2014 ~ Forex Watcher

Wednesday, December 31, 2014

Pound Holds Own as US Unemployment Claims Jumps

The British pound has posted small gains on Wednesday, as GBP/USD trades in the high-1.55 range in North American session. On the release front, the US released the final events of 2014, with mixed results. Unemployment Claims was weaker than expected, jumping to 298 thousand last week. Pending Home Sales posted a gain of 0.8%, while Chicago PMI dipped to 58.3 points. The only British event of the day, Housing Equity Withdrawal, came in at -10.9 billion pounds, missing expectations.

US releases have wrapped up 2014 with mixed results. Unemployment Claims surprised with a sharp rise, coming in at 298 thousand, compared with 280 thousand in the previous reading. The estimate stood at 287 thousand. On the housing front, Pending Home Sales bounced back from a decline in the previous reading, posting a gain of 0.8% in December. This beat the forecast of 0.6%. The news was not as good from Chicago PMI, which dropped to 58.3 points, its worst showing since June. The reading fell short of the estimate of 60.2 points.

With the US economy showing better numbers as we head into 2015, the US consumer is showing more optimism about the economy. On Tuesday, CB Consumer Confidence rose to 92.6 points, up from 88.8 points a month earlier. Although this missed the estimate of 94.6, this was a solid reading which follows last week’s UoM Consumer Sentiment report. That indicator has been on an upward swing and hit 93.6 points in December, its highest level since February 2007. Consumer confidence numbers are closely watched by analysts, as increased confidence should translate into more spending by consumers, creating more jobs and strengthening economic activity.

GBP/USD for Wednesday, December 31, 2014

GBP/USD December 31 at 16:30 GMT

GBP/USD 1.5584 H: 1.5619 L: 1.5550

GBP/USD Technical

1.5282

1.5392

1.5505

1.5644

1.5717

1.5864

GBP/USD was uneventful in the Asian session. The pair touched a high of 1.5619 in the European session but was unable to consolidate at this level. GBP/USD is stable in the North American session.

1.5644 is the next resistance line.

On the downside, 1.5505 is an immediate support line.

Current range: 1.5505 to 1.5644

Further levels in both directions:

Below: 1.5505, 1.5392, 1.5282 and 1.5165

Above: 1.5644, 1.5717, 1.5864, 1.6000 and 1.6141

OANDA’s Open Positions Ratio

USD/CAD is pointing to gains in short positions on Wednesday. This is not consistent with the pair’s movement, as the pound has posted small gains on the day. The ratio has a majority of long positions, indicative of trader bias towards the pound continuing to move to higher ground.

GBP/USD Fundamentals

9:30 Housing Equity Withdrawal. Estimate -9.2B. Actual -10.9B.

14:00 US S&P/CS Composite-20 HPI. Estimate 4.4%. Actual 4.5%.

13:30 US Unemployment Claims. Estimate 287K. Actual 298K.

14:45 US Chicago PMI. Estimate 60.2 points. Actual 58.3 points.

15:00 US Pending Home Sales. Estimate 0.6%. Actual 0.8%.

15:30 US Crude Oil Inventories. Estimate 0.2M. Actual -1.8M.

17:00 US Natural Gas Storage. Estimate -37B.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

USD/CAD – Canadian Dollar Dips Under 1.16 on Mixed US Data

The Canadian dollar has posted small gains on Wednesday, as USD/CAD trades in the high-1.15 range in the North American session. On the release front, the US released the final events of 2014, with mixed results. Unemployment Claims was weaker than expected, jumping to 298 thousand last week. Pending Home Sales posted a gain of 0.8%, while Chicago PMI dipped to 58.3 points. There are no Canadian releases until next week.

US releases were a mix on the last day of 2014. Unemployment Claims surprised with a sharp rise, coming in at 298 thousand, compared with 280 thousand in the previous reading. The estimate stood at 287 thousand. On the housing front, Pending Home Sales bounced back from a decline in the previous reading, posting a gain of 0.8% in December. This beat the forecast of 0.6%. The news was not as good from Chicago PMI, which dropped to 58.3 points, its worst showing since June. The reading fell short of the estimate of 60.2 points.

USD/CAD for Wednesday, December 31, 2014

USD/CAD December 31 at 15:50 GMT

USD/CAD 1.1593 H: 1.1616 L: 1.1571

USD/CAD Technical

1.1414

1.1493

1.1580

1.1669

1.1723

1.1875

USD/CAD has been marked by choppy trading on Wednesday. The pair tested support at 1.1580 late in the European session as well as early in North American trade.

1.1580 remains under strong pressure. Will USD/CAD break below this level? 1.1493 is stronger.

On the upside, 1.1669 has strengthened in resistance. 1.1723 is next.

Current range: 1.1580 to 1.1669

Further levels in both directions:

Below: 1.1580, 1.1493, 1.1414, 1.1278 and 1.1124

Above: 1.1669, 1.1723, 1.1875 and 1.1975

OANDA’s Open Positions Ratio

USD/CAD is unchanged on Wednesday. This is consistent with the pair’s movement, as the Canadian dollar has posted small gains on the day. The ratio has a majority of short positions, indicative of trader bias towards the Canadian currency continuing to move to higher ground.

USD/CAD Fundamentals

13:30 US Unemployment Claims. Estimate 287K. Actual 298K.

14:45 US Chicago PMI. Estimate 60.2 points. Actual 58.3 points.

15:00 US Pending Home Sales. Estimate 0.6%. Actual 0.8%.

15:30 US Crude Oil Inventories. Estimate 0.2M. Actual -1.8M.

17:00 US Natural Gas Storage. Estimate -37B.

*Key releases are highlighted in bold

*All release times are GMT

AUD/USD – Aussie Steady on Mixed US Numbers

AUD/USD is almost unchanged on Wednesday, as the pair trades in the high-0.81 range early in North American trade. Australian markets are closed for the New Year’s holiday. In the US, Unemployment Claims was weaker than expected, jumping to 298 thousand last week. Pending Home Sales posted a gain of 0.8%, while Chicago PMI dipped to 58.3 points.

AUD/USD for Wednesday, December 31, 2014

AUD/USD December 31 at 16:55 GMT

AUD/USD 0.8175 H: 0.8216 L: 0.8174

AUD/USD Technical

0.7904

0.8081

0.8150

0.8214

0.8315

0.8456

AUD/USD has been marked by choppy movement in light trade on Wednesday. The pair tested resistance at 0.8214 in the Asian session.

0.8150 remains a weak support line. 0.8081 is stronger.

0.8214 is a weak resistance line. 0.8315 is stronger.

Current range: 0.8150 to 0.8214.

Further levels in both directions:

Below: 0.8150, 0.8081, 0.7904, 0.7799 and 0.7701

Above: 0.8214, 0.8315, 0.8456 and 0.8550

OANDA’s Open Positions Ratio

AUD/USD ratio is pointing to gains in short positions on Wednesday, reversing the direction seen a day earlier. This is consistent with the movement of the pair, as the Australian dollar has posted small losses. The ratio has a majority of long positions, indicative of trader bias towards AUD/USD breaking out of range and moving higher.

AUD/USD Fundamentals

13:30 US Unemployment Claims. Estimate 287K. Actual 298K.

14:45 US Chicago PMI. Estimate 60.2 points. Actual 58.3 points.

15:00 US Pending Home Sales. Estimate 0.6%. Actual 0.8%.

15:30 US Crude Oil Inventories. Estimate 0.2M. Actual

17:00 US Natural Gas Storage. Estimate -37B.

*Key releases are highlighted in bold

*All release times are GMT

USD/JPY – Shrinking Yen Expected to Weaken Further in 2015

USD/JPY has steadied on Wednesday, after the yen gained about 100 points a day earlier. Later in the European session, USD/JPY is trading in the mid-119 range. On the release front, Japanese markets are closed on Wednesday and Thursday and there are no Japanese releases until next week. In the US, Unemployment Claims was weaker than expected, jumping to 298 thousand last week.

With the US economy showing better numbers as we head into 2015, the US consumer is showing more optimism about the economy. On Tuesday, CB Consumer Confidence rose to 92.6 points, up from 88.8 points a month earlier. Although this missed the estimate of 94.6, this was a solid reading which follows last week’s UoM Consumer Sentiment report. That indicator has been on an upward swing and hit 93.6 points in December, its highest level since February 2007. Consumer confidence numbers are closely watched, as increased confidence should translate into more spending by consumers, creating more jobs and strengthening economic activity.

The yen started 2014 at the 105 line, but has taken a tumble, as USD/JPY is trading just under the key 120 level as we wrap up the year. This is a sharp decline of 11% and marks the fourth annual loss for the hapless Japanese currency. Last week, Prime Minister Shinzo Abe announced a stimulus program to kick-start the sluggish economy and we could see more stimulus if the economic conditions don’t improve. With the Federal Reserve likely to raise interest rates sometime in 2015, the divergence in monetary stance between the Fed and the BOJ will likely push the yen to lower levels in 2015.

