The latest NZIER Quarterly Survey of Business Opinion showed a net 15% of business expect a deterioration in general economic conditions over the coming months. That’s notable improvement from Q3’s 38% and the worst reading of 68% during the most pessimistic period in March 2020.
On companies’s own activity, a net 1% reported reduced demand. NZIER said This measure suggests a rebound in annual GDP growth to around 2 percent at the end of 2020 from the lockdown lows in mid-2020.
Asian stock, except China, surge broadly today as US Treasury nominee, former Fed chair, Janet Yellen is report to adopt an “act big” stance on fiscal stimulus. Commodity currencies are trading broadly higher, as led by Australian Dollar. Yen, Dollar and Swiss Franc are back under pressure.
Yellen will appear before the Senate Finance committee today for her confirmation hearing. According to the prepared remarks obtained by the Financial Times, Yellen will say, “neither the president-elect, nor I, propose this relief package without an appreciation for the country’s debt burden.”
“But right now, with interest rates at historic lows, the smartest thing we can do is act big. In the long run, I believe the benefits will far outweigh the costs, especially if we care about helping people who have been struggling for a very long time,” She’ll add.
At the time of writing, Hong Kong HSI is up 883.4 pts or 3.06%. The strong break of the medium term channel resistance should confirm upside acceleration. Next target is 161.8% projection of 21139.26 to 26782.61 from 23124.25 at 32255.19. Current development also suggest that rise from 21139.26 is likely the start of another long term up trend, that would likely take out 33484.7 record high in the medium term.
German’s Bundesbank said in the monthly report that data up to November suggested there was “no significant setback” in the economy in Q4 despite pandemic restrictions. Business confidence also “brightened” strongly in December. The “encouraging signals
give reason to hope that the restrictions that were extended and tightened at the beginning of the new year will not set the economic recovery too far back ”
Though, it also warned, “if the infection rate does not subside significantly and the current restrictions on economic activity last longer or are further tightened, a noticeable setback could nonetheless occur.”
CAD/JPY’s break of 81.22 support suggests that a short term top was formed at 82.16. More importantly, the cross could have also completed a terminal triangle, in five wave started from 77.91. Deeper fall would be seen back to 80.12 support first. Firm break there would indicate near term bearish reversal. That is, whole rebound form 73.80 has completed, on bearish divergence condition in daily MACD.
More importantly, if that happens, that would mark rejection by long term falling channel. Larger down trend form 91.62 might then be resuming for another low below 73.80 in the medium term.
US Treasury Secretary nominee, former Fed chair, Janet Yellen was quoted on Sunday affirming the stance of not seeking a weaker exchange rate.
According to a WSJ report, Yellen will say in a Senate confirmation hearing, “the value of the U.S. dollar and other currencies should be determined by markets. Markets adjust to reflect variations in economic performance and generally facilitate adjustments in the global economy.”
“The United States doesn’t seek a weaker currency to gain competitive advantage,” she would add. “We should oppose attempts by other countries to do so.”
Current development, with break of a near term channel, suggests that bitcoin’s recovery from 30635 has completed at 40000 already. Consolidation pattern from 41964 high should have started the third leg. Deeper decline is now in favor back to 30635.
For now, we’d expect strong support around 30k psychological level to contain downside. In case of a deeper than expected correction, bitcoin could dip into support zone between 100% projection of 41964 to 30635 from 40000 at 28671 and 38.2% retracement of 17629 to 41964 at 26924, before making a bottom.
Gold breached 1817.05 support, and dipped to 1810.07 earlier today but quickly recovered. Bias stays neutral for some more consolidations first. In case of another recovery, we’d expect upside to be limited by 1863.51 resistance to bring fall resumption.
Current decline from 1959.16 is seen as the third leg of the pattern from 2075.18. Decisive break of 1817.05 should target 1764.31 support and below.
China’s GDP grew 6.5% yoy in Q4, accelerated from prior quarter’s 4.9% yoy, beat expectation of 6.1% yoy. Overall, GDP grew 2.3% in 2020, making it the only major economy that avoided a contraction, due to the coronavirus pandemic that started with outbreak in Wuhan.
