November 2014 ~ Forex Watcher

Sunday, November 30, 2014

Central Bank Intensive Week Gets Under Way with Swiss Relief

Swiss Gold Referendum rejected by voters. Metal drops to three week low

Week heavy with central bank activity with RBA first up

Friday’s NFP the highlight as U.S. economy on track for Fed rate hike

Central banks will dominate the spotlight this week as there will be rate announcements from Australia, Canada, United Kingdom and Europe to finish on Friday with the release of the U.S. non-farm payroll report. Over the weekend the Swiss gold referendum was rejected and will mandate the central bank to increase its reserves immediate with brings relief to policy makers as the EUR/CHF floor becomes more manageable. The Chinese PMI numbers came in below expectations and will increase the pressure on the People’s Bank of China to further stimulate the economy to avoid further slowdown. The effects of the events on the weekend will get the ball rolling in a week filled with major announcements and economic releases that will increase volatility across the FX market.

There are no rate changes expected as most of the policy makers have expressed a lower for longer message at different turns. The European Central Bank (ECB) is facing the most pressure after its governor Mario Draghi continues to ask European Union members to grant him the ability to launch a full on quantitative easing program. The major opponent to that stimulus alternative is Germany as it is against the buying of sovereign bonds by the central bank. That being said there is still some analysts that expect the ECB to step up to adversity and launch a program but it is unclear how it could work without the German’s blessing.

Gold Vote Losses Luster

The “Save our Swiss Gold” campaign could only sway about a quarter of Swiss voters this weekend. Earlier polls had hinted about the strong possibility the Swiss National Bank (SNB) would not have to repatriate gold holdings around the world and engage in a buying spree that would have pushed the price of the metal upwards. The uncertainty was still high even with polls favouring the outcome preferred by the central bank. When the results came in both the commodity and the currency dropped versus the dollar as the SNB would not be forced to more than double reserves. The EUR/CHF 1.20 is easier to defend without the added complexity of increasing gold reserves to 20%.

Gold fell as the referendum vote was one of the few events driving the price up in the last month. Lower demand for commodities as well as a lack of appetite in the metal as a safe haven and inflation hedge has seen gold touch four year lows. The precious metal continues to trade around $1,148.

RBA Lower for Longer Rate Decision

Reserve Bank of Australia (RBA) governor Glen Stevens said in a speech two weeks ago that interest rates will be low for years to come. The current Australian benchmark rate is 2.5% and it is not expected to change this week when the RBA publishes its policy statement. A weaker AUD could benefit the economy as it copes with the effects of a Chinese manufacturing slowdown.

ECB Rate Decision: Whatever it takes but What can Draghi do?

Last week a Credit Suisse (CS) analyst issued a call that the European Central Bank (ECB) will announce full on quantitative easing (QE) during their December 4 meeting. The current market consensus is on the ECB governor to fire more pleas to European Union members to follow through with policy reforms and maybe single out Germany to ease off the austerity which is preventing sovereign bonds to be purchased by the central bank. Even though there are some analysts forecasting a surprise announcement and after Japan and China last week it is understandable in this case the ECB does not have the independence that the Asian central banks have. For all the escalating rhetoric from Mario Draghi, German chancellor Angela Merkel and Bundesbank Governor Jens Weidmann have been firm on sovereign bonds not needed or wanted to spur growth and avoid deflation in the EU.

The economies of France and Italy continue to have budget issues and have been given a reprieve until next spring but there is little expectations that reforms will come in time and more pressure piles on the ECB to unlock the German QE negative stance.

BoC and BoE No Surprises as Held Rates are Expected

The Bank of Canada Governor Stephen Poloz has pledged the central bank is ready to adjust to whatever headwinds threaten the Canadian economy even suggesting a rate cut could be implemented. Canadian fundamentals continue to be mixed, but the most likely scenario is a rate hike next year following the lead of the U.S. Federal Reserve. The drop in commodities has taken a toll on the CAD, but a strong U.S. recovery would be beneficial for its northern neighbour.

The Bank of England at one point in the fall was the most likely major central bank to issue a rate hike but things have turned “gloomier” for the U.K. quoting Chief Economist Haldane. Exports continue to struggle and most of the strength continues to be all internal consumption which could turn rather quickly specially if house prices drop. That is the reason the BoE has been so diligent in trying to stabilize rising house prices with only moderate success.

Non-farm Payrolls Could Boost Fed Rate Hike Schedule

October’s payroll numbers came in slightly below expectations but there was an improvement in the unemployment rate to 5.8% which is the lowest in four and half years. November might prove along the same lines on the headline number with a forecasted 225,000 new jobs. The gain might still be above 200,000 but it would be unexpected to beat expectations given the less optimistic Conference Board survey results on job availability. The November and December figures can still impress the market and boost the case for the Fed to start their rate hike cycle next year. The original schedule as naively announced by chair Yellen in her first press conference was to raise the benchmark rate about six months after the end of QE. The six months will place it around Spring of 2015.

Japan’s Manufacturers Increased Investment

Japanese companies increased investment more than forecast in the third quarter, even as slumping consumption pushed the economy into a recession.

Manufacturers led a 5.5 percent gain in capital spending in the three months through September from a year earlier, beating the 1.8 percent median in a Bloomberg News survey. Corporate profits climbed 7.6 percent and sales increased 2.9 percent, according to finance ministry data released today.

The unexpectedly strong gain in domestic investment is a boost for Prime Minister Shinzo Abe as he campaigns for re-election on his economic growth strategy after Japan slipped into its fourth recession since 2008. Abe’s been calling on companies to spend their cash hoards on investment and wages to pull the economy out of two decades of stagnation.

Bloomberg

West TX Oil Near $64 as OPEC Seen Failing to Slow Shale

West Texas Intermediate fell below $65 a barrel to the lowest intraday level since July 2009 amid speculation that prices need to drop further before OPEC’s decision to maintain production slows U.S. shale supply.

Futures lost as much as 3.1 percent in New York, while London-traded Brent slid 3.2 percent. Current prices are no guarantee of a significant decline in U.S. shale output, Iran’s Oil Minister Bijan Namdar Zanganeh said in an interview on Nov. 28. Iraq is considering spending cuts amid the price slump, according to a cabinet statement.

Oil has collapsed into a bear market as the U.S. pumps crude at the fastest rate in three decades even amid signs that global demand is slowing. The Organization of Petroleum Exporting Countries last week resisted calls from members including Venezuela, Iran and Iraq to reduce its production target of 30 million barrels a day at a meeting in Vienna.

Bloomberg

Asian Equities Mainly Lower

Asian stocks fell with U.S. index futures as a Chinese manufacturing gauge dropped, American holiday spending slowed and oil tumbled to a five-year low. Malaysia’s ringgit headed for the biggest two-day retreat since 1998 and precious metals slumped.

The MSCI Asia Pacific Index (MXAP) fell 0.7 percent by 11:42 a.m. in Tokyo, with Standard & Poor’s 500 Index futures dropping 0.4 percent. West Texas Intermediate crude lost 2.1 percent to $64.74 a barrel, sending Australian energy stocks toward the biggest three-day loss since the global financial crisis. Gold sank as Swiss voters rejected a measure to force the central bank to hold bullion. The Bloomberg-JPMorgan Asia Dollar Index fell to a four-year low as the ringgit weakened 1.2 percent.

Collapsing oil prices are damping inflation expectations and pushing global commodity indexes to multi-year lows. U.S. consumers cut spending by an estimated 11 percent over the post-Thanksgiving weekend. China’s official factory index fell to 50.3 for November, below the 50.5 reading projected by economists, while a private gauge from HSBC Holdings Plc and Markit Economics came in at 50, the border between expansion and contraction .

Bloomberg

China Official PMI Falls to Eight Month Low at 50.3

A Chinese manufacturing gauge fell as factory shutdowns aggravated a pullback in the economy, raising pressure on the central bank to ease policy further after it lowered interest rates for the first time in two years.

The government’s Purchasing Managers’ Index (CPMINDX) fell to an eight-month low of 50.3 in November, compared with the 50.5 median estimate of analysts in a Bloomberg survey and October’s 50.8. Readings above 50 indicate expansion.

The government ordered factories in Beijing and surrounding regions to shut down during the Asia-Pacific Economic Cooperation forum to curb pollution. China’s central bank cut interest rates last month as the economy heads for its slowest full-year expansion since 1990.

Bloomberg

Swiss Gold Rejection Delivers Blow to Investors

As Switzerland rules out that its central bank will be the next big buyer of gold, sending prices to the lowest in more than three weeks, there’s one more reason for investors to be bearish.

Voters yesterday rejected a referendum requiring the Swiss National Bank hold at least 20 percent of its 520-billion-franc ($540 billion) balance sheet in gold. Had it been approved, it would have led to purchases of at least 1,500 metric tons over five years. With lower oil prices reducing costs for consumers and the U.S. considering raising interest rates, demand is fading for hedges against inflation such as gold.

Gold has lost 19 percent since peaking in March and investor holdings of exchange-traded products are near a five-year low. While prices probably won’t be affected too much by the “no” vote of the initiative called “Save Our Swiss Gold,” approval would have improved sentiment and increased prices by as much as $50 an ounce, HSBC Holdings Plc estimated in November.

Bloomberg

Swiss Voters Reject Gold Measure

Swiss voters rejected a measure in a referendum requiring their central bank to hold a portion of its assets in gold, a measure its President Thomas Jordan termed an “invitation to speculators” that could have hurt the economy. Bullion tumbled to a three-week low.