USD/JPY for Wednesday, December 31, 2014

USD/JPY December 31 at 13:30 GMT

USD/JPY 119.58 H: 119.78 L: 119.25

USD/JPY Technical

116.69

117.94

118.69

119.83

120.63

121.39

USD/JPY edged lower in the Asian session and posted stronger losses in the European session, breaking below support at 119.83.

119.83 has switched to a resistance role as the dollar has lost ground and is a weak line. 129.363 is next.

118.69 is a strong support level.

Current range: 118.69 to 119.83

Further levels in both directions:

Below: 118.69, 117.94 and 116.69 and 115.56

Above: 119.83, 120.63, 121.39, 122.18 and 124.16

OANDA’s Open Positions Ratio

USD/JPY is pointing to gains in short positions on Wednesday. This is consistent with the pair, as the yen has shown strong gains on the day. The ratio has a majority of long positions, indicative of trader bias towards the dollar continuing to post gains.

USD/JPY Fundamentals

13:30 US Unemployment Claims. Estimate 287K. Actual 298K.

14:45 US Chicago PMI. Estimate 60.2 points.

15:00 US Pending Home Sales. Estimate 0.6%.

15:30 US Crude Oil Inventories. Estimate 0.2M.

17:00 US Natural Gas Storage. Estimate -37B.

*Key releases are highlighted in bold

*All release times are GMT

Gold Expected to Soften in 2015 as US Recovery Deepens

Gold is stable on Wednesday, with a spot price of $1199.55 per ounce in the European session. In the US, today’s key event is Unemployment Claims, which will be released ahead of its usual Thursday slot due to New Year’s. We’ll also get a look at Chicago PMI and Pending Home Sales.

Gold is ending the year right where it started, at the key $1200 level. The metal hit the 2015 high of $1388 in March, but was unable to stay at this lofty level for very long. Gold has struggled in recent months as the dollar has surged on the currency markets and commodities such as oil have taken a hit. With the US recovery deepening and the Federal Reserve likely to raise rates in the first half of next year, we could see the metal lose more ground against the greenback in early 2015.

With the US economy showing better numbers as we head into 2015, the US consumer is showing more optimism about the economy. On Tuesday, CB Consumer Confidence rose to 92.6 points, up from 88.8 a month earlier. Although this missed the estimate of 94.6, this was a solid reading which follows last week’s UoM Consumer Sentiment report. That indicator has been on an upward swing and hit 93.6 points in December, its highest level since February 2007. Consumer confidence numbers are closely watched, as increased confidence should translate into more spending by consumers, creating more jobs and strengthening economic activity.

XAU/USD for Wednesday, December 31, 2014

XAU/USD December 31 at 12:05 GMT

XAU/USD 1198.15 H: 1203.79 L: 1195.85

XAU/USD Technical

1130

1156

1175

1200

1215

1240

XAU/USD has shown little movement in the Asian and European sessions. The pair continues to trade close to the 1200 level.

1200 is a weak resistance line and was tested in the Asian session. 1215 is stronger.

1175 is an immediate support line.

Current range: 1175 to 1200

Further levels in both directions:

Below: 1175, 1156, 1130 and 1111

Above: 1200, 1215, 1240, 1255 and 1275

OANDA’s Open Positions Ratio

XAU/USD is pointing to gains in short positions on Wednesday. This is not consistent with the pair, which has shown very little movement on the day. The ratio has a majority of long positions, indicative of trader bias towards gold breaking above range and moving to higher ground.

XAU/USD Fundamentals

13:30 US Unemployment Claims. Estimate 287K.

14:45 US Chicago PMI. Estimate 60.2 points.

15:00 US Pending Home Sales. Estimate 0.6%.

15:30 US Crude Oil Inventories. Estimate 0.2M.

17:00 US Natural Gas Storage. Estimate -37B.

*Key releases are highlighted in bold

*All release times are GMT

EUR/USD – Euro’s Rough Ride Likely to Continue in 2015

EUR/USD is listless on the final day of 2014, as the pair continues to trade in the mid-1.21 range. The euro finds itself at 2-year lows and has given up about 350 points in the past two weeks. Trade is light in the European session, as German markets are closed and there are no Eurozone events on Wednesday. In the US, Unemployment Claims will be released later today, along with Chicago PMI and Pending Home Sales.

The euro started 2014 in great shape, trading at 1.37 against the US dollar. However, EUR/USD tumbled about 11% this year, as the euro finds itself struggling at the 1.2150 mark as we head into 2015. This marks the euro’s biggest annual drop since 2005. The Eurozone’s woes have become a familiar broken record of low growth, rock bottom inflation and high unemployment. The ECB cut rates to the bone but this failed to kick-start the economy. The harsh economic reality engulfing the Eurozone means that ECB head Mario Draghi may be forced to use his strongest card, quantitative easing, early in 2015. This step would further weaken the wobbly euro, and analysts are forecasting that the currency will dip below the 1.20 level in the first quarter of 2015.

With the US economy showing better numbers as we head into 2015, the US consumer is showing more optimism about the economy. On Tuesday, CB Consumer Confidence rose to 92.6 points, up from 88.8 a month earlier. Although this missed the estimate of 94.6, this was a solid reading which follows last week’s UoM Consumer Sentiment report. That indicator has been on an upward swing and hit 93.6 points in December, its highest level since February 2007. Consumer confidence numbers are closely watched, as increased confidence should translate into more spending by consumers, creating more jobs and strengthening economic activity.

Greece was in the spotlight on Monday, but this time it was a political crisis rather than trouble with the country’s bailout plan. Greece lawmakers failed to elect a new president for a third time, leaving Prime Minister no choice but to dissolve parliament. A general election is likely to take place at the end of January. The country’s controversial bailout agreement promises to be a major election issue. The bailout agreement ends in February, and Greece owes EUR 260 billion to the troika (EU, ECB and the IMF). Negotiations between Greece and the troika are on hold until after the election. The bailout agreement forced Greece to implement stiff austerity measures which have proven deeply unpopular, and the Syriza Party, which leads in the polls, wants to cancel the bailout agreement and write off much of the country’s debt. Such a move could send shock waves across European markets, as other bailout countries such as Ireland would be tempted to follow Greece’s precedent and opt out of their financial obligations to the troika. The latest Greek saga will be closely watched by the markets as we move closer to Greek election day.

EUR/USD for Wednesday, December 31, 2014

EUR/USD December 31 at 10:15 GMT

EUR/USD 1.2152 H: 1.2170 L: 1.2144

EUR/USD Technical

1.1926

1.2042

1.2143

1.2286

1.2407

1.2518

EUR/USD is almost unchanged in the Asian and European sessions. The pair continues to put pressure on support at 1.2143.

1.2143 remains a weak support level. Will it break in the North American session? 1.2042 is next.

1.2286 remains a strong resistance line.

Current range: 1.2143 to 1.2286

Further levels in both directions:

Below: 1.2143, 1.2042, 119.26 and 118.02

Above: 1.2286, 1.2407, 1.2518, 1.2688 and 1.2806

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged on Wednesday. This is consistent with the lack of movement shown by EUR/USD. The ratio has a majority of long positions, indicative of trader bias towards the euro moving to higher ground.

EUR/USD Fundamentals

13:30 US Unemployment Claims. Estimate 287K.

14:45 US Chicago PMI. Estimate 60.2 points.

15:00 US Pending Home Sales. Estimate 0.6%.

15:30 US Crude Oil Inventories. Estimate 0.2M.

17:00 US Natural Gas Storage. Estimate -37B.

*Key releases are highlighted in bold

*All release times are GMT

European Deflation Battle Success Hinges on Unity in 2015

The euro lost 9.65% of its value versus the U.S. dollar in 2014. The American economy’s growing momentum coupled with the growth-sapping effect of European deflation has driven the EUR/USD to a two-year low (1.2260). To find a lower quote, we need to go back to the summer of 2012 when the Spanish bailout rumors drove the EUR (1.2171), and the five-year low it hit in the summer of 2010 (1.2020). The lower support levels are under threat if the European Union cannot achieve consensus on much needed reforms.

Europe joins Japan and China among the major economies looking for ways to foster a faster pace of growth. The United States and the United Kingdom have shown impressive growth, and each are six months away from ending an era of record low interest rates. The global growth slowdown and various geopolitical threats will make for a challenging 2015 for the single currency.

ECB to Do Whatever It Takes (or Whatever Germany Allows)

The European Central Bank (ECB) by design has never been the first central bank out of the gate with effective monetary policy. Arguments have to be made, options weighed, and consensus built before any decision is made. It is done at a pace that favors patience over action. The ECB has countered this frustratingly slow process with combative rhetoric. More than once, President Mario Draghi has vowed to do whatever it takes to defend the euro. Like the boy who cried wolf, the markets are now unsure if he could really do anything unless Germany supports his proposed measures. Something’s got to give. Record low interest rates, stagnant economic growth, and deflation are hammering the eurozone.