December data were mixed. Industrial production grew 7.3% yoy, accelerated from 7.0% yoy, beat expectation of 6.9% yoy. Fixed asset investment grew 2.9% ytd yoy, below expectation of 3.2% ytd yoy. Retail sales grew only 4.6% yoy, slowed from 5.0% yoy, missed expectation of 5.50% yoy.
Hong Kong HSI trades mildly higher today in response to the releases. HSI is now pressing an important resistance level, with 100% projection of 21139.26 to 26782.61 from 23124.25 at 28767.60, as well as medium term channel. Decisive break of the level will confirm upside acceleration. More importantly, rise from 21139.26 should finally b e seen as developing into a long term up trend.
NIESR estimated a 0.9% growth in UK GDP in Q4 of 2020, implying a total contraction of -9.8% for the whole year. With tight restrictions and some post-Brexit adjustment, Q1 is forecast to have negative growth on -3.4%. It added, “the short-term negative economic impact of lockdowns should be outweighed by the potential positive long-term health and economic impacts from controlling the virus and restoring confidence.”
“Today’s ONS data confirm a significant slowdown in the last quarter of 2020, despite November’s lockdown in England clearly having a far smaller effect than the first. Surveys and high frequency indicators suggest that recovery from the Covid-19 shock was weak even before a third lockdown become necessary in January. Temporary and permanent adjustments post-Brexit transition period are likely to also weigh on growth in the early part of 2021, but the vaccine roll-out provides some encouragement for consumption and investment in the second half of 2021 and beyond. The economic impact of the lockdowns is clearly negative in the short-term but will be significantly positive in the medium term if successful in controlling the virus and restoring confidence.” Rory Macqueen Principal Economist – Macroeconomic Modelling and Forecasting
US retail sales dropped -0.7% mom to USD 540.9B in December, much worse than expectation of 0.0% mom rise. Ex-auto sales dropped -1.4% mom, well below expectation of -0.1% mom. Ex-gasoline sales dropped -1.2% mom. Ex-auto, ex-gasoline sales dropped -2.1% mom.
PPI came in at 0.3% mom, 1.8% yoy, matched expectation. Core PPI was at 0.1% mom, 1.2% yoy, below expectation of 0.2% mom, 1.3% yoy.
Empire State general business condition index was dropped to 3.5, below expectation of 5.7.
UK GDP dropped -2.6% mom in November, better than expectation of -4.0% mom. That’s the first decline since six consecutive monthly increases. GDP was back to -8.5% below the levels seen in pre-pandemic February. Also, GDP dropped -8.9% in the 12 months to November, comparing with the annual decline of -6.8% to October.
Services was the main drag on growth, down -3.4% mom due to restrictions. Services was -9.9% below February’s level. Production dropped -0.1% mom, at -4.7% below February’s level. Construction rose 1.9% mom, at 0.6% above February’s level.
Also release, goods trade deficit widened to GBP -16.0B in November, versus expectation of GBP -11.1B.
US President-Elect Joe Biden outlined his USD 1.9T fiscal package a the remarks from Delaware overnight. The package include USD 1T in direct relief to households, with stimulus checks for USD 1400 on top of the USD 600 checks in last congressional stimulus. USD 440B will be used for small business and communities. USD 415B will be used on virus responses and vaccine rollouts.
Stock markets had very little reactions. DOW traded in very tight range and closed down -0.22%, or -68.95 pts, at 30991.52. There is no change in the near term bullish outlook with 29881.82 support intact. We’re expecting another rise, sooner or later, to 61.8% projection of 18213.65 to 29199.35 from 26143.77 at 32932.93.
Fed chair Jerome Powell said yesterday that “now is not the time to be talking about exit” from the asset purchase program. He added, “another lesson of the global financial crisis, is be careful not to exit too early.”
“We’ll let the world know. We’ll communicate very clearly to the public and we’ll do so, by the way, well in advance of active consideration of beginning a gradual taper of asset purchases,” he added. “That wouldn’t be a reason to raise interest rates unless we see troubling inflation or other imbalances that could threaten achievement of our mandate.”
On the outlook, Powell said, “we’ve got to get through this very difficult period this winter with the spread of COVID, but as the vaccines go out and we get COVID under control, there’s a lot of reason to be optimistic.”