The “Save Our Swiss Gold” proposal stipulating the Swiss National Bank hold at least 20 percent of its 520-billion-franc ($540 billion) balance sheet in gold and never sell any bullion was voted down by 77 percent to 23 percent, the government said yesterday. Polls had forecast the initiative’s rejection. Two other initiatives on tax privileges for foreign millionaires and immigration limits also were rejected.

SNB policy makers warned repeatedly that the measure, which also required the 30 percent of central bank gold stored in Canada and the U.K. to be repatriated, would have made it harder to keep prices stable and shield the central bank’s cap on the franc of 1.20 per euro. That minimum exchange rate was set three years ago, with the SNB pledging to buy foreign currency in unlimited amounts to defend it.

Bloomberg

Gold – Drops Sharply Below $1150 with Eyes on $1130

Gold for Monday, December 1, 2014

After making repeated runs at the resistance level at $1200 and failing every time, gold has now fallen sharply away. It is now eyeing off the previous support level around $1130 which may play a role and prop it up again. It wouldn’t be surprising to see $1130 seriously tested and potentially broken. In the last few weeks Gold has enjoyed a strong resurgence back to the key $1200 level where it has met stiff resistance, before its recent sharp decline. Throughout the second half of October gold fell very strongly and resumed the medium term down trend falling from above $1250 back down through the key $1240 level, down below $1200 to a multi year low near $1130. It spent a few days consolidating around $1160 after the strong fall which has allowed it to rally higher in the last couple of weeks. Earlier in October Gold ran into the previous key level at $1240, however it also managed to surge higher to a five week high at $1255.

In late August Gold enjoyed a resurgence as it moved strongly higher off the support level at $1275, however it then ran into resistance at $1290. In the week prior, Gold had been falling lower back towards the medium term support level at $1290 however to finish out last week it fell sharply down to the previous key level at $1275. During the second half of June, gold steadily moved higher but showed numerous incidents of indecision with its multiple doji candlestick patterns on the daily chart, around $1320 and $1330. The OANDA long position ratio for Gold has moved back towards the 50% level as gold has fallen sharply back to around $1150.

At the beginning of June, gold did very well to repair some damage and return to the key $1275 level, then it has continued the momentum pushing a higher to its recent four month high. After moving so little for an extended period, gold dropped sharply back in May from above the well established support level at $1275 as it completely shattered this level falling to a four month low around $1240. It remained around support at $1240 for several days before its strong rally higher. It pushed down towards $1280 before sling shotting back and also had an excursion above $1300 for a short period before moving quickly back to the $1293 area again.

Gold slid 2 percent on Monday and silver slumped to its lowest since 2009 after Swiss voters overwhelmingly rejected a proposal to boost central bank gold reserves, providing a new trigger for sell-offs in an already nervous market. The “Save our Swiss gold” initiative, which would have compelled the Swiss National Bank to boost its gold reserves to 20 percent of its assets from around 8 percent currently, was rejected by 77 percent of voters. Spot gold dropped as far as $1,142.91 an ounce, its lowest since early November when it marked a 4-1/2 year low of $1,131.85. It was down 1.6 percent at $1,148.01 by 0107 GMT. U.S. gold futures declined nearly 3 percent and silver futures tumbled 9 percent, before recovering slightly. “A ‘no’ was expected but there was probably a risk premium factored in. That’s why we are seeing this liquidation today,” said a Sydney-based precious metals trader.

(Daily chart / 4 hourly chart below)

g_20141201 g_20141201_4hour

Gold December 1 at 02:00 GMT 1152.1 H: 1167.1 L: 1142.8

Gold Technical

1130

—

1200

1255

—

During the early hours of the Asian trading session on Monday, Gold is trying to consolidate and stop the bleeding after falling sharply back to $1150 to start the new week. Current range: trading right around $1150.

Further levels in both directions:

• Below: 1130.

• Above: 1200 and 1255.

OANDA’s Open Position Ratios

(Shows the ratio of long vs. short positions held for Gold among all OANDA clients. The left percentage (blue) shows long positions; the right percentage (orange) shows short positions.)

The long position ratio for Gold has moved back towards the 50% level as gold has fallen sharply back to around $1150. The trader sentiment is in now quite even between long and short positions.

Economic Releases

05:00 JP Vehicle Sales (Nov)

08:00 UK Halifax House Price Index (1st-5th) (Nov)

09:00 EU Manufacturing PMI (Nov)

09:30 UK BoE – Mortgage Approvals (Oct)

09:30 UK BoE – Net Consumer Credit (Oct)

09:30 UK BoE – Secured Lending (Oct)

09:30 UK CIPS/Markit Manufacturing PMI (Nov)

09:30 UK M4 Money Supply (Oct)

14:00 EU Euro-Area Finance Chiefs Discuss National Budgets in Brussels

14:45 US Manufacturing PMI (Nov)

15:00 US ISM Manufacturing (Nov)

* 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.

Gauge of Global Bonds Drops to 18 Month Low

A gauge of government bond yields around the world fell to an 18-month low as tumbling oil prices push down inflation expectations and economic growth falters.

The average yield among securities in the Bank of America Merrill Lynch World Sovereign Bond Index dropped to 1.59 percent at the end of last week, the lowest level since May 2013. Australian 10-year yields dropped below 3 percent for the first time in two years.

“There’s a decrease in inflation pressure and inflation expectations,” said Hiroki Shimazu, the senior market economist in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s second-largest publicly traded bank. “It’s supporting the bond market globally.”

Bloomberg

Pressure May Build on RBA to Resume Rate Cuts

Australia’s central bank faces pressure to resume interest-rate cuts as the economy suffers for its dependence on iron ore, which accounts for more than $1 out of every $5 of export income.

Traders see 64 percent odds Governor Glenn Stevens will cut the overnight cash rate target by a quarter percentage point to 2.25 percent within 12 months, the strongest chance since September 2013, a Credit Suisse Group AG index based on swaps shows. Money markets and economists see no move at tomorrow’s Reserve Bank of Australia meeting.

“The risks for the Australian economy are tilting to the downside,” said Guy Bruten, an economist at AllianceBernstein. “There’s a growing prospect that the RBA may well need to cut” as analysts are underestimating a collapse in commodity prices that is likely to be “deeper and broader” than expected, he said.

Bloomberg

ECB to Invite Oil Decline into Stimulus Debate

Mario Draghi and his colleagues are about to debate whether cheaper energy is a blessing or a curse.

When the European Central Bank president convenes his Governing Council this week, the 24 policy makers will have to judge how the plunge in oil prices will affect inflation expectations in the euro area and what they should do about it. Crude’s biggest drop in three years, after OPEC opted not to reduce a supply glut, puts downward pressure on consumer prices that are already close to stagnating.

German council member Jens Weidmann signaled how oil is now a focal point in the quantitative-easing debate when he said last week that the drop in energy costs is like a mini stimulus package, suggesting no need for the ECB to expand its current measures. The opposing view, previously argued by Draghi and ECB Chief Economist Peter Praet, is that temporary price shocks can deliver lasting harm to an economy as feeble as the euro area’s.

Bloomberg

China and Japan Stocks Buck Trend Heading Higher

Stocks in Japan and Shanghai rose to multi-year highs on the first day of the month, while the rest of Asia’s indices declined on plunging oil prices and key Chinese data.

U.S. crude and Brent crude lost nearly $2 on Monday with U.S. crude sliding to its lowest level in over five years as last week’s sell-off continued. Prices have been in free fall following OPEC’s (Organization of the Petroleum Exporting Countries) decision to maintain production on Thursday. Both U.S. crude and Brent have declined for five straight months, their longest losing streak since 2008, Reuters reported.

Precious metals were also in focus with spot silver and spot gold prices tumbling 6 and 2 percent, respectively, after Swiss voters rejected proposals to boost gold reserves over the weekend.

CNBC

U.S. Stocks Close November With Another Monthly Gain

U.S. stocks closed mixed on Black Friday amid a slide in oil prices following OPEC’s announcement that it would not cut its output. The Dow Jones Industrial Average eked out a record close by 0.49 points, ending the month without having lost ground in back-to-back sessions since Oct. 15-16.

Friday was the final trading day of November, and the Dow and S&P 500 posted a second straight month of gains and the 8th in 11 months this year. Both indexes barely held onto their 6th straight week of gains, their longest winning streak in a year.

The S&P 500 Energy Sector entered bear market territory with a plunge of more than 6 percent, the biggest since August 8, 2011 following the S&P downgrade of the U.S. credit rating. The sector also had its worst week in more than 3 years with a decline of more than 9 percent.

CNBC

EUR/CHF up to 1.2040 after Gold Vote

The Swiss franc slipped against the euro early on Monday after the Swiss National Bank affirmed its pledge to cap the currency as voters rejected proposals for the central bank to boost its gold reserves.

The other major currencies were more subdued with the euro a touch firmer against both the dollar and yen at $1.2452 and 148.05 respectively. The greenback held firm at 118.86 yen, just below a seven-year peak of 118.98 set late in November.

The “Save our Swiss gold” initiative would have forced the Swiss National Bank (SNB) to boost its gold reserves to 20 percent of its assets, from around 8 percent currently, and banned it from ever selling the metal. That would threaten its ability to defend a 1.20 euro cap on the franc.

CNBC

USD/JPY Hits 119 on Economy

The dollar rose to a seven-year high versus the yen before data forecast to show U.S. manufacturing outpaced global peers, reinforcing the outlook for higher interest rates in the world’s largest economy.

The dollar extended gains against the currencies of commodity-producing nations after oil slumped to a five-year low. Australia’s dollar slid to a four-year low on speculation demand for the nation’s gold will wane after voters in Switzerland rejected a referendum to force the Swiss National Bank to hold more of the metal. Australia is the world’s largest gold producer after China. The Swiss franc weakened.