Deflation will reduce consumption, as prices stay low the longer consumer spending is flat. This creates a vicious cycle where growth remains elusive, and internal demand continues to be driven down, thereby reducing the overall growth of the economy. Even the German engine has begun to stall with the adverse conditions within Europe. Adding to the brooding sense of economic woe, macroeconomic headwinds courtesy of sluggish growth in China and Japan is to the currency bloc’s detriment.

The main challenge for the ECB is to convince Germany and other members to unleash a quantitative easing (QE) program that includes the purchase of sovereign bonds. The governor of the Bundesbank, Jens Weidmann, has time and again stated that such a move is not necessary. Meanwhile, Chancellor Angela Merkel has aimed her criticisms at France and Italy for those nations’ lack of reforms to boost productivity. French Finance Minister Michel Sapin has in turn publicly scolded Merkel, saying her comments only serve to fuel populism.

U.K. Elections and Anti-Austerity Political Parties in Europe

There is evidence that what Sapin is saying rings true. Greece was one of the hardest hit by the credit crisis in 2008, but before granting it a bailout, the eurozone served up austerity that brought protestors to the streets and fueled the rise of leftist parties. The same pattern is at play in Italy and France where anti-austerity parties or movements continue to fragment power, which could further complicate the already complex quagmire that is the E.U.

Even outside of continental Europe, anti-austerity winds are blowing. The right-wing U.K. Independence Party (UKIP) will add a new wrinkle to the usual two-leading party system in the coming elections. The Labour and Conservative parties cannot ignore the rising anti-E.U. sentiment that has fueled the rise of UKIP, and will add to the debate around stimulus versus austerity that is playing out around the world.

The Ukraine-Russia Energy Crisis That Wasn’t

Energy exporters, especially those where it is the main national export, face an uphill battle after the Organization of the Petroleum Exporting Countries (OPEC) did not orchestrate a cut in production that would have sent the price of oil higher. Ten out of the 12 OPEC members are currently underwater as the price of oil is lower than needed to balance their budgets. Non-OPEC members like Russia — which made energy a negotiation tool with Ukraine — have lost ground as it can hardly afford the West’s sanctions with decreasing revenue for energy exports.

In order to avoid a repeat of past issues with Russia, Europe stockpiled gas to allow for a longer round of negotiations with Moscow. The slower global growth means nations are demanding less energy, while producers maintain the same output, resulting in lower prices. New technologies such as shale oil extraction have also introduced a new source of energy that has put pressure on crude oil prices.

Europe to Face Headwinds Out in the Open

The deadlock in the E.U. parliament will have to be unlocked by Draghi and his peers at the ECB in order to launch a stimulus package. It is the only conceivable path at this juncture that will persuade the markets that the euro won’t keep dropping in 2015. The market remains unconvinced, and until there are signs that Germany is coming around to the idea of sovereign bond-buying, the single currency will remain volatile against the greenback. That makes it harder for investors to predict EUR/USD direction. The Federal Reserve’s impending interest rate hike will mark and end to the low-rate era that resulted after the credit crisis in 2008.

2015 offers European leaders little in terms of a clear path forward. A weaker currency alongside structural reforms could be the recipe for Europe to escape the grip of deflation. Germany is blocking further stimulus measures that would weaken the currency. Italy and France are struggling to pass important reforms. Even if everyone miraculously came together within the contentious E.U., Japan’s fortunes stand as a warning for all. In other words, despite a weakened currency and a QE program pumping out fresh money, there are no guarantees it will turn the tide as intended.

GBP/USD – Pound Higher as US Consumer Confidence Misses Forecast

GBP/USD has posted gains on Tuesday, as the pair trades in the mid-1.55 range in the North American session. After a slow start to the week, there were releases from the UK and US on Tuesday. In the UK, Nationwide HPI edged lower to 0.2%. Over in the US, CB Consumer Confidence rose to 92.4 points, short of the estimate.

British Nationwide HPI, an important gauge of the health of the housing sector, continues to soften. The December reading dipped to 0.2%, short of the estimate of 0.3%. This weaker gain is somewhat surprising, given that British employment and consumer spending data has been strong. Analysts expect the housing market to pick up in early 2015 and are not overly concerned that the indicator has slowed over the past two releases.

With the US economy showing better numbers as we head into 2015, the US consumer is showing more optimism about the economy. On Tuesday, CB Consumer Confidence rose to 92.6 points, up from 88.8 a month earlier. Although this missed the estimate of 94.6, this was a solid reading which follows last week’s UoM Consumer Sentiment report. That indicator has been on an upward swing and hit 93.6 points in December, its highest level since February 2007. Consumer confidence numbers are closely watched, as increased confidence should translate into more spending by consumers, creating more jobs and strengthening economic activity.

GBP/USD for Tuesday, December 30, 2014

GBP/USD December 30 at 14:15 GMT

GBP/USD 1.5570 H: 1.5574 L: 1.5501

GBP/USD Technical

1.5282

1.5392

1.5505

1.5644

1.5717

1.5864

GBP/USD was flat in the Asian session. The pair has posted slight gains in the European session and this trend continues in North American trade.

1.5644 is an immediate resistance line. 1.5717 is next.

On the downside, 1.5505 has some breathing room as the pair trades at higher levels.

Current range: 1.5505 to 1.5644

Further levels in both directions:

Below: 1.5505, 1.5392, 1.5282 and 1.5165

Above: 1.5644, 1.5717, 1.5864, 1.6000 and 1.6141

OANDA’s Open Positions Ratio

USD/CAD is pointing to gains in long positions on Tuesday. This is consistent with the pair’s movement, as the pound has posted gains on the day. The ratio has a majority of long positions, indicative of trader bias towards the pound continuing to move to higher ground.

GBP/USD Fundamentals

14:00 US S&P/CS Composite-20 HPI. Estimate 4.4%. Actual 4.5%.

15:00 US CB Consumer Confidence. Estimate 94.6 points. Actual 92.6 points.

*Key releases are highlighted in bold

*All release times are GMT

USD/CAD – Slight Losses as US Consumer Confidence Misses Estimate

The Canadian dollar has posted slight gains on Tuesday, as USD/CAD trades slightly above the 1.16 line in the North American session. On the release front, there are no Canadian releases. In the US, today’s highlight was CB Consumer Confidence. The indicator improved to 92.6 points, shy of the estimate of 94.6 points.

With the US economy showing better numbers as we head into 2015, the US consumer is showing more optimism about the economy. On Tuesday, CB Consumer Confidence rose to 92.6 points, up from 88.8 a month earlier. Although this missed the estimate of 94.6, this was a solid reading which follows last week’s UoM Consumer Sentiment report. That indicator has been on an upward swing and hit 93.6 points in December, its highest level since February 2007. Consumer confidence numbers are closely watched, as increased confidence should translate into more spending by consumers, creating more jobs and strengthening economic activity.

USD/CAD for Tuesday, December 30, 2014

USD/CAD December 30 at 15:30 GMT

USD/CAD 1.1617 H: 1.1651 L: 1.1612

USD/CAD Technical

1.1414

1.1493

1.1580

1.1669

1.1723

1.1875

USD/CAD was flat in the Asian session. The pair has moved lower in the Asian and European sessions, putting some pressure on support at 1.1580.

1.1580 has weakened in support as the pair trades at lower levels. Will USD/CAD break below this level? 1.1493 is stronger.

On the upside, 1.1669 is an immediate resistance line. 1.1723 is next.

Current range: 1.1580 to 1.1669

Further levels in both directions:

Below: 1.1580, 1.1493, 1.1414, 1.1278 and 1.1124

Above: 1.1669, 1.1723, 1.1875 and 1.1975

OANDA’s Open Positions Ratio

USD/CAD is pointing to gains in long positions on Tuesday. This is not consistent with the pair’s movement, as the Canadian dollar has posted gains on the day. The ratio has a majority of short positions, indicative of trader bias towards the Canadian currency continuing to move to higher ground.

USD/CAD Fundamentals

14:00 US S&P/CS Composite-20 HPI. Estimate 4.4%. Actual 4.5%.

15:00 US CB Consumer Confidence. Estimate 94.6 points. Actual 92.6 points.

*Key releases are highlighted in bold

*All release times are GMT

AUD/USD – Slight Gains Ahead of US Consumer Confidence

AUD/USD has posted slight gains on Tuesday, as the pair trades in the high-0.81 range early in North American trade. Later in the day, we’ll get a look at US consumer confidence numbers, with the markets expecting an excellent release for December. The estimate stands at 94.6 points. There are no Australian releases on Tuesday.

Last week’s US releases were a mix. GDP was excellent in Q3, jumping 5.0%, ahead of the estimate of 4.6%. This marked the indicator’s strongest gain since the third quarter of 2003. The US economy is expected to continue to surge in 2015, driven by increased consumer spending and lower oil prices. Core Durable Goods Orders and Durable Goods Orders both disappointed with declines in November. UoM Consumer Sentiment continued to rise, hitting 93.6 points in December. This marked its highest level since February 2007, as the US consumer remains very optimistic about the economy as we move into 2015. Unemployment Claims posted another solid reading, indicative of a strong US labor market.

