 low) is seen as at the same degree as the down trend from 149.76 (2014 high) to 109.03 (2016 low). It should now be targeting 141.04/149.76 resistance zone. On the downside, break of 132.04 support is needed to indicate medium term reversal. Otherwise, outlook will stay bullish in case of deep pull back.

For the 24 hours to 23:00 GMT, the GBP declined 0.24% against the USD and closed at 1.3507, after Britain's total trade deficit unexpectedly widened in November.

Data showed that UK's total trade deficit widened to £2.8 billion in November, marking the largest deficit since June 2017, thus suggesting that trade may crimp the nation's fourth quarter economic growth. The nation had registered a revised total trade deficit of £2.23 billion in the prior month, while investors had anticipated the deficit to narrow to £1.5 billion.

Meanwhile, the nation's construction output rebounded 0.4% MoM in November, undershooting market expectations for a rise of 0.8%. Construction output had registered a revised drop of 1.1% in the previous month.

On the other hand, the nation's manufacturing production grew 0.4% on a monthly basis in November, exceeding market consensus for an advance of 0.3%, highlighting that the sector remained buoyant in the final months of 2017. In the prior month, manufacturing production had registered a revised advance of 0.3%. Also, the nation's industrial production climbed 0.4% on a monthly basis in November, meeting market estimates and after recording a revised gain of 0.2% in the previous month.

In other economic news, leading think tanker, NIESR estimated that Britain's gross domestic product (GDP) climbed more-than-expected by 0.6% in the three months to December 2017, compared to a revised similar rise in the September-November period.

In the Asian session, at GMT0400, the pair is trading at 1.3505, with the GBP trading slightly lower against the USD from yesterday's close.

The pair is expected to find support at 1.3471, and a fall through could take it to the next support level of 1.3436. The pair is expected to find its first resistance at 1.3551, and a rise through could take it to the next resistance level of 1.3596.

Going ahead, traders would await the Bank of England's credit conditions survey report, scheduled to release in a few hours.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 1.11% against the JPY and closed at 111.39.

In the Asian session, at GMT0400, the pair is trading at 111.73, with the USD trading 0.31% higher against the JPY from yesterday's close.

Early morning data indicated that Japan's preliminary leading economic index climbed to a level of 108.6 in November, at par with market expectations and following a reading of 106.5 in the previous month. Also, the nation's flash coincident index registered a rise to a level of 118.1 in November, beating market anticipation for an advance to a level of 117.9 and compared to a reading of 116.4 in the prior month.

The pair is expected to find support at 111.21, and a fall through could take it to the next support level of 110.68. The pair is expected to find its first resistance at 112.32, and a rise through could take it to the next resistance level of 112.90.

Going ahead, traders would focus on Japan's trade balance (BOP Basis) for November, followed by the Eco-Watchers survey for December, set to release tomorrow.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.