“The dollar will probably remain strong amid declines in oil prices and dovishness among other nations’ central banks,” said Toshiya Yamauchi, a senior analyst in Tokyo at Ueda Harlow Ltd., which provides margin-trading services. “If oil prices continue to fall, that would build the case for easy monetary policy in more places than just Europe and Japan.”

Bloomberg

Australia 200 – Falls Further from 5400 Resistance to below 5300

Australia 200 for Monday, December 1, 2014

Over the last few weeks the Australia 200 index has returned some of its recent gains falling from above 5550 down to a one month low below 5300 before finding a little support around 5340. Over the last week the index has been struggling with resistance at 5400 and this level remains key as the index has since fallen away back below 5300 again. The 5400 level has been a major player all year and the index must get back above this level to encourage more buying and bullish sentiment. Earlier last week the index has been content to consolidate just below the 5400 level. Prior to that it had enjoyed a solid resurgence throughout October after getting much needed support from the 5200 level, which has resulted in it moving back above the 5400 and 5500 levels, around a two month high. Throughout most of September the Australia 200 Index declined strongly from its multi-year high after running into resistance around 5650 back to enter its previously established trading range between 5400 and 5500, before falling further below 5200 and to an eight month low around 5120 a few weeks ago. Several weeks ago it received solid support from the 5100 level which saw it rally well to close out a couple of weeks ago.

Back in early September the 5400 level was called upon to offer support as the index desperately tried to stay in touch with its range, however it fell through there before rallying strongly back up to 5400. Up until recently, the 5400 level had done well and propped up price to keep it within the range. In its recent fall at the beginning of August it moved down to a three week low around 5375, however it received solid support at the 5400 level which has allowed to consolidate and rally higher. The solid move higher throughout July saw it move strongly up through both the 5500 and 5550 levels to reach a then six year high around 5620. In recent weeks it has discovered a new key level to deal with after running into a short term resistance level at 5550, which earlier last week provided some solid support. It reversed strongly several weeks ago bringing it back down to almost touch the 5400 level before rallying back higher again.

At the beginning of June the Australian 200 Index fell and broke back down through the key 5500 level towards a four week low around 5400 before consolidating and resting on support there for an extended period. Back at the end of May, it moved back and forth between the two key levels of 5500 and 5550 before the recent fall. Over the last couple of months the Australia 200 Index has formed an amazing attraction to the key 5500 level as it spent a considerable amount of time trading around it. A couple of weeks ago, the index fell away heavily back down to support around 5400 before returning to the key 5500 level just as quickly, as if gravity had pulled it back. The index has done very well over the last couple of years moving from below 4000 to its present trading levels around 5500.

Australia is on track to build a record number of new homes this year, with that strength expected to continue into 2015. New home sales rose three per cent in October, following a flat result in September, figures released by the Housing Industry Association show. HIA chief economist Harley Dale said while monthly sales are off the peak reached in April, they are still high. “That augurs well for healthy new home construction activity persisting into 2015,” he said on Thursday. Dr Dale said other indicators point towards further housing market strength in the new year. “Australian Bureau of Statistics building approvals are past their peaks but remain at elevated levels,” he said. “Lending for new housing is still trending higher and doesn’t appear to have peaked yet.” The figures come after the Australian Bureau of Statistics found that total construction work across the country slipped to its worst level since the post Sydney Olympics slump during the September quarter. The amount of construction completed fell 2.2 per cent in the three-month period, with residential work down 1.6 per and engineering projects 3.2 per cent lower.

(Daily chart below)

asx_20141201

Australia 200 December 1 at 01:30 GMT 5272 H: 5329 L: 5260

Australia 200 Technical

5250

5100

—

5650

—

During the hours of the Asian trading session on Monday, the Australia 200 Index is declining further below 5300 after falling away from the resistance level at 5400 last week. For most of this year the Australia 200 Index has moved well from the lower support level at 5000 up to the multi-year highs above 5600 in September.

Further levels in both directions:

• Below: 5250 and 5100.

• Above: 5650.

Economic Releases

05:00 JP Vehicle Sales (Nov)

08:00 UK Halifax House Price Index (1st-5th) (Nov)

09:00 EU Manufacturing PMI (Nov)

09:30 UK BoE – Mortgage Approvals (Oct)

09:30 UK BoE – Net Consumer Credit (Oct)

09:30 UK BoE – Secured Lending (Oct)

09:30 UK CIPS/Markit Manufacturing PMI (Nov)

09:30 UK M4 Money Supply (Oct)

14:00 EU Euro-Area Finance Chiefs Discuss National Budgets in Brussels

14:45 US Manufacturing PMI (Nov)

15:00 US ISM Manufacturing (Nov)

* All release times are GMT

Skeptics Doubt “Abenomics” Will Cure Ills

Mihoko Asaka wants to know how candidates in this month’s election in Japan will create jobs and halt the drastic population decline that is bleeding her home region of youth and vitality, but has little hope they will offer real solutions. Like many of his age group, her 25-year-old son left the largely rural prefecture of Akita in northeastern Japan to find work after graduating from college.

“I’m interested to see how much they are listening to the voices from this region,” said Asaka, 57, waiting for a bus in Akita City, the prefecture’s capital. “But I don’t think our voices are being heard. They talk about money being thrown around, but we can’t see where it goes.”

Critics say Prime Minister Shinzo Abe’s policies to end deflation and generate growth have helped mainly big cities, large companies and the rich by boosting share prices and exporters’ profits with a hyper-easy monetary policy that has slashed the value of the yen and sent asset prices higher.

CNBC

Swiss Voters Reject Gold

Swiss voters overwhelmingly rejected proposals on Sunday that would have forced the central bank to buy huge amounts of gold and imposed strict curbs on immigration, in what is seen as a result strengthening Swiss ties with the European Union.

The measures proposed on Sunday reflect a growing sense that Switzerland is under siege by foreign workers eroding its Alpine culture and trading partners who have insisted in recent years that the Swiss dismantle their business model based on banking secrecy.

The “Save our Swiss gold” initiative failed to secure a winning vote in a majority of Swiss cantons, the so-called “cantonal majority” required for the initiative to pass, according to data from Swiss broadcaster SRF.

CNBC

Oil’s Decline a ‘gift’ for Asia Economies

Plummeting oil prices, which on Monday saw Brent crude tumbling to its lowest level in four years, may be bad for producers but should come as a welcome relief for Asia economies, boosting economic activity and reducing inflationary pressures, economists say.

“This is a tax cut for most of Asia [as] this is an energy short region,” Paul Gruenwald, chief economist, Asia Pacific at Standard and Poor’s (S&P) Ratings Services. “A couple of producers in the region – Malaysia and Australia – may take a minor hit but for the rest of the region, this is a gift,” he said.

The majority of countries in Asia are energy importers, with net import bills ranging under 2 percent of gross domestic product (GDP) for Vietnam to more than 10 percent for Thailand, according to Fitch Ratings.

CNBC

Gold Drops to $1150 after Swiss Vote

The “Save our Swiss gold” initiative, which would have compelled the Swiss National Bank to boost its gold reserves to 20 percent of its assets from around 8 percent currently, was rejected by 77 percent of voters.

Spot gold dropped as far as $1,142.91 an ounce, its lowest since early November when it marked a 4-1/2 year low of $1,131.85. It was down 1.6 percent at $1,148.01 by 0107 GMT.

CNBC

Oil Continues Decline after OPEC Decision Last Week

US crude prices plunged on OPEC’s decision to not cut output, but light trading on Friday after the U.S. Thanksgiving Day holiday meant there could be more losses when markets return to full strength next week, traders said.

U.S. crude’s front-month contract closed $7.54, or 10.2 percent, lower at $66.15 per barrel—its lowest settlement since September 2009. The front month for benchmark North Sea Brent crude fell about $2 to $70.45, its lowest since July 2010.

West Texas Intermediate (WTI) light U.S. crude hit fresh lows after Saudi Arabia blocked calls on Thursday from poorer members of the Organization of the Petroleum Exporting Countries to reduce production. U.S. markets were officially closed on Thursday for Thanksgiving, with only electronic trading.

CNBC

China Official Factory PMI Falls to 50.3

China’s factory activity eased more sharply than expected in November, official data showed Monday, underscoring the challenges manufacturers face amid a cooling economy.

The official Purchasing Managers’ Index (PMI) fell to 50.3, missing a forecast in a Reuters poll for a 50.6 figure and down from the 50.8 reading in October.

Investors are now awaiting the HSBC final PMI reading for November due out later Monday. The flash reading released last month showed activity stalled, with the figure clocking in at the breakeven level of 50.0 that separates expansion from contraction

CNBC

AUD/USD – Drops to New Multi-Year Low Below 0.8450

AUD/USD for Monday, December 1, 2014

The Australian dollar hasn’t had a great last couple of weeks as it has dropped sharply and fallen to a new multi-year low to start this week below 0.8450. During the middle of last week it enjoyed some solid support from 0.85, however this has given way to overwhelming supply. To start last week it rallied back above 0.8650 again before falling lower throughout the rest of the week. In the week prior the Australian dollar was able to rally higher and bounce off multi year lows around 0.8550 and in doing so has moved back within the previously well established trading range between 0.8650 and 0.88. The resistance level at 0.88 has stood tall on numerous occasions over the last few months. During the last couple of months the Australian dollar has done well to stop the bleeding and trade within this range after experiencing a sharp decline throughout September which saw it move from close to 0.94 down to below 0.8650 and a then eight month low in the process.