AUD/USD for Tuesday, December 30, 2014

AUD/USD December 30 at 15:20 GMT

AUD/USD 0.8189 H: 0.8198 L: 0.8122

AUD/USD Technical

0.7904

0.8081

0.8150

0.8214

0.8315

0.8456

AUD/USD was flat in the Asian session. The pair broke above resistance at 0.8150 in European trade. AUD/USD is unchanged in the North American session.

0.8150 is a weak support line. 0.8081 is stronger.

0.8214 is under strong pressure. Will the pair break through in the North American session? 0.8315 is stronger.

Current range: 0.8150 to 0.8214.

Further levels in both directions:

Below: 0.8150, 0.8081, 0.7904, 0.7799 and 0.7701

Above: 0.8214, 0.8315, 0.8456 and 0.8550

OANDA’s Open Positions Ratio

AUD/USD ratio is pointing to gains in long positions on Tuesday. This is consistent with the movement of the pair, as the Australian dollar has posted gains. The ratio has a majority of long positions, indicative of trader bias towards AUD/USD breaking out of range and moving higher.

AUD/USD Fundamentals

14:00 US S&P/CS Composite-20 HPI. Estimate 4.4%.

15:00 US CB Consumer Confidence. Estimate 94.6 points.

*Key releases are highlighted in bold

*All release times are GMT

USD/JPY – Yen Rebounds, Moves Below 120

USD/JPY has posted strong gains on Tuesday, as USD/JPY is trading in the mid-119 range late in the North American session. On the release front, it’s another quiet day, with no Japanese releases. In the US, today’s highlight is US CB Consumer Confidence. The markets are expecting a strong improvement in the December reading, with the estimate standing at 94.6 points.

Japanese Prime Minister Shinzo Abe has wasted little time in tackling the country’s economic woes, after winning the election earlier this month. On Saturday, Abe unveiled a stimulus program worth JPY 3.5 trillion. The program aims at reviving consumer spending, which has been sluggish since a sales tax hike back in April. The government expects the scheme to add 0.7% to GDP, which has contracted for two straight quarters, as the economy is officially in recession.

Last week’s Japanese releases underscored an economy that continues to struggle as we head into 2o15. Tokyo Core CPI, the key inflation indicator, edged down to 2.3% in November, matching the market forecast. However, the indicator continued a worrying downward trend, dropping for a fourth straight month. Consumer demand remains weak, as Household Spending posted a sharp decline of 2.5%. Retail Sales posted a gain of 0.4%, but this was well short of the forecast of 1.2% and the weakest showing since June. There was no relief from the manufacturing front, as Preliminary Industrial Production fell by 0.6%, well short of the estimate of a 1.0% gain.

USD/JPY for Tuesday, December 30, 2014

USD/JPY December 30 at 12:40 GMT

USD/JPY 119.43 H: 120.67 L: 119.18

USD/JPY Technical

116.69

117.94

118.69

119.83

120.63

121.39

USD/JPY edged lower in the Asian session and posted stronger losses in the European session, breaking below support at 119.83.

119.83 has switched to a resistance role as the dollar has lost ground and is a weak line. 129.363 is next.

118.69 is a strong support level.

Current range: 118.69 to 119.83

Further levels in both directions:

Below: 118.69, 117.94 and 116.69 and 115.56

Above: 119.83, 120.63, 121.39, 122.18 and 124.16

OANDA’s Open Positions Ratio

USD/JPY is pointing to gains in short positions on Tuesday. This is consistent with the pair, as the yen has shown strong gains on the day. The ratio has a majority of long positions, indicative of trader bias towards the dollar continuing to post gains.

USD/JPY Fundamentals

14:00 US S&P/CS Composite-20 HPI. Estimate 4.4%.

15:00 US CB Consumer Confidence. Estimate 94.6 points.

*Key releases are highlighted in bold

*All release times are GMT

EUR Steady Ahead of Turn

Greek contagion contained

Single currency broadly unchanged

Spanish disinflation remains an issue

Euro credit shows some improvement

The collapse of the Greek government is not expected to have the same knock on contagion effect witnessed during the ‘darkest days’ of the Euro debt crisis two-years ago. Back then and similar to today, the ECB pledged to save the EUR currency by any means. Any major contagion is likely to be met with policy support from Draghi and company. With potential ECB QE on the immediate horizon, the markets believe that this is a Greek problem, despite the expected peppering of future “Grexit” talk.

Greek Assets Punished

Investors’ immediate reaction has seen Greek equities and bonds plunge, while other periphery markets (Italy, Spain and Portugal) are small rocked as conservative funds continue to flow into German bunds (hover around record high prices) and gold (+0.6% to $1,188). Currently, there is no panic even from Europe’s second most indebted nation – Italy. It’s ten-year debt trades close to +2%, a long way from the +7% at the height of the debt and contagion crisis. Even today’s Italian 10’s auction results, despite some mixed results, the positive price action would say more than anything else – there is demand willing to pay and support some record low yields for various tranches.

Nevertheless, Greece’s failed presidential vote should be capable of creating a bigger element of uncertainty once the markets are back to being fully functional after the seasonal holidays. What the dealers and investors will be watching mostly in Greece will be the rise of the SYRIZA party (strong opponents of the E.U./ECB/troika agreement) and their potential influence on like minded parties throughout the Eurozone. Market psychology should eventually support a greater risk-off mood just on ‘event’ risk outcome, but nothing compared to the last freefall go around.

The EUR remains broadly steady outright (€1.2155) and off it’s two-year low (€1.2124), and this despite single currency bears calling for a €1.20 print backed by the uncertainty surrounding Greece. It seems that the market does not have the momentum to follow through with conviction. Perhaps it requires greater market participation and an ECB QE announcement to up the immediate EUR negative ante. The situation in Greece highlights the view that the crisis in EMU is far from over.

ECB’s price and lending issues

Spanish Consumer Price data this morning stresses the continuation of the “disinflation” trend within the Eurozone. The December reading surprised on the downside with a -1.1% year-over-year drop both under the EU-harmonized CPI calculation and its own domestic CPI estimate. The result is now the weakest on record, firmly beating the respective -0.5% and -0.4% print from November. This is strong proof for the ECB that deflationary problems remain strong even from a Eurozone economy with significant economic growth. Do not be surprised that energy prices will be expected to take the bulk of the blame.

Euro Credit Improving

If it’s not price then it’s usually lending concerns that keep the ECB busy. Central bank data this morning suggests that the Eurozone’s flow of credit is slowing improving. Lending to the private sector improved last month (M3 broadest measure +3.1% vs. +2.5%, m/m), but remains below year-over-year levels (-0.9%). Despite the improvement, Euro’s M3 value remains well below the ECB’s “reference value” of +4.5% that Draghi and company consider consistent with their goal of achieving and maintaining a inflation rate of just under +2%. Annual eurozone inflation was +0.3% last month and with the plunge in energy prices this number could turn negative early next year. Despite the negativity, the ECB can take some heart that stimulus measures undertaken during the summer (cheaper bank loans, record low interest rates and the purchase of covered bonds) at least seem to be having an impact, albeit a slow one.

None of today’s data should change market opinion on “when, not if” the ECB will start QE.

Forex heatmap

Gold Calm Ahead of US Consumer Confidence Report

Gold is stable on Tuesday, with a spot price of $1186.99 per ounce in the European session. Today’s highlight is US CB Consumer Confidence. The markets are expecting a strong improvement in the December reading, with the estimate standing at 94.6 points.

Greece was in the spotlight on Monday, but this time it was a political crisis rather than trouble with the country’s bailout plan. Greece lawmakers failed to elect a new president for a third time, leaving Prime Minister no choice but to dissolve parliament. A general election has now been scheduled for January 25. The country’s controversial bailout agreement promises to be a major election issue. The bailout agreement ends in February, and Greece owes EUR 260 billion to the troika (EU, ECB and the IMF). Negotiations between Greece and the troika are on hold until after the election. The bailout agreement forced Greece to implement stiff austerity measures have proven deeply unpopular, and the Syriza Party, which leads in the polls, wants to cancel the bailout agreement and write off much of the country’s debt. Such a move could send shock waves across European markets, as other bailout countries such as Ireland would be tempted to follow Greece’s precedent and opt out of their financial obligations to the troika. The latest Greek saga will be closely watched by the markets as we move closer to Greek election day.

XAU/USD for Tuesday, December 30, 2014

XAU/USD December 30 at 11:45 GMT

XAU/USD 1186.99 H: 1190.80 L: 1181.80

XAU/USD Technical

1130

1156

1175

1200

1215

1240

XAU/USD edged higher in the Asian session. The pair is unchanged in the European session.

1200 is an immediate resistance line. 1215 is next.

1175 is a weak support line. 1156 is next.

Current range: 1175 to 1200

Further levels in both directions:

Below: 1175, 1156, 1130 and 1111

Above: 1200, 1215, 1240, 1255 and 1275

OANDA’s Open Positions Ratio

XAU/USD is pointing to gains in long positions. This is not consistent with the pair, which has shown very little movement on the day. The ratio has a majority of long positions, indicative of trader bias towards gold breaking above range and moving to higher ground.

