Wednesday 17th December: European Open Briefing

Global Markets:

  • Asian stock markets: Nikkei up 0.30 %, Shanghai Composite rose 0.25 %, Hang Seng fell 0.30 %, ASX gained 0.20 %
  • Commodities: Gold at $1198 (+0.40 %), Silver at $15.88 (+0.80 %), Crude Oil at $55.20 (-1.90 %)
  • Rates: US 10 year yield at 2.057, UK 10 year yield at 1.772, German 10 year yield at 0.598

News & Data:

  • Australia MI Leading Index -0.1 %, Previous: 0.1 %
  • China MNI Business Indicator 56.2, Previous: 55.2
  • Japan Trade Balance -¥892bln, Expected: -¥1.0trln, Previous: -¥710bln
  • Japan Exports 4.9 %, Expected: 6.3 %, Previous: 9.6 %
  • Japan Imports -1.7 %, Expected: 1.1 %, Previous: 2.7 %
  • AUD/USD drops to fresh 4-year low; GBP/USD at highest level since September 2009
  • Japan’s Chief Cabinet Secretary Suga: Wants to monitor decline of currencies including USDRUB
  • RBNZ Assistant Governor McDermott says NZD rate remains unjustifiable, unsustainable
  • Asia Stocks Rise Before Fed as Energy, Utility Shares Lead Gains (BBG)
  • VIX Bets Surge Amid Biggest Stock Swings Since October (BBG)
  • Oil Trades Near 5-Year Low as Russia Matches OPEC Output Policy (BBG)

Market Update:

Asian equities are slightly higher on the day, but the markets remain nervous with Russia facing a rapid decline in the Ruble and Oil printing fresh lows almost daily. Liquidity was very poor in the RUB pairs yesterday and as a consequence, many FX brokers either hiked margin requirements or suspended trading altogether. USD/RUB almost reached a high of 80.00, while the EUR/RUB briefly traded above the 100 level. With the CBR not having many options left and the downtrend in Oil very much intact, the Ruble will stay under pressure.

In Asia, Oil opened around $55.60 and declined to $54.60 around the Tokyo open. After that, it consolidated in a tight range, trading between $54.60 and $55.00. XAU/USD slowly rose towards $1200 and the price action in Silver was similar, with the metal rising to a high of $15.95.

In FX, the USD/JPY caught a bid at the Tokyo open with local institutional names good buyers of the pair. It bounced off a low of 116.45 back above 117.00. Asia reports solid offers in the 117.50 area, while to the downside, stops in god size through 116.35. Price action is likely to remain choppy ahead of today’s FOMC meeting with 115.50 and 118.00 the key levels to watch.

AUD/USD declined to a fresh multi-year low of 0.8144 overnight. There is no apparent reason, with USD only mildly stronger and metals slightly higher on the day. Traders are citing the usual reasons – stops getting ran & position-covering ahead of the FOMC. Looking at the charts, there is not much support until the 2010 low of 0.8066.

EUR/USD traded lower after it failed once again to sustain momentum above 1.25. Bids reported in front of the 1.2450 level, with intraday stops building through 1.2440. Chart support seen at 1.2415 and then 1.2350/60. Similar price action in GBP/USD. Plenty of UK event risk ahead, with the BOE meeting minutes and employment data at 0930 GMT.

Upcoming Events:

  • 09:30 GMT – UK Claimant Count Change (-21.2k)
  • 09:30 GMT – UK Unemployment Rate (5.9 %)
  • 09:30 GMT – UK Average Earnings (1.2 %)
  • 09:30 GMT – Bank of England Meeting Minutes
  • 10:00 GMT – Euro Zone CPI (-0.2 % m/m, 0.3 % y/y)
  • 13:30 GMT – US CPI (-0.1 % m/m, 1.4 % y/y)
  • 13:30 GMT – US Core CPI (0.1 % m/m, 1.8 % y/y)
  • 13:30 GMT – US CUrrent Account (-$97.9bln)
  • 13:30 GMT – Canadian Wholesale Sales (0.9 % m/m)
  • 19:00 GMT – FOMC Statement
  • 19:30 GMT – Fed Chair Yellen speaks
  • 21:45 GMT – New Zealand GDP (0.7 % q/q, 3.2 % y/y)

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