Back at the beginning of September the Australian dollar showed some positive signs as it surged higher again bouncing off support below 0.93 and reaching a new four week high around 0.94 however that all now seems a distant memory. The Australian dollar reached a three week high just shy of 0.9480 at the end of July after it enjoyed a solid period which saw it surge higher through the resistance level at 0.9425 to the three week around 0.9480, before easing back towards that level. The Australian dollar enjoyed a solid surge higher reaching a new eight month high above 0.95 at the end of June, only to return most of its gains in very quick time to finish out that week. Since the middle of June the Australian dollar has made repeated attempts to break through the resistance level around 0.9425, however despite its best efforts it was rejected every time as the key level continued to stand tall, even though it has allowed the small excursion to above 0.95.

After the Australian dollar had enjoyed a solid surge in the first couple of weeks of June which returned it to the resistance level around 0.9425, it then fell sharply away from this level back to a one week low around 0.9330 before rallying higher yet again. Its recent surge higher to the resistance level around 0.9425 was after spending a couple of weeks at the end of May trading near and finding support at 0.9220. Throughout April and into May the Australian dollar drifted lower from resistance just below 0.95 after reaching a six month high in that area and down to the recent key level at 0.93 before falling lower. During this similar period the 0.93 level has become very significant as it has provided stiff resistance for some time. The Australian dollar appeared to be well settled around 0.93 which has illustrated the strong resurgence it has experienced throughout this year.

(Daily chart / 4 hourly chart below)

a_20141201 a_20141201_4hour

AUD/USD December 1 at 01:05 GMT 0.8441 H: 0.8506 L: 0.8427

AUD/USD Technical

0.8400

—

0.8650

0.8800

0.9000

During the early hours of the Asian trading session on Monday, the AUD/USD is trying to consolidate and stop the bleeding after starting the week falling sharply down to new multi-year lows below 0.8430. Current range: trading right around 0.8440.

Further levels in both directions:

• Below: 0.8400.

• Above: 0.8650, 0.8800, and 0.9000.

OANDA’s Open Position Ratios

(Shows the ratio of long vs. short positions held for the AUD/USD among all OANDA clients. The left percentage (blue) shows long positions; the right percentage (orange) shows short positions.)

The long position ratio for the AUD/USD has moved back up towards 70% as the Australian dollar has fallen back through the support level at 0.8500 to a new multi-year low below 0.8450. The trader sentiment remains in favour of long positions.

Economic Releases

05:00 JP Vehicle Sales (Nov)

08:00 UK Halifax House Price Index (1st-5th) (Nov)

09:00 EU Manufacturing PMI (Nov)

09:30 UK BoE – Mortgage Approvals (Oct)

09:30 UK BoE – Net Consumer Credit (Oct)

09:30 UK BoE – Secured Lending (Oct)

09:30 UK CIPS/Markit Manufacturing PMI (Nov)

09:30 UK M4 Money Supply (Oct)

14:00 EU Euro-Area Finance Chiefs Discuss National Budgets in Brussels

14:45 US Manufacturing PMI (Nov)

15:00 US ISM Manufacturing (Nov)

* All release times are GMT

Looking Ahead in Asia

Economic data is back on the radar in Asia at the start of December after plunging oil prices dominated headlines for much of last week. China’s monthly purchasing manager’s indices (PMI) and Australia’s third-quarter gross domestic product (GDP) will take the spotlight.

The week begins with separate readings of China’s November factory activity from the government and HSBC. The closely-watched reports come on the heels of the central bank’s surprise interest rate cut late last month, which indicated that policymakers are worried about the country’s economic slowdown despite publicly quashing stimulus hopes in previous months.

Economists polled by Reuters expect the official manufacturing Purchasing Managers’ Index at 50.6, a touch lower than 50.8 in October. Meanwhile, HSBC’s preliminary reading for November showed PMI falling to a six-month low of 50 from October’s final reading of 50.4.

CNBC

Week in FX Americas – BoC’s Poloz to Stay the Course

Central banks remain “front and centre”

Loonie penalized by crude prices

25% fall in oil prices adds +0.3% to U.S GDP

Demons of deflation persist

Friday’s surprising +2.8% annualized Canadian gross domestic product (GDP) gain in the third quarter is unlikely to persuade Governor Stephen Poloz at the Bank of Canada (BoC) to change course anytime soon. Canada’s is a commodity-rich and sensitive economy. With oil representing about +20% of Canadian exports, the recent slide in energy prices is weighing on Canada’s terms of trade. The big driver for growth in the third quarter was net exports, which added +0.9% to Canada’s overall growth.

Over the past few months, plummeting energy prices are having a “net” negative impact on the economy north of the U.S. border and its currency, the “loonie.” The CAD ($1.1410) is trading lower, despite Friday’s better-than-expected GDP report in this holiday shortened trading week. Immediately after the release, the CAD did find some outright traction. Nevertheless, the weight of crude prices is having a much greater negative impact, supported obviously by OPEC’s (Organization of the Petroleum Exporting Countries) decision to not cut its production target. On Thursday, OPEC oil ministers maintained the existing daily production of +30M bpd quota.

Loonie to End Its Bull Cycle

Technical analysts believe that a USD/CAD daily close north of Thursday evening’s $1.1324 print sends a strong signal to the market that the loonie’s recent bullish run has come to an end. The trend reversal will now target this year’s USD/CAD high ($1.1465). Despite the energy sector’s growing importance to the U.S. economy, many believe that the recent drop in crude prices will be a net gain for American economic growth. With crude prices falling -25% in recent months, it equates to approximately -$75 billion in tax cuts for the U.S. consumer, or it adds +0.3% to U.S. GDP in the coming year. Regardless, the market will be required to follow U.S. yields to gauge the big dollar’s overall strength. The demons of deflation in Europe and Japan will not be powering global yields higher anytime soon.

What to Expect Next Week

Be ready to hit the ground running next week. The bulk of the market’s attention will again be on central bank decisions and reactions. It all starts with the Swiss National Bank on Sunday. No matter which way the gold referendum vote goes, investors will want to cash in on some of their longstanding positions. Meanwhile, the Reserve Bank of Australia’s rate decision will kickstart Australasia’s week. The Bank of England, European Central Bank, and BoC will all make public statements in middle of the week before giving way to the granddaddy of economic indicators: the U.S. nonfarm payrolls report on Friday.

MarketPulse Economic Calendar

WEEK AHEAD

* CHF Swiss Gold Referendum
* USD ISM Manufacturing
* AUD Reserve Bank of Australia Rate Decision
* AUD Gross Domestic Product
* EUR Euro-Zone Gross Domestic Product
* CAD Bank of Canada Rate Decision
* GBP Bank of England Rate Decision
* EUR European Central Bank Rate Decision
* GBP BoE/GfK Inflation Next 12 Months
* CAD Unemployment Rate
* USD Change in Non-farm Payrolls

Week in FX Asia – JPY Weaker But Is it Weak Enough?

USD/JPY breaks through 118 price level

BOJ still confident on 2% Inflation target

OPEC decision fallout could benefit Asia

Softer economic data out of Japan drove the USD/JPY higher even after policy makers and analysts stated that the JPY was weak enough. Inflation continued gaining year over year, but it has been doing so at the slowest pace after the April sales tax. Core inflation fell below 1% and there are growing concerns that with cheaper energy prices Japan won’t get any inflation boost through imports.

Exports have grown at a faster pace in Japan but not even a weaker Yen has been able to significantly change the course of the economy. The main reason for this is that following a globalization and cost reduction strategy Japan has outsourced almost a third of it’s manufacturing. For comparison in the 80’s only a tenth of Japanese companies manufactured out of Japan. This shift makes it hard for Yen weakness to boost exports overnight and it reduces the overall impact they can have on the bottom-line of corporations.

BoJ Governor Haruhiko Kuroda addressed the central bank readiness to act if needed earlier in the week. According to Kuroda the soft yen is having a negative effect on the Japanese economy. The yen received a boost after the BoJ minutes showed that some policymakers opposed the BoJ’s decision to expand its stimulus program in October. At that time, the BoJ shocked the markets when it increased its government debt purchases from JPY 60-70 trillion to 80 trillion per year. The division within the BOJ could make it harder on Kuroda to introduce further stimulus. The governor stressed the need to act now and the measure is seen as a preemptive to avoid Japan losing even more momentum after the April sales tax hike.

The Organization of the Petroleum Exporting Countries (OPEC) held its production setting meeting this week in Vienna. There was much speculation regarding the final decision as the price of crude has been falling as demand continues to shrink while production continues unchanged. Oil producing countries were disappointed as the OPEC maintained the 30 million barrels a day ceiling while the price of oil around the world dropped to below $80. Asia has been one of the winners as energy importing nations such as China, Japan and India have been taking advantage of low prices. For Japan it is a mixed bag as there is a trade deficit benefit but an inflation hit.

Next Week For Asia:

The bulk of the market’s attention will again be on central bank decisions and reactions. It all starts with the gold referendum in Switzerland on Sunday. No matter which way the vote goes, investors will want to cash in on some of their existing positions. Meanwhile, the Reserve Bank of Australia’s rate decision will kickstart Australasia’s week. The Bank of England, ECB, and Bank of Canada will all make public statements in middle of the week before giving way to the number one economic indicator: the U.S. non-farm payrolls report on Friday.

Fore more market moving events visit the MarketPulse Economic Calendar

WEEK AHEAD

Italian Unemployment Hits Record

Meanwhile, unemployment figures for October showed a reading of 11.5 percent for the euro zone, holding steady from September. Italy was the major drag with the struggling nation’s numbers reaching a record higher of 13.2 percent in October.