XAU/USD Fundamentals

14:00 US S&P/CS Composite-20 HPI. Estimate 4.4%.

15:00 US CB Consumer Confidence. Estimate 94.6 points.

*Key releases are highlighted in bold

*All release times are GMT

EUR/USD – Little Activity as Markets Eye US Consumer Confidence

EUR/USD continues to trade quietly in the final year of 2014. In Tuesday’s European session, the pair is trading in the mid-1.21 range. The euro is struggling, having lost about 350 points in the past two weeks. On the release front, Spanish CPI posted a sharp decline of 1.1%, while Eurozone Private Loans came in at -0.9%, matching the forecast. In the US, today’s highlight is CB Consumer Confidence. The markets are expecting a strong reading for December, with the estimate standing at 94.6 points.

Greece was in the spotlight on Monday, but this time it was a political crisis rather than trouble with the country’s bailout plan. Greece lawmakers failed to elect a new president for a third time, leaving Prime Minister no choice but to dissolve parliament. A general election has now been scheduled for January 25. The country’s controversial bailout agreement promises to be a major election issue. The bailout agreement ends in February, and Greece owes EUR 260 billion to the troika (EU, ECB and the IMF). Negotiations between Greece and the troika are on hold until after the election. The bailout agreement forced Greece to implement stiff austerity measures have proven deeply unpopular, and the Syriza Party, which leads in the polls, wants to cancel the bailout agreement and write off much of the country’s debt. Such a move could send shock waves across European markets, as other bailout countries such as Ireland would be tempted to follow Greece’s precedent and opt out of their financial obligations to the troika. The latest Greek saga will be closely watched by the markets as we move closer to Greek election day.

EUR/USD for Tuesday, December 30, 2014

EUR/USD December 30 at 10:40 GMT

EUR/USD 1.2150 H: 1.2188 L: 1.2124

EUR/USD Technical

1.1926

1.2042

1.2143

1.2286

1.2407

1.2518

EUR/USD edged lower in the Asian session, testing support at 1.2143. The pair has reversed directions in the European session and posted gains.

1.2143 is a weak support level. 1.2042 is next.

1.2286 remains a strong resistance line.

Current range: 1.2143 to 1.2286

Further levels in both directions:

Below: 1.2143, 1.2042, 119.26 and 118.02

Above: 1.2286, 1.2407, 1.2518, 1.2688 and 1.2806

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in short positions on Tuesday. This is not is consistent with the pair’s movement, as the euro has posted small gains. The ratio has a majority of long positions, indicative of trader bias towards the euro moving to higher ground.

EUR/USD Fundamentals

8:00 Spanish Flash CPI. Estimate -0.7%. Actual -1.1%.

9:00 Eurozone M3 Money Supply. Estimate 2.6%. Actual 3.1%.

9:00 Eurozone Private Loans. Estimate -0.9%. Actual -0.9%.

9:00 Italian 10-year Bond Auction.

14:00 US S&P/CS Composite-20 HPI. Estimate 4.4%.

15:00 US CB Consumer Confidence. Estimate 94.6 points.

*Key releases are highlighted in bold

*All release times are GMT

Can the U.S. Dollar Keep Up its Torrid Pace in 2015?

The U.S. dollar climbed against every major currency this year on the strength of the U.S. economy; a sharp contrast to the struggles of Europe and Japan. The U.S. Federal Reserve transitioned leadership and is on the cusp of changing from an expansionary to a tightening cycle. Ben Bernanke stepped down from the chair of the central bank to make way for Janet Yellen to assume the post. Before he departed, Bernanke announced the Fed’s bond-buying exercise would end in the fall, thereby setting the expectations of a higher interest rate environment next year. American employment has recovered and is now close to pre-credit crisis levels alongside other major indicators.

A strong economy and a central bank poised to raise rates have boosted the USD, but it’s the uncertainty about global growth that secured its place as the top currency in 2014. From political turmoil in the Group of Seven economies like the Scottish referendum, to armed conflict and health crises, 2014 was not short of market volatility. 2015 promises more of the same. That will make for an interesting FX market and one investors can find opportunities to trade in.

The Fed’s Patience is a Virtue

The Fed continues to confound the market as to when it will make its move. Yellen let it slip at her debut press conference at the beginning of the year that rates could be raised six months after the end of the Fed’s bond-buying program. With the Fed’s sprawling quantitative easing (QE) initiative ending last fall, the tightening cycle could begin as early as the spring of 2015. However, some Fed members have issued statements that the central bank needs to be patient and raise rates only when necessary, while others are urging for the start of the rate-hike cycle. That tone and perspective made its way into the official Federal Open Market Committee (FOMC) as was evidenced by the FOMC’s final statement in 2014.

The EUR/USD price action has been driven by the European Central Bank’s (ECB) desire to launch an effective stimulus program to reverse European deflation, and the strong U.S. economic data driving the Fed toward a rate hike sometime next year. The gridlock between Germany and Southern Europe around the purchase of sovereign bonds as part of a QE program has rendered all alternatives fruitless. The market expectations are for the stimulus crowd to win out, but things in Europe might have to get worse as the anti-austerity movements gain traction. Lower European rates and a boost from the ECB will keep the single currency depreciating against the dollar, so long as the Fed stays on course in the opposite direction. The resulting rate divergence will keep the USD bid against all major pairs and emerging markets.

U.S. Growth Moderate but Outpacing Developed Economies

Federal Reserve Bank of New York President William Dudley said market expectations about a higher benchmark interest rate are well founded. The former Goldman Sachs economist sees U.S. growth as stable and conditions such as low oil prices being beneficial, as it reduced the price of energy imports. The U.S. economy grew by 4.6% in the second quarter one year after a harsh winter laid results in the first quarter low. The surprise came in the third quarter where growth beat expectations to make clear that it was not a single quarter bounce as gross domestic product data increased by 3.9%. Dudley sees slower growth in 2015, but still around 2.5% to 3%, with a rate hike likely midyear 2015.

The International Monetary Fund, the World Bank, and the Organization for Economic Cooperation and Development have all cut their global growth forecasts for 2014 and 2015. Here divergence among recovering economies is clear as the U.S. and the U.K. lead the developed world with Europe and Japan at a standstill.

Emerging markets continue to struggle trapped between diminishing foreign direct investment that is diverted to safe-haven assets as major central banks keep the markets on edge, and unfolding geopolitical events diminish appetites for riskier investments. The U.S. has benefited from safe-haven inflows. The American economy remains solid as commodities continue to plummet, and investors struggle to diversify their portfolios as they search for stability.

USD on an Uncertain Fast Track

Japan and Europe depend on the Fed to stick to its intended plan in order for their stimulus to have an impact and boost growth. The Fed tightening, and the BoJ’s and ECB’s expansionary policies, should result in further USD dominance next year. Central bankers have heavily dictated the pace of the post crisis economy acting in concert. Uncertainty will build up with the Fed breaks the ranks to be joined by the Bank of England once the U.K. elections have passed. Higher rates in the developed world are coming and the dollar is set to take advantage. Central bankers in Europe and Japan will have their work cut out for them as Yellen and the rest of the Fed have an easier job of keeping the economy on track.

One of the drivers of the U.S. recovery has been a weak dollar as it allowed America to recover its exporting edge while reducing imports. With that competitive advantage gone continued growth will come with agreements like the Trans-Pacific Partnership (TPP) where Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam aim to create a trade pact to boost growth among members and defy the lower growth forecasts for next year. Challenges abound for the TPP to move forward, ironically Japan and the United States are two of the last members to join, and they continue to block the agreement from being ratified to negotiate tariff reductions protecting national lobbies.

2014 proved to be an eventful year for the global forex market. Shock central bank decisions, political turmoil in Europe, and the projected slowdown in China that is about to become a reality has seen the resurgence of the USD as the go-to currency. Gold has decoupled from global conflict as a safe haven, and in a world with little inflation, it has seen its usefulness decline. Increased volatility also means that current trends can be reversed when taking into account a patient Fed and a near-desperate ECB facing off against a stern German blockade.

GBP/USD – Pound Steady in Light Trade

GBP/USD is steady on Monday, as the pair trades in the mid-1.55 range in the North American session. British markets were closed on Thursday and Friday, and traders can expect a very quiet start to the week. There are no UK or US releases on Monday.

Both the UK and US released GDP for Q3 last early last week, ahead of the Christmas holiday. In the US, GDP was red-hot in Q3, jumping 5.0%, ahead of the estimate of 4.6%. This marked the indicator’s strongest gain since the third quarter of 2003. The US economy is expected to continue to surge in 2015, driven by increased consumer spending and lower oil prices.

In the UK, British GDP came in at 0.7% in the Q3, matching the forecast. This was slightly lower than the revised release for Q2 of a 0.8% gain, but still a very respectable figure. Current Account surprised as the deficit ballooned to GBP 27.0 billion, much higher than the estimate of GBP 21.1 billion. Mortgage Approvals softened for a fifth straight month, dropping to 36.7 thousand. This missed the forecast of 37.3 thousand.

