Monday 8th December: European Open Briefing

Global Markets:

  • Asian stock markets: Nikkei down 0.05 %, Shanghai Composite up 1.40 %, Hang Seng gained 0.40 %, ASX rose 0.80 %
  • Commodities: Gold at $1193 (+0.20 %), Silver at $16.24 (-0.10 %), Crude Oil at $65.12 (-1.10 %)
  • Rates: US 10 year yield at 2.32, UK 10 year yield at 2.02, German 10 year yield at 0.78

News & Data:

  • Japan GDP -0.5 % q/q, Expected: -0.1 %, Previous: -0.4 %
  • Japan GDP -1.9 % y/y, Expected: -0.5 %, Previous: -1.6 %
  • Japan Tankan Index 10, Previous: 13
  • Japan Current Account ¥0.8trln, Expected: ¥0.39trln, Previous: ¥0.96trln
  • Japan GDP Price Index 2.0 % y/y, Expected: 2.1 %, Previous: 2.1 %
  • China Exports 4.7 %, Expected: 7.9 %, Previous: 11.6 %
  • China Imports -6.7 %, Expected: 3.5 %, Previous: 4.6 %
  • China Trade Balance 54.4bln, Expected: 43.1bln, Previous: 45.4bln
  • China faces more pressure as November imports drop unexpectedly, exports slow (RTRS)
  • Japan economy shrinks more than expected, backs Abe’s tax decision (RTRS)
  • Australian banks may need $42bln to guard against risks (RTRS)

CFTC Positioning Data:

  • EUR net short 159K vs net short 165K prior
  • JPY net short 111K vs net short 104k prior
  • GBP net short 31K vs net short 31K prior
  • AUD net short 41K vs net short 44K prior
  • CAD net short 18K vs net short 16K prior
  • CHF net short 23K vs net short 23K prior
  • NZD net short 2k vs net short 2k prior

Markets Overview:

The biggest moves in FX overnight were in the commodity currencies. The Australian Dollar opened lower in Asia on news of a government-backed review that Australian banks may need an additional $42 billion in capital to guard against potential risks. Both the Aussie and the Kiwi Dollar extended losses as the Chinese trade figures were released later in the session. Exports slowed down and imports unexpectedly fell by 6.7 % versus expectations of a 3.5 % increase. This sent the AUD/USD to 0.8290 and the pair eventually declined to 0.8272. Meanwhile, NZD/USD dropped from 0.77 to 0.7740 ahead of this weeks RBNZ meeting, where the bank is expected to keep rates unchanged at 3.50 %, but keep their somewhat dovish tone amid declining commodity prices.

The Japanese GDP revisions were bad, but not a major surprise and the BoJ has already taken measures on October 31th, so the reaction in USD/JPY was short-lived. After a quick spike to 121.80, driven by demand from fast money names, the pair declined to 121.30 and is currently consolidating around the 121.50 level. Asia reports option-related offers in front of the 122.00 level and stops in decent size through 122.15. To the downside, intraday support at 121.30 and 121.00, with 120.50 now the pivotal short-term support level.

It was a quiet session for the EUR/USD. Dealers reported some short-covering going through the market and the pair briefly traded above 1.23. Light stops through 1.2325, with better offers expected to rest ahead of 1.2350. No significant data releases out of the Euro Zone today, but the EZ finance ministers are meeting today to discuss the €240bln Greece bailout programme that runs out at the end of this year, so keep an eye on any sharp moves in EU peripheral yields.

Upcoming Events:

  • 07:00 GMT – German Industrial Production (0.2 %)
  • 08:15 GMT – Swiss Retail Sales (0.9 %)
  • 08:15 GMT – Swiss CPI (-0.1 % m/m, -0.1 % y/y)
  • 09:30 GMT – Euro Zone Sentix Investor Confidence (-9.7)
  • 13:15 GMT – Canadian Housing Starts (194k)
  • 13:30 GMT – Canadian Building Permits (2.1 %)

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