This is the highest the figure has ever been since records began back in 1977. The youth unemployment rate – those aged between 15 and 24 – came in at 43.3 percent, adding 0.6 percentage points in a month, according to the statistics agency Istat.

via CNBC

European Bond Yield Fall Awaiting ECB QE

Bond yields across Europe continued to slide Thursday as weak inflation data and hints from the Vice President of the European Central Bank (ECB) boosted hopes of a full-blown sovereign bond-buying program.

Bonds from countries on the so-called periphery of the euro zone performed particularly well, with yields on benchmark 10-year bonds from Ireland, Italy and Portugal hitting 10-year lows. France and Germany’s bond yields also slipped.

It comes after ECB Vice President, Vitor Constancio, raised hopes of full-blown quantitative easing – also known as QE – on Wednesday.

He said the central bank expected its balance sheet to rise to 2012 levels on the back of measures already agreed, but added the purchase of sovereign debt and “other assets” could be an option if the environment didn’t develop as expected.

via CNBC

European Commission Defers Budget Punishment on Italy and France

The new European commission has shied from penalising eurozone countries, notably France and Italy, for being in breach of the single currency rulebook, and has given Paris and Rome until next spring to deliver on their pledges of sweeping changes to their labour markets and other structural reforms.

“As a new commission, we’re not seeing it as a priority to punish countries,” said Valdis Dombrovskis of Latvia, it’s new vice-president in charge of the euro.

Armed with new powers to scrutinise eurozone draft budgets in advance, dictate changes and punish recalcitrants, the commission said seven of 16 countries being assessed were at risk of breaking the stability and growth pact.

Of those, France, Italy and Belgium were the most serious sinners, France because of its persistent inability to get its budget deficit to within 3% of GDP; Italy and Belgium because of soaring public debt levels well beyond the 60% of GDP limit.

All three countries have written to Brussels promising to do more to comply with the rules. Less than a month into the tenure of the five-year commission under Jean-Claude Juncker, Brussels decided to give the three countries the benefit of the doubt.

via The Guardian

Denmark Gets Investment Boost Leading to Growth in Q3

Denmark’s economy unexpectedly grew last quarter after companies stepped up investments, offsetting a decline in household spending and exports.

Gross domestic product expanded 0.5 percent from the previous three-month period, the Danish statistics office said today in a statement. Economists surveyed by Bloomberg had foreseen a 0.1 percent decline from the second quarter. GDP grew 0.9 percent from a year earlier.

Denmark’s government has said there’s no more room in the budget to stimulate the $300 billion economy as households spend less and exporters struggle to adapt to lackluster demand in the rest of Europe. Denmark exports about half its output. The central bank uses policy to keep the krone pegged to the euro, leaving it no leeway to adjust rates to steer demand.

Household spending dropped 0.6 percent in the third quarter from the second while exports declined 0.2 percent, the office said today. Fixed investments rose 1.2 percent after increasing 1 percent in the second quarter.

via Bloomberg

Indian GDP Slows Down to 5.3% Growth

The Indian economy grew at an annual pace of 5.3% in the three months to the end of September, down from 5.7% in the previous quarter, figures show.

Although the rate was slower than earlier in the year, it was still better than many analysts had expected.

The figures cover the first full quarter under the government of Prime Minister Narendra Modi.

Earlier, Indian stock market indexes hit new highs, in anticipation of the figures.

Investors were also encouraged by the news that the government is to cut its holdings in state-run banks, such as State Bank of India.

via BBC

Oil Drops to Four Year Low on OPEC Decision

Oil prices hit a four-year low in the wake of the decision by the Opec producers’ cartel not to cut output.

Brent crude touched a new four-year low of $71.12 a barrel early on Friday, before recovering to trade above $73.

The price of Brent had dived by more than $5 a barrel on Thursday after Opec announced no change to its production plans following a meeting in Vienna.

The 12 Opec members decided to maintain production at 30 million barrels per day, as first agreed in December 2011.

The price of US oil fell to $67.75 a barrel – the lowest level since May 2010.

Following the meeting in Vienna, Opec’s secretary general Abdallah Salem el-Badri said the group would not try to bolster prices by cutting output.

“There’s a price decline. That does not mean that we should really rush and do something,” he said.

via BBC

Eurozone Inflation Falls to 0.3%

The eurozone’s inflation rate fell to 0.3% in November, from 0.4% in October, suggesting that deflation remains a threat for the 18-nation bloc.

Eurostat, the European Union’s statistics agency, said that the rate was pulled down by lower energy prices.

The European Central Bank considers anything below 1% to be in its deflation “danger zone”.

The eurozone’s low inflation is blamed for undermining growth, which has prompted ECB stimulus measures.

A fear among policymakers is that if deflation takes hold, consumers and companies will delay purchases in the hope prices will fall further.

Consumer inflation has not been at the ECB’s target level of close to, but below 2% since the start of 2013 and has been falling since a 3% peak in late 2011.

Eurostat said energy prices fell 2.5% from October and by 1.1% on an annual basis. Core inflation, stripping out energy and food prices, was 0.7%, unchanged from October.

Earlier this week, Germany’s inflation reading fell to its lowest for nearly five years.

via BBC

Putin Confident Oil will Stabilize Next Year

Russian President Vladimir Putin said on Friday he was confident the oil market would find its balance by the middle of next year.

“I am confident that in the first quarter, in the middle of next year the (oil) market will find a balance,” Putin told a meeting with the chief executive officer of France’s Total (TOTF.PA), Patrick Pouyanne.

Brent crude oil steadied below $73 a barrel on Friday after hitting a fresh four-year low following OPEC’s decision not to cut output.

Putin added he had expected oil prices to fall after OPEC’s meeting and said Moscow had not insisted on any specific action to stabilize them.

via Reuters

OPEC Decision Puts Pressure on Russia as it Loses Leverage

The decision by the Organization of Petroleum Exporting Countries (OPEC) to keep production at its current limits in the face of slumping oil prices means trouble for the Russian economy, analysts believe.

Despite hopes from members Venezuela, Iran and Iraq that the 12-counrty oil cartel would cut production from its current 30 million barrels a day, the committee, led by Saudi Arabia, sent out the message that it could cope with lower oil prices.

Brent crude was hovering near a four-year low early Friday of $72.43 a barrel, while U.S. crude futures tumbled Thursday nearly $6 to $67.75, the lowest since May 2010 after OPEC’s decision. Crude prices have fallen around 30 percent since June on the back of an abundant supply and lack of demand. As such, there was hope that OPEC might support prices by cutting production but these were dashed on Thursday.

Along with the currencies of other oil producing nations, such as Norway and Canada, the Russian ruble fell further after the OPEC decision was announced. On Friday, it was trading at 49.14 against the greenback, having dipped from 47.39 against the greenback ahead of the OPEC decision on Wednesday. Russian stocks also dropped on the news but the country’s MICEX index had recovered to trade slightly higher Friday morning at 1,533.

via CNBC

India Stock Market Set to Continue Rally

India markets have made a stunning recovery from last year’s taper tantrum, with the Nifty index at record highs, and some analysts are calling the run up just the beginning.

“India has huge growth potential and it is a structural story. If you are not in it, buy it,” said Bhaskar Laxminarayan, chief investment officer at Swiss private bank Pictet, which has made the market a core holding in its Asian portfolios.

Indian assets have already seen a strong rally. Both the Nifty and Sensex indexes are tapping record highs after rising around 37 percent each so far this year. Last year during the taper tantrum, the rupee tumbled to a record low, with the U.S. dollar fetching nearly 70 rupees. This year, the currency has remained in a tighter range, with the dollar fetching around 58-63 rupees.

Laxminarayan believes India is on a structural upswing, offering a five to 10 year opportunity.

via CNBC

Japan’s Unemployment Rate Improved to 3.5% in October

Japan’s unemployment rate improved to 3.5 percent in October from 3.6 percent the previous month, with some companies eager to hire women due to labor shortages, government data showed Friday.

The number of unemployed people fell a seasonally adjusted 1.3 percent from the previous month to 2.34 million, the Ministry of Internal Affairs and Communications said, adding the number of people holding jobs slid 0.2 percent to 63.55 million.

The number of unemployed women fell 60,000 to 910,000, while that of unemployed men rose 20,000 to 1.43 million, the ministry said in a preliminary report.

The unemployment rate for women decreased 0.2 percentage point from September to 3.2 percent, though that for men rose 0.1 point to 3.8 percent, it said.

“As some industries such as construction have been trying to adequately staff their operations, the job market has continued to pick up,” a ministry official briefing reporters said.

Separate data showed job availability improved for the first time in four months.

The ratio of employment offers to seekers rose to 1.10 in October from 1.09 in September, which means 110 positions were available for every 100 job seekers, according to the Ministry of Health, Labor and Welfare.

via Mainichi

USD Gets OPEC Boost As Commodity Currencies Drop

The dollar strengthened on Friday after OPEC decided not to cut oil output, slamming commodity currencies like the Norwegian crown, which fell to five-year lows against the greenback and euro.

The euro slipped before data due at 1000 GMT, which is expected to show euro zone prices rose just 0.3 percent in November. That is deep in the European Central Bank’s “danger zone” for inflation of below 1 percent and even further away from its target of just under 2 percent.

Investors took aim at currencies of oil-rich countries such as Norway and Canada as Brent crude tumbled to a four-year low of $71.25 after OPEC’s decision. Crude is down more than 10 percent this week alone.

The U.S. dollar rallied to 6.9963 Norwegian crowns, a high not seen in over five years, up 0.9 percent on the day. The euro also hit a five-year high of 8.7080 crowns.

Against the Canadian dollar, the greenback rose 0.4 percent to a two-week high of C$1.1384.

