Monday 19th January: European Open Briefing

Global Markets:

  • Asian stock markets: Nikkei up 1.00 %, Shanghai Composite dropped 7 %, Hang Seng declined 1.20 %, ASX gained 0.20 %
  • Commodities: Gold at $1276.50 (-0.05 %), Silver at $17.67 (-0.50 %), WTI Oil at $48.78 (-0.75 %), Brent Oil at $49.82 (-0.40 %)
  • Rates: US 10 year yield at 1.831, UK 10 year yield at 1.536, German 10 year yield at 0.455

News & Data:

  • Australia MI Inflation Gauge m/m 0.0 %, Previous: 0.1 %
  • Japan Industrial Production -0.5 %, Expected: -0.6 %, Previous: -0.6 %
  • Japan Household Confidence 38.8, Expected: 38.6, Previous: 37.7
  • UK Houseprice Index 1.4 %, Previous: -2.2 %
  • Yen Rises as China Stocks Rout Spurs Haven Bid; Euro Holds Loss (BBG)
  • Oil Declines as Iraq Pumps Crude at Record Pace Amid Glut (BBG)
  • China Stocks Drop Most Since ’09; Copper Rises, Gas Drops (BBG)

CFTC Positioning Data:

  • EUR net short 168K vs net short 161K prior
  • JPY net short 94K vs net short 90k prior
  • GBP net short 37K vs net short 26K prior
  • AUD net short 45K vs net short 48K prior
  • CAD net short 21K vs net short 17K prior
  • CHF net short 26K vs net short 24K prior
  • NZD net short 2k vs net short 1k prior
  • Gold net long 130K vs net long 122K prior

Markets Update:

Another risk-off session in Asia, with China the cause this time. Chinese regulators announced that they would stop the three largest equity brokers from opening new margin accounts for clients, for at least 3 months. This led to a big decline in the stocks of the brokerage firms, which then pulled the Shanghai Composite Index lower as well. The index is currently down 7 %. Gold had a quiet session, consolidating between $1275 and $1281. Similar price action in Silver, with traded $17.60-$17.75 for most of the session.

In FX, the Swiss Franc was the worst performer as EUR/CHF rose back above parity and USD/CHF rallied to a high of 0.8680. In the near-term, it is best to avoid trading the CHF pairs as liquidity will remain poor and we could see random 200-300 pip moves any time. Further, while the peg has been abadoned, the SNB has said that they still will intervene if necessary.

EUR/USD spent the session in a 1.1550-1.1575 range and flows were light. Everyone is waiting for the ECB meeting on Thursday, but we could see some light short squeeze ahead of the event amid crowded positioning. The key levels to watch are 1.1460 and 1.1350 to the downside and 1.1650 & 1.1730 to the topside. GBP/USD has been weak in the last few sessions, but we are likely to see further consolidation 1.50-1.52 ahead of the Bank of England Minutes & employment data on Wednesday.

Upcoming Events:

  • US HOLIDAY – Martin Luther King Day
  • 08:15 GMT – Swiss PPI (-0.6 % m/m, -2.4 % y/y)
  • 09:00 GMT – Euro Zone Current Account (€21.3bln)
  • 13:30 GMT – Canadian Foreign Securities Purchases
  • 21:00 GMT – New Zealand NZIER Business Confidence

Key Data This Week:

Tuesday, January 20th

  • China GDP
  • China Industrial Production
  • Germany ZEW Economic Sentiment
  • New Zealand CPI

Wednesday, January 21st

  • Bank of Japan Meeting & Press Conference
  • Bank of England Minutes
  • UK Unemployment Rate & Claimant Count Change
  • US Building Permits & Housing Starts
  • Bank of Canada Rate Decision & Monetary Policy Report

Thursday, January 22nd

  • ECB Rate Decision & Press Conference
  • US Initial Jobless Claims

Friday, January 23rd

  • China HSBC Manufacturing PMI
  • Germany & Euro Zone Manufacturing/Services PMI
  • UK Retail Sales
  • Canada CPI
  • US Existing Home Sales

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