Elsewhere in the US, the news was mixed. Core Durable Goods Orders and Durable Goods Orders both disappointed with declines in November. UoM Consumer Sentiment continued to rise, hitting 93.6 points in December. This marked its highest level since February 2007, as the US consumer remains very optimistic about the economy as we move into 2015. Unemployment Claims posted another solid reading, indicative of a strong US labor market.

GBP/USD for Monday, December 29, 2014

GBP/USD December 29 at 17:00 GMT

GBP/USD 1.5532 H: 1.5586 L: 1.5523

GBP/USD Technical

1.5282

1.5392

1.5505

1.5644

1.5717

1.5864

GBP/USD edged higher in the Asian session, but backtracked and posted losses in European trade. The US dollar remains under pressure in the North American session.

1.5644 remains a strong resistance line.

1.5505 is a weak support level. 1.5392 is stronger.

Current range: 1.5505 to 1.5644

Further levels in both directions:

Below: 1.5505, 1.5392, 1.5282 and 1.5165

Above: 1.5644, 1.5717, 1.5864, 1.6000 and 1.6141

OANDA’s Open Positions Ratio

GBP/USD ratio continues to maintain a majority of long positions, indicative of trader bias towards the pound continuing to move higher.

GBP/USD Fundamentals

* There are no UK or US releases on Monday.

USD/CAD – Unchanged After Christmas Break

The Canadian dollar is showing little change on Monday, as USD/CAD trades in the low-1.16 range in the North American session. The Canadian markets were closed on Thursday and Friday, and traders can expect a very quiet start to the week. There are no US releases on Monday, and no Canadian events until next week.

In the US, there were a host of key events last week, ahead of the Christmas holiday. GDP was red-hot in Q3, jumping 5.0%, ahead of the estimate of 4.6%. This marked the indicator’s strongest gain since the third quarter of 2003. The US economy is expected to continue to surge in 2015, driven by increased consumer spending and lower oil prices. The news was not as positive from Core Durable Goods Orders, which posted a decline of 0.4%, its fourth decline in five readings. The reading was well off the estimate of 1.1%. Durable Goods Orders looked even worse, with a reading of -0.7%. This surprised the markets which had anticipated a strong gain of 3.0%. UoM Consumer Sentiment continues to rise, hitting 93.6 points in December. This marked its highest level since February 2007, as the US consumer remains very optimistic about the economy as we move into 2015. Unemployment Claims posted another solid reading, indicative of a strong US labor market.

USD/CAD for Monday, December 29, 2014

USD/CAD December 29 at 15:15 GMT

USD/CAD 1.1628 H: 1.1642 L: 1.1606

USD/CAD Technical

1.1414

1.1493

1.1580

1.1669

1.1723

1.1875

USD/CAD has shown little movement during the day, as the pair remains range-bound.

1.1580 is a weak support level. 1.1493 is stronger.

On the upside, 1.1669 is an immediate resistance line. 1.1723 is next.

Current range: 1.1580 to 1.1669

Further levels in both directions:

Below: 1.1580, 1.1493, 1.1414, 1.1278 and 1.1124

Above: 1.1669, 1.1723, 1.1875 and 1.1975

OANDA’s Open Positions Ratio

USD/CAD ratio has a majority of short positions, indicative of trader bias towards USD/CAD breaking out of range and moving to lower ground.

*There are no US or Canadian releases on Monday.

AUD/USD – Aussie Stable in Light Trade

AUD/USD has posted slight gains on Monday, as the pair trades in the mid-0.81 line. There are no Australian or US releases to start off the week. On Tuesday, we’ll get a look at US consumer confidence numbers, with the markets expecting an excellent release for December. The estimate stands at 94.6 points.

AUD/USD for Monday, December 29, 2014

AUD/USD December 29 at 14:50 GMT

AUD/USD 0.8142 H: 0.8163 L: 0.8113

AUD/USD Technical

0.7799

0.7904

0.8081

0.8150

0.8214

0.8315

AUD/USD posted slight gains in the Asian session. The pair tested resistance in European trade before retracting. AUD/USD is unchanged early in the North American session.

0.8150 is under pressure and could break during the North American session. 0.8214 is stronger.

0.8081 is an immediate support line. 0.7904 is next.

Current range: 0.8081 to 0.8150.

Further levels in both directions:

Below: 0.8081, 0.7904, 0.7799 and 0.7701

Above: 0.8150, 0.8214, 0.8315, 0.8456 and 0.8550

OANDA’s Open Positions Ratio

AUD/USD ratio has a majority of long positions, indicative of trader bias towards AUD/USD breaking out of range and moving higher.

AUD/USD Fundamentals

* There are on Australian or US releases on Monday.

USD/JPY – Little Movement in Subued Trade

USD/JPY is almost unchanged on Monday, as USD/JPY is trading in the mid-120 range. There are no Japanese or US releases on Monday. On Saturday, Prime Minister Abe announced a JPY 3.5 trillion stimulus package aimed at boosting the struggling economy.

With US and European markets closed on Thursday, the spotlight shifted to Japan, which released a batch of key events. Tokyo Core CPI, the key inflation indicator, edged down to 2.3% in November, matching the market forecast. However, the indicator continued a worrying downward trend, dropping for a fourth straight month. Consumer demand remains weak, as Household Spending posted a sharp decline of 2.5%. Retail Sales posted a gain of 0.4%, but this was well short of the forecast of 1.2% and the weakest showing since June. There was no relief from the manufacturing front, as Preliminary Industrial Production fell by 0.6%, well short of the estimate of a 1.0% gain. The weak numbers paint a grim picture of the health of the Japanese economy as we head into 2o15.

USD/JPY for Monday, December 29, 2014

USD/JPY December 29 at 14:00 GMT

USD/JPY 120.47 H: 120.60 L: 120.17

USD/JPY Technical

117.94

118.69

119.83

120.63

121.39

122.18

USD/JPY has shown little movement in the Asian and European sessions, as the pair continues to put pressure on resistance at 120.63.

120.63 is a weak resistance line. 121.39 is stronger.

119.83 is an immediate support level. 118.69 is stronger.

Current range: 119.83 to 120.63

Further levels in both directions:

Below: 119.83, 118.69, 117.94 and 116.69

Above: 120.63, 121.39, 122.18, 124.16 and 125.72

OANDA’s Open Positions Ratio

USD/JPY ratio has a majority of long positions, indicative of trader bias towards the dollar breaking above range and posting gains.

USD/JPY Fundamentals

* There are no Japanese or US releases on Monday.

Gold Steady After Strong Gains

Gold is steady on Monday, after posting strong gains of 1.6% on Friday. In Monday’s European session, the spot price stands at $1191.38 per ounce. There are no US releases on Monday, but we’ll get a look at CB Consumer Confidence, a key event, on Tuesday. The markets are expecting a sharp improvement in the December release, with an estimate of 94.6 points.

With no economic releases on Monday, today’s lead event is the political deadlock in Greece. Earlier on Monday, Greece lawmakers failed to elect a new president for a third time, so a general election has now been scheduled for January 25. Greece agreed to a EUR 240 billion program with the EU, ECB and IMF, but the austerity measures the country was forced to implement have proven deeply unpopular, and one major party has promised to rescind the agreement. The political uncertainty in this latest Greek saga will likely provide some twists and turns and could affect the price of gold.

XAU/USD for Monday, December 29, 2014

XAU/USD December 29 at 12:05 GMT

XAU/USD 1191.38 H: 1197.41 L: 1190.66

XAU/USD Technical

1130

1156

1175

1200

1215

1240

XAU/USD is showing limited movement in the Asian and European sessions.

1200 remains a weak resistance line. 1215 is next.

1175 is an immediate support line.

Current range: 1175 to 1200

Further levels in both directions:

Below: 1175, 1156, 1130 and 1111

Above: 1200, 1215, 1240, 1255 and 1275

OANDA’s Open Positions Ratio

XAU/USD The ratio has a majority of long positions, indicative of trader bias towards gold moving to higher ground.

XAU/USD Fundamentals

* There are no US releases on Monday.

EUR/USD – Little Change as Greece Headed to Elections

It’s the final trading week of 2014 and predictably, the currency markets are in slow gear. EUR/USD is trading just below the 1.22 line on Monday, unchanged from last week and close to 2-year lows. There are no Eurozone or US releases on Monday. However, we could see some movement from the pair in response to the announcement from Athens that the Greek prime minister has called elections for the end of January.

With no economic releases on Monday, today’s lead event is the political deadlock in Greece. Earlier on Monday, Greece lawmakers failed to elect a new president, so a general election has now been scheduled for January 25. Greece agreed to a EUR 240 billion program with the EU, ECB and IMF, but the austerity measures the country was forced to implement have proven deeply unpopular, and one major party has promised to rescind the agreement. The political uncertainty in this latest Greek saga could chill the markets and hurt the shaky euro.