“If oil prices remain where they are or decline further, the need to buy these currencies will be less because their exports have become markedly cheaper,” said Hamish Pepper, currency strategist at Barclays in London.

“There’s a very direct channel through which these currencies are impacted.” The dollar rose 0.7 percent against a basket of major currencies to 88.217, leaving it on track to finish November with five straight months of losses – its best run in five years.

via CNBC

Sweden Expands Slightly Above Forecasts in Q3

Sweden’s economy expanded more than estimated last quarter as unprecedented monetary easing helped underpin business investment even as household spending stalled.

Gross domestic product grew 0.3 percent from the second quarter, just beating a 0.2 percent median estimate in a Bloomberg survey of analysts.

“The economy continues to grow at a decent clip,” Colin Bermingham, an economist at BNP Paribas in London, said in a note. “But the slowdown in consumption expenditure is a concern, given the low level of inflation.”

While the largest Nordic economy has outgrown Europe on average since the region’s debt crisis started, Sweden has slipped into a deflationary spiral that drove the central bank last month to cut its main interest rate to zero for the first time in its history. Today’s report suggests price pressure is unlikely to come from consumer demand.

Private spending was unchanged from the second quarter while fixed investment rose 1.1 percent. Exports increased 0.7 percent.

via Bloomberg

Nikkei Rises After Weaker JPY and Oil Drop

apan’s Nikkei index closed at its highest level for two weeks, with exporters boosted by a weaker yen and airlines helped by falling oil prices.

The Nikkei 225 closed up 211.35 points, or 1.2%, at 17,459.85.

Shares in exporters rose as the dollar went above 118 yen. A weaker yen helps make Japanese exports more competitive.

Falling oil prices and the prospect of cheaper fuel pushed Japan Airlines’ shares up 5.3%, while rival All Nippon Airways jumped 7.4%.

The decision by oil producers’ group Opec on Thursday to maintain current output levels sent the price of oil down sharply. Brent crude was trading at $72.49 a barrel on Friday having fallen by more than $5 on Thursday.

Investors were also digesting a large amount of economic data from Japan, which painted a mixed picture of the world’s third-largest economy.

Excluding the effect of a large tax rise in April, the inflation rate in October was 0.9%, way below the 2% target.

Including the tax rise, core inflation was 2.9% higher in October than a year ago, compared with 3% in September.

Household spending fell by 4% in the year to October, but retail sales rose 1.4%, beating expectations and the unemployment rate fell from 3.6% to 3.5%.

via BBC

Japan Industrial and Retail Data Rise Above Expectations

Japan’s industrial production and retail sales figures exceeded expectations in October, signalling a tentative recovery in demand as businesses and consumers continue to adjust to the April sales-tax hike.

Industrial production rose 0.2 percent on month in October, above expectations for a 0.6 percent decline in a Reuters poll but down from September’s 2.7 percent increase. Meanwhile, retail sales rose 1.4 percent on year, above expectations for a 1.2 percent rise but slower than September’s 2.3 percent increase.

In April, the government raised the consumption tax to 8 percent from 5 percent to rein in the country’s budget-to-GDP ratio. It was the first tax hike in 17 years.

The Japanese economy struggled to deal with the tax hike’s impact on demand, prompting markets to call on the Bank of Japan to pursue fresh stimulus measures. At the end of October the central bank did just that, expanding its already massive stimulus in an effort to re-energize a fragile economic recovery.

via CNBC

Japan’s Inflation Slows Down Putting Pressure on BOJ

A flurry of economic data released Friday revealed a mixed picture for Japan, suggesting the outlook remains challenging for the world’s third biggest economy which slipped into recession in the third quarter.

While consumer inflation slowed to its lowest level in a year in October, raising skepticism over the Bank of Japan’s (BOJ) ability to achieve its inflation target, industrial output and spending showed further signs of revival.
The nationwide core consumer price index (CPI) – which excludes volatile food prices – rose 2.9 percent in the month from a year ago. The figure was in line with a Reuters poll and follows a 3 percent rise in September.

However, adjusted for an increase in the sales tax hike that took effect in the second quarter, core consumer prices rose 0.9 percent on year, below September’s 1 percent rise and well below the 2 percent target the Bank of Japan (BOJ) aims to achieve by April 2015.

“The first thing that pops into my head is that I’m very glad that [Japanese Prime Minister Shinzo] Abe has already announced he wants to defer the consumption tax increase because it might just have been possible that he would have used numbers like these to say: Let’s hike the consumption tax next year as planned. That would not have been the right thing,” he added.

via CNBC

China Could have up to $6.8 Trillion in Ineffective Investments

“Ghost cities” lined with empty apartment blocks, abandoned highways and mothballed steel mills sprawl across China’s landscape – the outcome of government stimulus measures and hyperactive construction that have generated $6.8 trillion in wasted investment since 2009, according to a report by government researchers.
In 2009 and 2013 alone, “ineffective investment” came to nearly half the total invested in the Chinese economy in those years, according to research by Xu Ce of the National Development and Reform Commission, the state planning agency, and Wang Yuan from the Academy of Macroeconomic Research, a former arm of the NDRC.

China is this year on track to grow at its slowest annual pace since 1990, and the report highlights growing concern in the Chinese leadership about the potential economic and social consequences if wasteful investment leaves projects abandoned and bad loans overloading the financial system.
The bulk of wasted investment went directly into industries such as steel and automobile production that received the most support from the government following the 2008 global crisis, according to the report.

via CNBC

Canadian Energy Companies Face Difficult Prospects After OPEC

Canada’s biggest energy producers now face the same prospects of shrinking budgets and declining profit as their smaller rivals as prices drop for what’s already the world’s cheapest oil.

Producers including Suncor Energy Inc. (SU) and Canadian Natural Resources Ltd. (CNQ), which each fell the most in at least three years yesterday, operate in one of the most expensive places on earth to produce oil. If crude prices continue sinking following OPEC’s decision not to cut global oil supplies, Canada’s producers big and small will have to tighten their belts to prepare for declining profits.

“This is a pretty big shock,” said Justin Bouchard, an analyst at Desjardins Securities Inc. in Calgary. “There’s no question there’s going to be a slowdown. Even the big guys will have to look at their capital spending plans.”

Western Canada Select, the Canadian benchmark, has lost more than a third of its value since June, in step with declines for West Texas Intermediate and the international gauge Brent. WCS traded yesterday at $55.94 a barrel, the lowest in the world.

Investors reacted by sending the 69-company Standard & Poor’s/TSX Composite Index Energy Sector Index down 5.1 percent, the most since August 2011. WTI sank as much as 8.1 percent and Brent fell as much as 8.4 percent after the announcement from the Organization of Petroleum Exporting Countries.

via Bloomberg

Brent Oil Near $77 after Report says OPEC Won’t Cut Production

U.S. oil prices settled lower on Wednesday after Saudi Arabia’s oil minister said he expects OPEC members to reach a unified decision later this week, but he would not disclose details on the decision, according to Dow Jones reported.

A Gulf OPEC delegate told Reuters the GCC had reached a consensus not to cut oil output. Three OPEC delegates separately told Reuters they believed OPEC was unlikely to cut output when the 12-member organisation meets on Thursday.

WTI crude ended the session 40 cents lower at $73.69 a barrel, not far from its session low $73.30. Benchmark Brent futures were last down by about 50 cents at $78 a barrel, having hit a low of $77.30 in the session.

CNBC

West TX Oil Drops Below $73 Before OPEC

Oil slid to a four-year low amid concern OPEC won’t agree to cut output at today’s meeting. Chinese shares traded at a three-year high on further monetary loosening and the yen strengthened a third day.

West Texas Intermediate crude tumbled 1.2 percent to $72.84 a barrel by 12:22 p.m. in Tokyo, falling for a fourth straight day. The Shanghai Composite Index rose 0.3 percent, touching the highest intraday level since August 2011. Samsung Electronics advanced as much as 8.3 percent in Seoul after saying it will buy back $2 billion of shares. Standard & Poor’s 500 Index futures increased 0.1 percent after the U.S. gauge rose to a record before today’s holiday. The yen gained 0.2 percent.

Representatives from the 12 Organization of Petroleum Exporting Countries meet today in Vienna, with oil prices mired in a bear market. China’s central bank didn’t sell repurchase agreements in open-market operations for the first time since July, further loosening monetary policy after cutting interest rates for the first time since 2012. Reports on Spanish economic growth and German unemployment are due, while U.S. markets are closed for Thanksgiving.

Bloomberg

U.S. Dollar Remains Lower

The dollar held its first two-day drop this month against major counterparts as a gauge of economic surprises fell to a three-month low, signaling U.S. data are weaker than analysts estimated.

The yen remained higher versus the greenback as trading patterns suggest its declines this month were excessive. Australia’s currency erased earlier losses after a report showed the nation’s private capital expenditure unexpectedly increased. U.S. financial markets are shut for Thanksgiving.

“Some investors might look to take some of their chips off the table following the run up in the dollar in the past couple of months,” said Michael Turner, a debt and currency strategist at Royal Bank of Canada in Sydney. “The data have turned this week in the U.S., but the reaction has been exaggerated.”

Bloomberg

Japan Stocks Fall Again as Yen Rises

Japanese stocks fell for a second day as the yen strengthened and energy companies led losses as crude oil slid to a four-year low.

Inpex Corp., Japan’s biggest oil explorer, dropped 2.2 percent. Yakult Honsha Co. plunged 5.5 percent after Paris-based Danone was said to be considering selling its 20 percent stake in the Japanese maker of fermented milk products. Honda Motor Co., which gets about 80 percent of its sales abroad, lost 2.2 percent. Tokyo Electron Ltd. jumped 3.2 percent after an analyst said Samsung Electronics Co. will drop objections with South Korean authorities against the Japanese company’s takeover by Applied Materials Inc.