US initial jobless claims rose 181k to 965k in the week ending January 9, well above expectation of 785k. Four-week moving average of initial claims rose 18.3k to 834.3k.
Continuing claims rose 199k to 5271k in the week ending January 2. Four-week moving average of continuing claims dropped -59k to 5216k.
In the accounts of December 9-10 monetary policy meeting, ECB noted “market sentiment had improved notably following the news of the successful development of vaccines and on account of expected monetary policy measures.” But uncertainty “remained high” and concerns were voiced over exchange rate developments, and the “negative consequences for the inflation outlook.”
The resurgence of the pandemic, downward revision in inflation forecasts and risk of unanchoring inflation expectations, “additional monetary policy measures were necessary”. However, the “current environment warranted a recalibration of policy instruments… rather than the adoption of additional measures”.
“The expansion and extension of PEPP purchases and the recalibration of the TLTRO III conditions were widely seen as the most suitable tools to ensure that financing conditions remained favourable throughout the pandemic.”
Bitcoin’s break of 36649.0 resistance argues that the correction from 41964.0 has completed at 30635.0 already, after hitting 4 hour 55 EMA. The support from 36649.0 resistance turned support further affirms upside bias. Retest of 41964.0 high.
The depth of the correction might have met target, but the time spent is a bit too short. Hence, we’re not expecting sustained break of 41964.0 high yet. Instead, another falling leg is likely, to make the consolidation an three-wave pattern. Break of 36649.0 will argue that the third leg has started, for another take on 30k handle.
EUR/CAD’s decline from 1.5783 accelerates after taking out near term trend line support, with 4 hour MACD diving down too. The development is in line with our view that corrective rise from 1.5313 has completed with three waves up to 1.5783. More importantly, the pattern from 1.5978 is resuming with another falling leg.
Further decline is now expected as long as 1.5534 resistance holds. Break of 1.5402 support will solidify this bearish case. Retest of 1.5313 should be seen next. And 100% projection of 1.5978 to 1.5313 from 1.5783 at 1.5118 should be the eventual near term target.
In USD terms, China’s exports rose 18.1% yoy to USD 281.9B in December. Imports rose 6.5% yoy to USD 203.8B. Total trade rose 12.9% yoy to USD 485.7B. Trade surplus came in at USD 78.2B, above expectation of USD 72.0B.
For the whole 2020, exports rose 3.6% to USD 2591B. Imports dropped -1.1% to USD 2056B. Total trade rose 1.5% to USD 4646B. Trade surplus was at USD 535.0B.
BoJ Governor Haruhiko Kuroda told branch managers in a quarterly meeting, “domestic economic conditions remain severe due to the impact of coronavirus infections at home and abroad but we have seen a pickup.”
“Japan’s economy is likely to improve as a trend as the impact from the pandemic gradually subsides, although the pace will be moderate as caution over COVID-19 persists,” he added.
“The BOJ will scrutinise the impact of the pandemic for the time being and stand ready to take additional easing steps without hesitation if needed,” he said.
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Prospect of stronger rebound in EUR/CHF, EUR/JPY and EUR/USD today
Following strong risk on-markets in Asia, Euro is trading generally higher against Dollar, Yen and Swiss Franc. Considering that respectively pairs have just drew support from near term support levels, there is prospect of a stronger rebound in the common currency today.
EUR/CHF recovered after touching 1.0737 near term support level. 4 hour MACD’s cross above signal line indicates stabilization. Focus is back on 1.0787 support turned resistance. Firm break there will argue that the three wave corrective fall from 1.0890 has completed. That would also retain near term bullishness for another up-move through 1.0890.
EUR/JPY also recovered after breaching 38.2% retracement of 121.63 to 127.48 at 125.24 briefly. Focus is back on 125.91 minor resistance. Firm break there will argue that the pull back from 127.48 has completed earlier than expected. That would bring stronger rally for a retest on 127.48 high.
Recovery in EUR/USD is relatively weaker comparing to the above two pairs. Though, 4 hour MACD’s cross above signal line does suggest stabilization, after hitting 1.2058 cluster support (38.2% retracement of 1.1602 to 1.2348 at 1.2063). Break of 1.2131 would turn bias to the upside for stronger rebound back towards 1.2348 high.