EUR/USD for Monday, December 29, 2014

EUR/USD December 29 at 11:05 GMT

EUR/USD 1.2190 H: 1.2221 L: 1.2169

EUR/USD Technical

1.1926

1.2042

1.2143

1.2286

1.2407

1.2518

EUR/USD is showing little movement, as the pair stays close to the 1.22 line.

1.2143 is an immediate support level.

1.2286 is a strong resistance line.

Current range: 1.2143 to 1.2286

Further levels in both directions:

Below: 1.2143, 1.2042, 119.26 and 118.02

Above: 1.2286, 1.2407, 1.2518, 1.2688 and 1.2806

OANDA’s Open Positions Ratio

EUR/USD ratio is showing little change on Monday, continuing the trend we saw last week. This is consistent with the pair’s limited movement, as the euro has shown very small gains. The ratio has a majority of long positions, indicative of trader bias towards the euro moving to higher ground.

EUR/USD Fundamentals

* There are no Eurozone or US releases on Monday.

EUR Not Bothered By Greek Outcome

Greek PM fails to acquire votes

Snap Greek elections end of January

Is “Grexit” a worry for EUR?

EUR Bear eyes €1.20 with confidence

It’s a difficult week to get excited about in Capital Markets. Most of the necessary positional business that had to be done will have been concluded well ahead of the New-Year “turn” due to the massive liquidity limitations. Investors should not be surprised to see unexpected event risk, and weak speculative position taking to guide this weeks currency move as we count down remaining few days of the calendar year.

Greece – third time a charm?

In the eurozone, the markets have been bracing themselves for this morning’s third round of Presidential polls in Greece after two failed votes already this month. Greek Prime Minister Samaras, who had previously offered early elections if his candidate was to be elected, had again repeated that he was doing everything in his power to prevent a political crisis after his party fell short of the compulsory votes. It seems that his actions and words have fallen on deaf ears as the current Greek government has failed for a third time to obtain the number of necessary votes (180) this morning. This will require the Greek parliament to be dissolved in 10-days and new elections to be held within a month (whispers of a January 25 snap election).

So far, it seems that the current political uncertainty has been well contained and is affecting mostly Greek assets. Shorter dated Greek paper is suffering the most, with 5-year bonds backing up +50bp to +9.43%. Obviously not helping the situation is the lack of liquidity within the Christmas and New Years’ holidays. To date, it seems that the other Euro peripheral bond markets are instead been helped by ECB QE expectations in Q1, 2015. New Greek elections would require periphery product to reprice with wider spreads for event risk purposes as it brings back the spectra of a “Grexit” from the EUR.

Currently, it’s the lack of market interest that is providing a “no” show by fixed income traders. Nervous investors continue to acquire German bunds, mostly on the back of the opinion polls favoring the opposition SYRIZA party (strong opponent of the EU/ECB/Troika agreement). Whatever the outcome, a ‘new’ Greek government would have to abide by previous Euro commitments to ensure continued external support.

The 18-member single currency has again eased below the psychological €1.22 handle on the news that Greece’s Dimas has failed in his attempt to become the new president. The EUR’s pre-election vote range was relatively tight (€1.2173-1.2222). Things now become rather interesting for the Eurozone in the latter half of January. The market is currently expecting an ECB QE announcement on January 22, and in hot pursuit a Greek within days there after. The EUR bear will feel rather comfortable as we head into the New-Year. They remain confidently fixated on their €1.20 short term target. A break above the €1.2340 resistance would alleviate some of the immediate EUR pressure.

Abe delivers no surprises

As correctly speculated by the market last week, Prime Minister Abe’s Japanese government has confirmed it would offer a fiscal stimulus package in the amount of $29b (3.5T). The bulk of the package is comprised of subsidies and merchandise vouchers for individual households. The government’s obvious objective is to help stimulate consumption. The packaged announced is expected to provide more relief and prevention measures targeted at the great earthquake-hit regions, with the government estimating the impact of stimulus at +0.7% of added GDP growth. Even with all the subsidies, there is regional speculation that PM Abe is still expected to lower the corporate tax rates by -3.3% over the next two-years.

Like most of the other major currency pairs, USD/JPY (120.47) price action seems to have taken a necessary breather. For the yen bears, the overall scope is for dollar gains back towards 121.86, this year’s dollar high print earlier in the month. The yen bear does not believe that they have to be aggressive in their actions. They currently remain comfortable buying USD on dips and are presently looking to add to their ‘short’ yen positions just below 119, this month’s low and where there is a plethora of USD bids located.

Forex heatmap

USD/JPY – Limited Movement as Japan Posts Mixed Numbers

USD/JPY is almost unchanged on Friday, as USD/JPY is trading slightly above the 120 line. Japanese markets were open on Christmas Day, and there were a host of Japanese releases, led by inflation and consumer spending reports. On Friday, the sole Japanese release, Average Cash Earnings, missed expectations with a decline of 1.5%. There are no US releases on Friday.

With US and European markets closed on Thursday, the spotlight shifted to Japan, which released a batch of key events. Tokyo Core CPI, the key inflation indicator, edged down to 2.3% in November, matching the market forecast. However, the indicator continued a worrying downward trend, dropping for a fourth straight week. Consumer demand remains weak, as Household Spending posted a sharp decline of 2.5%. Retail Sales posted a gain of 0.4%, but this was well short of the forecast of 1.2% and the weakest showing since June. There was no relief from the manufacturing front, as Preliminary Industrial Production fell by 0.6%, well short of the estimate of a 1.0% gain. The weak numbers paint a grim picture of the health of the Japanese economy as we head into 2o15. Prime Minister Abe, armed with a fresh mandate after recent elections, is under strong pressure to reinvigorate economic activity and is expected to unveil new stimulus measures on Saturday.

In the US, there were a host of key events on Tuesday, with mixed results. GDP was red-hot in Q3, jumping 5.0%, ahead of the estimate of 4.6%. This marked the indicator’s strongest gain since the third quarter of 2003. The US economy is expected to continue to surge in 2015, driven by increased consumer spending and lower oil prices. The news was not as positive from Core Durable Goods Orders, which posted a decline of 0.4%, its fourth decline in five readings. The reading was well off the estimate of 1.1%. Durable Goods Orders looked even worse, with a reading of -0.7%. This surprised the markets which had anticipated a strong gain of 3.0%. UoM Consumer Sentiment continues to rise, hitting 93.6 points in December. This marked its highest level since February 2007, as the US consumer remains very optimistic about the economy as we move into 2015.

USD/JPY for Friday, December 26, 2014

USD/JPY December 26 at 11:00 GMT

USD/JPY 120.28 H: 120.43 L: 120.15

USD/JPY Technical

117.94

118.69

119.83

120.63

121.39

122.18

USD/JPY has shown almost no movement in the Asian and European sessions, trading close to resistance at 120.63.

120.63 has had a busy week and remains a weak resistance line. 121.39 is stronger.

119.83 is a weak support level. 118.69 is stronger.

Current range: 119.83 to 120.63

Further levels in both directions:

Below: 119.83, 118.69, 117.94 and 116.69

Above: 120.63, 121.39, 122.18, 124.16 and 125.72

OANDA’s Open Positions Ratio

USD/JPY ratio is almost unchanged on Friday. This is consistent with the limited movement we’re seeing from the pair. The ratio has a majority of long positions, indicative of trader bias towards the dollar breaking above range and posting gains.

USD/JPY Fundamentals

1:30 Japanese Average Cash Earnings. Estimate +0.5%. Actual -1.5%.

*Key releases are highlighted in bold

*All release times are GMT

Gold Posts Slight Post-Holiday Gains

Gold has moved higher on Friday, taking advantage of light trade in the markets after the Christmas holiday. In the European session, as the spot price stands at $1187.06 per ounce. The metal has recovered some of the sharp losses recorded on Monday. There are no US releases on Friday, so traders can expect a quiet North American session as we wrap up the trading week.

XAU/USD for Friday, December 25, 2014

XAU/USD December 25 at 10:25 GMT

XAU/USD 1188.36 H: 1188.93 L: 1176.52

XAU/USD Technical

1130

1156

1175

1200

1215

1240

XAU/USD posted gains in the Asian session. The pair is almost unchanged in European trade.

On the upside, 1200 has weakened as gold has moved higher. 1215 is next.

1175 is an immediate support line.

Current range: 1175 to 1200

Further levels in both directions:

Below: 1175, 1156, 1130 and 1111

Above: 1200, 1215, 1240, 1255 and 1275

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged on Friday. This is consistent with the lack of movement we are seeing from the pair. The ratio has a majority of long positions, indicative of trader bias towards gold moving to higher ground.

XAU/USD Fundamentals

* There are no US releases on Friday.

EUR/USD – Unchanged in Thin Trade

As we wrap up the week following the Christmas day break, EUR/USD, is trading quietly at the 1.22 line on Friday. US and European markets were closed on Thursday, and with no economic releases until next week, we are unlikely to see any movement from the pair during the day.