The Topix (TPX) slipped 0.6 percent to 1,398.69 as of 12:31 p.m. in Tokyo, with all but four of its 33 industry groups declining. Volume on the measure was about 21 percent below the 30-day intraday average. The Nikkei 225 Stock Average dropped 0.3 percent to 17,324.82. The yen rose 0.2 percent to 117.54 per dollar, strengthening for a third day.

Bloomberg

A Snapshot of Central Bank Thinking

Rate divergence to continue

European Central Bank Credibility on the Line

Inflation Stymies the Bank of Russia

The Fed’s Game of Show and Tell

Some of the main central banks continue to eye handcuffing investors to a low rate environment throughout the first half of 2015. The current exception to the loose monetary policy regime will be the Federal Reserve and the Bank of England (BoE) in that order; however, a precarious economic environment will continue to bring forth varying results.

The People’s Bank of China’s Cautious Approach

The coming year is shaping up to be a challenging one for Asian central bankers. They are confronted with a balancing act of supporting economic growth whilst guarding against potential volatility arising from the normalization of U.S. interest rates.

There is a popular fear that growth in the world’s second-largest economy could slow to as little as +5% in the near term. Currently, the market is expecting China’s central bank to wait until fourth-quarter economic data is out, as Beijing monitors U.S. and Japanese monetary policy before considering any more rate cuts or easing.

Last week, the People’s Bank of China (PBoC) surprised the markets by cutting rates for the first time in more than two years to help stabilize its domestic economy. It was an unexpected departure from a central bank that has maintained a relative neutral stance for the last few years. The PBoC’s policymakers have already indicated they need to look at the fourth quarter’s macroeconomic index before implementing the next move. Friday’s interest rate cut is expected to bring some stability into the all-important property sector next year.

The Bank of Japan’s Shock and Awe Play

Tuesday’s meeting minutes from the Bank of Japan (BoJ) revealed that the central bank’s surprise move last month to expand its already massive stimulus program was about sending the message that it will do whatever it takes to “conquer deflation.” Clearly, Governor Haruhiko Kuroda wanted to send a strong message to shock the wider economy. Both Japanese consumers and business leaders remain unmoved by the BoJ’s monetary policy. Even the benefits of a much weaker yen (117.75) are not being filtered through to the Japanese exporter. Inflation looks set to straddle +1%, well below the BoJ’s stated target (+2%), despite capital investments continuing to pick up but not by enough to boost economic growth. The BoJ seems more optimistic than Prime Minister Shinzo Abe. With Japan now mired in another recession, pushed there in part by the first consumption sales tax hike, Abe needed to go to the electorate to gain consensus. Japan’s snap general election over the coming weeks will keep markets moving.

The Reserve Bank of India Feels the Heat

India’s economic growth is expected to have slipped to around +5% in the third quarter from +5.7% in the previous quarter. This will undoubtedly be putting pressure on the central bank to cut interest rates. Markets should expect Prime Minister Narendra Modi to press Reserve Bank of India Governor Raghuram Rajan to lower borrowing costs when the two meet ahead of a decision on interest rates next Tuesday. It has been six months since Modi swept to power with a promise that “better days are coming.” The growth of +5% is considered a major setback from the previous quarter, and it falls well short of the desired +8% that Asia’s third-largest economy requires creating enough jobs for its growing workforce.

Inflation Stymies the Bank of Russia

The Bank of Russia’s (BoR) Chair Elvira Nabiullina indicated this week that Russian policymakers would consider easing monetary policy in the second half of 2015 if inflation can be brought to heel. When a steady trend of lower inflation does transpire, the BoR is expected to establish a looser monetary policy cycle. Riding the trading bands is a priority to stabilize the ruble (RUB). It allows the central bank to be more proactive to protect the currency while it’s under threat. Currently, consumer inflation is exceeding the bank’s ceiling of +6.5%, and critics say it may reach +9% by the end of the year. Already the BoR has raised interest rates four times this year in an attempt to preempt rising inflation.

A weak ruble and Moscow’s ban on food imports from has any nation that imposed sanctions on the country due to the ongoing Ukraine crisis are supporting Russian inflation.

The Swiss National Bank’s Golden Moment Is at Hand

The Swiss Central Bank (SNB) is on a mission. Not surprisingly, EUR/CHF has managed to climb to a one-week high (€1.2032) on thoughts of lower European Central Bank (ECB) funding. European/U.S. rate divergence is lending the SNB a helping hand ahead of the Swiss gold referendum on November 30, currently allowing the EUR/CHF to be supported and gradually move away from the SNB’s well-publicized floor (€1.2000).

The Swiss go to the polls on Sunday to vote on whether the SNB should be holding +20% of its reserves in gold. The proposal is to ban SNB from selling gold reserves below this threshold. More than +50% of the electorate needs to vote in favor. The current polls indicate that +38% support the proposal, +47% are opposed, and +15% undecided. Support for the initiative was +44% in October. The SNB is worried that the proposal could curb its ability to set monetary policy.

The bank’s “line in the sand stance,” reassured for another three weeks, complicates the SNB’s policy of buying EURs whenever the currency weakens “too quickly or too far.”

New rules (if voted in), would require the SNB to buy gold to balance any EUR purchases. This would tie policymakers’ hands when trying to conduct standard monetary policy. The pressure on the SNB to defend the franc, especially with the ECB is expanding its balance sheet and looking at other assets it can purchase. The downward pressure should be expected to increase. A “yes” vote would only invite more aggressive speculation — the SNB would be left with few tools to weaken the CHF.

The Reserve Bank of Australia Ponders a Rate Cut

Aussie policymakers expect the AUD (A$0.8516) to drop in line with commodity export prices just as the currency plunged to a four-year low on November 25. Part of the reason for the AUD’s fall can be attributed to Reserve Bank of Australia (RBA) Deputy Governor Philip Lowe’s suggestion the RBA could cut interest rates next year if need be. The RBA believes that “if the exchange rate is to play its important stabilizing role, it needs to go down when the terms of trade and investment are declining.”

The central bank has gone to great lengths to tell the market that it has seen “some adjustment, but if the assessment of the fundamentals are correct, it would expect to see more in time.” Despite the AUD declining more than -8% over the past three months, it remains elevated as the nation’s key interest rate of +2.5% attracts investors away from the U.S., Japan, and Europe where benchmarks are at or near zero (further supporting the carry trade). Yield differentials have helped the Aussies resist a fall in the terms of trade, or export prices relative to import prices.

A Bank of England Rate Hike Will Come next Year

The BoE was the original frontrunner to reignite a normal rate policy until the Fed has deposed them. Governor Mark Carney continues to speak of “heightened” external risks menacing the U.K. as weakening global economies and political tensions weigh on the BoE’s outlook. In recent months, global economic conditions have deteriorated in two of the major economies, Europe and Japan, coupled with a difficult geopolitical situation, Carney is not as bullish as the market had perceived earlier in the year. The BoE policymakers cut their economic forecasts earlier this month because of meager global expansion and the threat of stagnation in Europe. U.K. citizens go to the polls next May, and event risk related to the election outcome is as great a threat to the U.K.’s fortunes as was last September’s Scottish referendum.

European Central Bank Credibility on the Line

Already this November, ECB President Mario Draghi pointed to European flash purchasing managers’ index results to indicate that a strong recovery is unlikely in the coming months. His sense of urgency to lift inflation expectations “as soon as possible,” has a percentage of the market already anticipating the ECB will sweeten the terms of the TLTRO (targeted long-term refinancing operation) in December, while leaving the debate over balance sheet expectations until January.

Draghi needs to get a real “bang for his buck” before hot air whistles away and the ECB loses street credibility. Eurozone policymakers will need to make sure that they have exhausted all existing balance sheet avenues before they begin to charge down the route of no return: sovereign bond purchases. To date, the ECB has had the minimum of success in expanding its balance sheet. In fact, it has actually declined –€11B since the beginning of September. The EUR will remain very sensitive to short interest rate trends, with further downside very much on the cards.

The Organization for Economic Cooperation and Development (OECD) is ahead of the curve on the eurozone’s limitations. The OECD thinks the region poses a serious danger for global growth, with the world’s economy already “in low gear,” as unemployment remains high and inflation persistently far from the ECB’s target. The next two months could make or break the ECB’s remaining credibility starting with its December 4 meeting.

The Fed’s Game of Show and Tell

The Fed is in its own class and well ahead of the remaining Group of Seven pack.

Fed Chair Janet Yellen and company are weighing whether they should communicate more of their views about the probable pace of interest rate increases after they lift off zero next year. The transparency question is a hot topic among the central bank’s rate-setting committee. Some members think it would be helpful to clarify its likely approach to the pace of increases – fixed-income dealers are currently pricing in a second-quarter 2015 hike. The discussion at the Fed’s last meeting in October highlighted how much officials will rely on forward guidance in the future. After bond purchases ended last month, language may be the most practical option left to assure investors that policy won’t become overly restrictive if officials decide to take a stand against inflation seen as too low.

Week in FX Europe — No Thanksgiving for OPEC

OPEC punishes energy prices

Russia to feel the squeeze

Deflation demons awake on OPEC decision

Look out for gold this weekend

Energy prices continue to make records. Today, OPEC (the Organization of the Petroleum Exporting Countries) is back calling the shots, and putting the squeeze on global crude producers, commodity currencies, trade balances and Russia in particular, after yesterday’s stand-pat decision to maintain its existing daily production of +30M bpd. This decision pushed the benchmark North American West Texas Intermediate crude oil to trade down -6% to $68 per barrel, a fresh four-year low.

OPEC’s decision has given an upward bias to the mighty U.S. dollar, as lower oil prices are deemed a direct boon to the American economy. OPEC’s bearish position is also managing to send commodity currencies like the CAD ($1.1385), NOK ($6.99), and RUB tumbling. The loonie, as the Canadian dollar coin is known, has been the least effective; dropping one cent outright on expectations that stronger U.S. growth will eventually “rub off on Canada’s economy.” Overnight and outright, USD/RUB has managed to hit a fresh record high ($49.755). Now the FX market will need to be vigilant, it is unknown if or when the Central Bank of Russia (CBR) will intervene in large amounts to stabilize its embattled currency. This will depend on whether or not the CBR regards Russia’s financial stability is at risk.

Russian Bear Tamed by OPEC

Investors should not expect any let up for Russia for the remainder of this year. Russian banks and companies need to pay down +$30B in foreign debt next month. This and potential new sanctions will only heap further pressure on the RUB. This ongoing scenario should exert significant pressure on Russia’s sovereign ratings for next year. Ratings agencies up to now had expected the oil market environment to be much more benign for Russia in 2015.

Deflation Demons Awake on OPEC Decision

After OPEC refrained from cutting its oil output, disinflation remained the key theme in both Asia and European trading sessions overnight. Investors and dealers note that decline in oil prices would make it even more difficult for the European Central Bank (ECB) and the Bank of Japan (BoJ) to push up inflation. This morning’s eurozone November Flash consumer-price index (CPI) estimate came in line with expectations (+0.3%, year-over-year), but matched its five-year low. This makes December’s ECB monetary meetup that much more interesting.

The BoJ is in the same boat. USD/JPY is currently holding above the 118 level after Japan’s October National CPI data registered its 17th consecutive year-on-year gain, but at the slowest pace since the consumption tax hike in April; core inflation fell below +1% for the first time in a year. Prime Minister Shinzo Abe’s snap general election call next month will keep investors busy throughout the historically low volatile holiday month.

Will Swiss Tie Its National Bank to a Golden Leash?

Further event risk remains on the fore this Sunday, as the Swiss go to the polls on to vote on whether the Swiss National Bank (SNB) should hold +20% of its reserves in gold. The proposal is to ban SNB from selling gold reserves below this threshold. More than +50% of the electorate needs to vote in favor. The current polls indicate that +38% support the proposal, +47% are opposed, and +15% undecided. Support for the initiative was +44% in October. The SNB is worried that the proposal could curb its ability to set monetary policy.

The bank’s “line in the sand stance,” (defends its cap of 1.20 CHF per EUR) reassured for another three years, complicates the SNB’s policy of buying EURs whenever the currency weakens “too quickly or too far.”

It’s important to remember that the demands of the gold initiatives would not be implemented immediately. The SNB has five years to lift its gold asset share to +20% – this would suggest that betting against the SBN would not be very clever.

What to Expect Next Week

Be ready to hit the ground running next week. The bulk of the market’s attention will again be on central bank decisions and reactions. It all starts with the SNB on Sunday. No matter which way the gold referendum vote goes, investors will want to cash in on some of their longstanding positions. Meanwhile, the Reserve Bank of Australia’s rate decision will kickstart Australasia’s week. The Bank of England, ECB, and Bank of Canada will all make public statements in middle of the week before giving way to the granddaddy of economic indicators: the U.S. nonfarm payrolls report on Friday.

MarketPulse Economic Calendar

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WEEK AHEAD

USD/JPY – Steady as Japanese Inflation, Retail Sales Numbers Meet Expectations

USD/JPY is stable on Friday, as the pair trades in the low-118 range. Japan released a host of data on Thursday, as consumer spending and inflation releases met expectations. On Friday, Housing Starts declined but beat the estimate. There are no US releases on Friday, following the Thanksgiving holiday on Thursday.

Japan released a batch of events on Thursday, and most were very close to their estimates. Tokyo Core CPI, the most important inflation index, dipped for the fourth straight month, coming in at 2.4%. Still, this was good enough to edge above the estimate of 2.5%. Retail Sales posted a gain of 1.4%, just shy of the forecast of 1.5%. Preliminary Industrial Production fell to just 0.2%, but this beat the estimate of -0.4%. Household Spending came in at -4.0%, its seventh straight decline. This beat the estimate of -4.8%.

The Japanese yen continues to trade at low levels, and BoJ Governor Haruhiko Kuroda addressed this earlier in the week, noting that the soft yen was having a negative effect on the Japanese economy. The yen received a boost after the BoJ minutes showed that some policymakers opposed the BoJ’s decision to expand its stimulus program in October. At that time, the BoJ shocked the markets when it increased its government debt purchases from JPY 60-70 trillion to 80 trillion per year. The yen reacted by dropping sharply and continues to trade at low levels against the dollar.

USD/JPY for Friday, November 28, 2014

USD/JPY November 28 at 11:35 GMT

USD/JPY 118.19 H: 118.34 L: 117.86

USD/JPY Technical

115.75

116.66

117.94

118.89

119.93

120.63

USD/JPY has posted gains in the Asian session, breaking above resistance at 117.74. The pair is almost unchanged in European trade.

117.94 was breached and has reverted to a support role. 116.66 is stronger.

118.89 is an immediate resistance line.

Current range: 117.94 to 118.89

Further levels in both directions:

Below: 117.94, 116.66, 115.75, 114.65 and 113.68

Above: 118.89, 119.83, 120.63 and 121.39

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in long positions on Friday. This is consistent with the movement we are seeing from the pair, as the dollar has posted small gains. The ratio has a majority of long positions, indicative of trader bias towards the dollar moving to higher ground.

USD/JPY Fundamentals

23:30 Japanese Housing Starts. Estimate -14.4%. Estimate -12.3%.

*Key releases are highlighted in bold

*All release times are GMT

USD/CAD – Greenback Rally Continues as 1.14 in Sight

USD/CAD has posted gains on Friday, as the pair continues to move higher. The Canadian dollar has slumped over Thanksgiving, losing about 150 points since Thursday. USD/CAD is trading just under the 1.14 line, a 2-week high. On the release front, Canada will release GDP as well as the Raw Materials Price Index. The markets are expecting good things, with the estimate for GDP at 0.4% and a forecast of a 1.5% gain for the RMPI.

Canadian Current Account posted a strong reading in Q3, as the deficit narrowed to C$8.4 billion, compared to C$11.9 billion in Q2. This marked the third consecutive drop in the deficit. Earlier in the week, Canadian Core Retail Sales improved to 0.0% in the September release. Although this was shy of the estimate of 0.4%, the indicator snapped a streak of two declines. Canadian Retail Sales was sharp, posting a 0.8% gain. This beat the estimate of 0.6%, and came after two consecutive declines. Retail Sales is the primary gauge of consumer spending, a key engine of economic growth.

Ahead of the Thanksgiving holiday, the US released a batch of data on Wednesday and the numbers were anything but impressive. Unemployment Claims jumped to 313 thousand, its highest level since mid-September. Core Durable Goods Orders declined 0.9%, its third decline in four readings. The estimate stood at 0.5%. New Home Sales fell to a 3-month low, dropping to 458 thousand. This was short of the estimate of 471 thousand. Pending Home Sales was no better, declining by 1.1%, well off the estimate of 0.9%. There was better news from UoM Consumer Sentiment, which posted a fourth straight gain, rising to 88.8 points. However, this was short of the estimate of 90.2 points. Despite the weak numbers, market sentiment towards the US economy remains high, and the US dollar has posted a strong rally against its Canadian counterpart.

USD/CAD for Friday, November 28, 2014

USD/CAD November 28 at 11:00 GMT

USD/CAD 1.1389 H: 1.1393 L: 1.1335

USD/CAD Technical

1.1004

1.1124

1.1278

1.1414

1.1493

1.1669

USD/CAD was calm in the Asian session and posted gains late in the session. The pair is steady in European trade.

1.1278 is providing strong support. 1.1124 is stronger.

1.1414 has weakened and is under strong pressure. 1.1493 is stronger.

Current range: 1.1278 to 1.1414

Further levels in both directions:

Below: 1.1278, 1.1124, 1.1004, 1.0961 and 1.0886

Above: 1.1414, 1.1493, 1.1669 and 1.1723

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to gains in short positions on Friday. This is not consistent with the movement of the pair, as the US dollar continues to post gains. The ratio is showing a majority of short positions, indicative of trader bias towards the Canadian dollar recovering from its sharp slide.

USD/CAD Fundamentals

13:30 Canadian GDP. Estimate 0.4%.

13:30 Canadian RMPI. Estimate 1.5%.

13:30 Canadian IPPI. Estimate 0.3%.

* Key releases are highlighted in bold

*All release times are GMT

Gold Stable in Post-Holiday Trade

Gold is trading quietly on Friday, as the spot price stands at $1184 per ounce. There are no US releases on Friday, so traders can expect light trading during the day.

XAU/USD for Friday, November 28, 2014

XAU/USD November 28 at 9:55 GMT

XAU/USD 1184.92 H: 1190.08 L: 1181.76

XAU/USD Technical

1130

1156

1175

1200

1215

1240

XAU/USD edged lower in the Asian session. The pair is steady in the European session.

1175 is a weak support level. 1156 is stronger.

The round number of 1200 is the next resistance line. 1215 follows.

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 almost unchanged on Friday. This is consistent with the limited movement we’re seeing from the pair. The ratio has a slight majority of long positions, indicative of slight trader bias towards gold moving to higher ground.

XAU/USD Fundamentals

There are no US releases on Friday.

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