The euro continues to struggle and has lost a remarkable 300 points in the past week. The sharp fall started with the Federal Reserve policy statement last week. Previous Fed policy statements have usually stated that the Fed would maintain low rates for a “considerable time”, but the December statement changed terminology, saying the Fed would be “patient” before raising rates. In a follow-press conference, Federal Reserve chair Janet Yellen was less ambiguous, saying that the Fed was unlikely to raise rates for the “next couple of meetings”. The markets took this to mean that a rate hike is in the works, but not before April. The news sent the euro sprawling, as the currency lost about 170 points after the Fed statement.

The Eurozone economy continues to struggle with low growth and weak inflation, but recent releases out of Germany, the Eurozone’s largest economy, give room for some optimism. The January forecast for German Consumer Climate came in at 9.0 points, a notch above the estimate of 8.9 points. This marked the fourth straight rise for the indicator, pointing to stronger optimism from consumers as we head into the New Year. These strong numbers come on the heels of German Business Climate, which improved to 105.5 points, up from 104.4 a month earlier. This edged above the forecast of 105.4 points. On the inflation front, German PPI, which tracks manufacturing inflation, improved to 0.0% in November, up from -0.2% a month earlier. Like the consumer confidence indicator, this release is on an upward trend. Strong German consumer and business confidence numbers are welcome news, as the Eurozone economy continues to struggle.

EUR/USD for Friday, December 26, 2014

EUR/USD December 26 at 8:45 GMT

EUR/USD 1.2196 H: 1.2222 L: 1.2190

EUR/USD Technical

1.1926

1.2042

1.2143

1.2286

1.2407

1.2518

EUR/USD is unchanged on the day, as the pair hugs the 1.22 line.

1.2143 is an immediate support level.

1.2286 is a strong resistance line.

Current range: 1.2143 to 1.2286

Further levels in both directions:

Below: 1.2143, 1.2042, 119.26 and 118.02

Above: 1.2286, 1.2407, 1.2518, 1.2688 and 1.2806

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged on Friday, continuing the trend we have seen throughout the week. This is consistent with the pair’s limited movement, as the euro has shown very small gains. The ratio has a majority of long positions, indicative of trader bias towards the euro moving to higher ground.

EUR/USD Fundamentals

* There are no Eurozone or US releases on Friday.

GBP/USD – Slight Gains For Pound in Light Trade

GBP/USD has posted slight gains on Wednesday, as the pair trades in the mid-1.55 line in the North American session. On the release front, US Unemployment Claims dropped to 280 thousand, beating the forecast. Crude Oil Inventories was unexpectedly strong, posting a gain of 7.3 million last week. There are no British releases on Wednesday.

US Unemployment Claims continues to drop, reflecting a brighter employment picture as the economy continues to pick up steam. The indicator dropped to 280 thousand last week. This easily beat the estimate of 291 thousand and marked a fourth straight drop. There was excellent news on Tuesday, as GDP soared by 5.0% in Q3, ahead of the estimate of 4.6%. This marked the indicator’s strongest gain since the third quarter of 2003. The US economy is expected to continue to surge in 2015, driven by increased consumer spending and confidence. The news was not as positive from Core Durable Goods Orders, which posted a decline of 0.4%, its fourth decline in five readings. The reading was well off the estimate of 1.1%. Durable Goods Orders looked even worse, with a reading of -0.7%. This surprised the markets which had anticipated a strong gain of 3.0%.

Elsewhere in the US, housing data continues to weaken as New Home Sales slipped to 438 thousand, its poorest showing since July and well short of the forecast of 461 thousand. UoM Consumer Sentiment continues to rise, hitting 93.6 points in December. This marked its highest level since February 2007, as the US consumer remains very optimistic about the economy as we move into 2015.

On Tuesday, British GDP came in at 0.7% in the Q3, matching the forecast. This was slightly lower than the revised release for Q2 of a 0.8% gain, but still a very respectable figure. Current Account surprised as the deficit ballooned to GDP 27.0 billion, much higher than the estimate of GDP 21.1 billion. Mortgage Approvals softened for a fifth straight month, dropping to 36.7 thousand. This missed the forecast of 37.3 thousand.

GBP/USD for Wednesday, December 24, 2014

GBP/USD December 24 at 16:15 GMT

GBP/USD 1.5554 H: 1.5558 L: 1.5505

GBP/USD Technical

1.5282

1.5392

1.5505

1.5644

1.5717

1.5864

GBP/USD has been marked by some choppiness during the day. The pair touched support at 1.5505 in the Asian session.

On the upside, 1.5644 remains a strong line.

1.5505 is a weak support level. 1.5392 is stronger.

Current range: 1.5505 to 1.5644

Further levels in both directions:

Below: 1.5505, 1.5392, 1.5282 and 1.5165

Above: 1.5644, 1.5717, 1.5864, 1.6000 and 1.6141

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to gains in long positions on Wednesday. This is consistent with the movement of the pair, as the pound has posted small losses. The ratio has a majority of long positions, indicative of trader bias towards the pound continuing to move higher.

GBP/USD Fundamentals

13:30 US Unemployment Claims. Estimate 291K. Actual 280K.

15:30 US Crude Oil Inventories. Estimate -2.4M. Actual 7.3M.

17:00 US Natural Gas Storage. Estimate -81B.

*Key releases are highlighted in bold

*All release times are GMT

USD/CAD – Limited Activity as US Jobless Claims Dips Lower

The Canadian dollar is showing little change on Wednesday, as USD/CAD trades just above the 1.16 line in the North American session. On the release front, US Unemployment Claims dropped to 280 thousand, beating the forecast. Crude Oil Inventories was unexpectedly strong, posting a gain of 7.3 million last week. There are no Canadian releases on Wednesday.

On Tuesday, Canadian GDP, which is released monthly, posted a gain of 0.3%. This was shy of the previous release of 0.4%, but still beat the forecast of 0.1%. The reading was an improvement after Friday’s inflation and retail sales reports. Core CPI declined 0.2%, while CPI declined 0.4%. Both readings marked a 4-month low. Core Retail Sales edged higher to 0.2%, up from 0.0%. Retail Sales came in at a flat 0.0%, beating the estimate but much lower than the previous release of 0.8%.

USD/CAD for Wednesday, December 24, 2014

USD/CAD December 24 at 16:00 GMT

USD/CAD 1.1615 H: 1.1641 L: 1.1590

USD/CAD Technical

1.1278

1.1414

1.1493

1.1669

1.1723

1.1875

USD/CAD has been uneventful, with the pair trading close to the 1.16 line.

1.1493 continues to provide strong support.

On the upside, 1.1669 remains a weak resistance line. 1.1723 is next.

Current range: 1.1493 to 1.1669

Further levels in both directions:

Below: 1.1493, 1.1414, 1.1278, 1.1124 and 1.1004

Above: 1.1669, 1.1723, 1.1875 and 1.1975

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged on Wednesday, continuing the trend we have seen all week. This is consistent with the movement of the pair, as USD/CAD has shown limited movement. The ratio has a majority of short positions, indicative of trader bias towards USD/CAD moving to lower ground.

13:30 US Unemployment Claims. Estimate 291K. Actual 280K.

15:30 US Crude Oil Inventories. Estimate -2.4M.

17:00 US Natural Gas Storage. Estimate -81B.

*Key releases are highlighted in bold

*All release times are GMT

AUD/USD – Flat in Light Trade

AUD/USD is showing little movement on Wednesday, as the pair is trading just above the 0.81 line. In the US, Unemployment Claims dropped to 280 thousand, beating the forecast. There are no Australian releases on Wednesday.

AUD/USD for Wednesday, December 24, 2014

AUD/USD December 24 at 13:45 GMT

AUD/USD 0.8115 H: 0.8124 L: 0.8104

AUD/USD Technical

0.7799

0.7904

0.8081

0.8150

0.8214

0.8315

AUD/USD has had a very quiet day. The pair edged higher in the Asian session and is unchanged in European trade.

0.8150 is a weak resistance line. 0.8214 is stronger.

On the downside, 0.8081 continues to provide weak support. 0.7904 is next.

Current range: 0.8081 to 0.8150.

Further levels in both directions:

Below: 0.8081, 0.7904, 0.7799 and 0.7701

Above: 0.8150, 0.8214, 0.8315, 0.8456 and 0.8550

OANDA’s Open Positions Ratio

AUD/USD ratio is almost unchanged on Wednesday. This is consistent with the pair, which has shown very limited movement. The ratio has a majority of long positions, indicative of trader bias towards AUD/USD moving higher.

AUD/USD Fundamentals

13:30 US Unemployment Claims. Estimate 291K. Actual 280K.

15:30 US Crude Oil Inventories. Estimate -2.4M.

17:00 US Natural Gas Storage. Estimate -81B.

*Key releases are highlighted in bold

*All release times are GMT

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Wednesday, December 31, 2014

Tuesday, December 30, 2014

Monday, December 29, 2014

Friday, December 26, 2014

Wednesday, December 24, 2014

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