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AUD/NZD soars, setting up long term up trend?

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    ActionForex.com
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    AUD/NZD soars in response to much better than expected Australia job data, and heightened expectation of RBA rate hike this year. The strong break of 100% projection of 1.0278 to 1.0610 from 1.0314 at 1.0646 is seen as a sign of upside acceleration. Further rally is now expected as long as 1.0583 support holds. Next target is 161.8% projection at 1.0851.

    The bigger question now is whether the medium term fall from 1.1042 has completed as a corrective pattern, with three waves down to 1.0278. Break above above mentioned 1.0851 resistance will add credence to this bullish case. That would also argue that rise from 1.2078 is developing into a long term up trend, resuming the move from 2019 low at 0.9992 through 1.1042.

    China Shanghai SSE breaches 2800 as tech stocks boosted by government focus

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      ActionForex.com
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      Chinese stocks are enjoying a strong rally today. The Shanghai SSE breaches 2800 handle and is holding 2% gain. Tech stocks led the way higher as the government indicated strong focus in development in the sector. Yesterday, the State Council renewed the ” National Science, Technology and Education Leading Group” to “National Science and Technology Leading Group”, showing the dedication in science and technology.

      The group is headed by Premier Li Keqiang with Vice-Premier Liu He as deputy. Fourteen high level officials from National Development and Reform Commission, the Ministry of Education, and the Ministry of Science and Technology are also part of the group.

      The major responsibilities of the group include studying and reviewing national strategies, plans and major policies for sci-tech development; deliberating major national scientific tasks and projects, and coordinating major sci-tech affairs among ministries, departments and local authorities.

      Eurozone GDP grew 0.3% qoq in Q4, EU up 0.4% qoq

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        ActionForex.com
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        Eurozone GDP grew 0.3% qoq in Q4, slightly below expectation of 0.4% qoq. EU GDP grew 0.4% qoq. The 2021 annual growth was at 5.2% based on first estimation for both Eurozone and EU.

        Among the EU Member States for which data are available, Spain (+2.0%) recorded the highest increase compared to the previous quarter, followed by Portugal (+1.6%) and Sweden (+1.4%). Declines were recorded in Austria (-2.2%), Germany (-0.7%) and in Latvia (-0.1%). The year on year growth rates were positive for all countries.

        Full release here.

        Australia NAB business confidence rose to 18 in Q4

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          ActionForex.com
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          Australia NAB business confidence jumped from -2 to 18 in Q4. Current business conditions was unchanged at 12. Conditions for the next 3 months rose from 8 to 30. Conditions for the next 12 months also rose from 26 to 34. Capex plans rose from 26 to 34.

          “The economy was showing considerable strength prior to the spread of the Omicron variant, and that translated into a positive outlook for the coming months,”Alan Oster, NAB Group Chief Economist. “We now know that Omicron has dampened that recovery somewhat but, fundamentally, we expect that positive trajectory to continue when the current virus outbreak recedes.”

          Full release here.

          NY Fed 1-yr inflation expectations rose to 6.8%, but 3-yr expectations down

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            ActionForex.com
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            According to New York Fed’s survey of consumer expectations, median one-year-ahead inflation expectations rose from 6.6% to 6.8% in June, hitting a new series high. However, three-year ahead inflation expectations dropped from 3.9% to 3.6%.

            Median expected one-year-ahead change in home prices dropped sharply from 5.8% to 4.4%. Median year-ahead household spending growth expectations retreated from a series high in May, declining -0.6% point to 8.4%.

            New York Fed added, “households’ assessments of their current financial situation deteriorated in June as more respondents reported being financially worse off than they were a year ago.”

            Full release here.

            ECB Wunsch: If core inflation remains persistent, terminal rate of 3.5% would be a minimum

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              ActionForex.com
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              ECB Governing Council member Pierre Wunsch said, “I don’t think we’re going to move from 50 basis points (in March) to zero.”

              “It might be another 50 basis points or we might be moving to 25. I will certainly not exclude another 50 basis points but that’s going to be dependent on the data,” he added.

              “If core remains persistent, if we keep seeing core momentum being close to 5%, for me a terminal rate of 3.5% would be a minimum,” Wunsch said. “But I don’t want to give any number that is not conditional on incoming data.”

              “Rates are clearly above 4% in the UK and the U.S.; that would also be a reference for me,” Wunsch said. “Why would we stay at 3% if we have more or less similar core numbers?”

              “I’m not saying we need to go to 4%… but if incoming data continue to show very persistent core, we will have to look at what the U.S. and UK seem to consider as a restrictive enough interest rates to bring inflation back to 2%.”

               

              S&P upgrades New Zealand rating back to AA+/AAA

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                ActionForex.com
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                S&P raised New Zealand’s foreign and local currency government debt rating by a notch to AA+ and AAA, up from AA and AA+ respectively. The ratings are back to a level last seen in 2009. A “stable” outlook was attached to the new ratings.

                “New Zealand is recovering quicker than most advanced economies after the Covid-19 pandemic and subsequent government lockdown delivered a severe economic and fiscal shock to the country,” S&P said. “While downside risks persist, such as another outbreak, we expect New Zealand’s fiscal indicators to recover during the next few years.”

                “This provides us with better clarity over the extent of the pandemic’s damage to the government’s balance sheet,” it said in a statement,” it said, “We now believe that the government’s credit metrics can withstand potential damage from negative shocks to the economy, including a possible weakening of the real estate market”.

                 

                Eurozone CPI finalized at 9.2% yoy in Dec, core CPI at 5.2% yoy

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                  ActionForex.com
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                  Eurozone CPI was finalized at 9.2% yoy in December, down from November’s 10.1% yoy. CPI core (ex energy, food, alcohol & tobacco) was finalized at 5.2% yoy, up from prior month’s 5.0% yoy. The highest contribution came from food, alcohol & tobacco (+2.88%), followed by energy (+2.79%), services (+1.83%) and non-energy industrial goods (+1.70%).

                  EU CPI was finalized at 10.4% yoy, down from prior month’s 11.1% yoy. The lowest annual rates were registered in Spain (5.5%), Luxembourg (6.2%) and France (6.7%). The highest annual rates were recorded in Hungary (25.0%), Latvia (20.7%) and Lithuania (20.0%). Compared with November, annual inflation fell in twenty-two Member States, remained stable in two and rose in three.

                  Full release here.

                  ECB stands pat, downgrades inflation forecasts

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                    ActionForex.com
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                    ECB keeps interest rates unchanged as widely expected, with main refinancing rate at 4.50%, marginal lending facility rate at 4.75%, and deposit facility rate at 4.00%. The central maintained the language that current inflation will contribute substantially to bring inflation down to target, given that it’s maintained for sufficiently long duration. Future decisions will remain data-dependent.

                    In the new economic projections, both headline and core inflation forecasts are revised down reflecting lower contribution from energy prices. Inflation is estimated to average 2.3% in 2024, 2.0% in 2025, and 1.9% in 2026. Core inflation is expected to average 2.6% in 2025, 2.1% in 2025, and then 2.0% in 2026.

                    Growth projection for 2025 was downgraded to 0.6% as economic activity is expected to remain subdued in the near term. Thereafter the economy is expected to pick up and grow at 2.5% in 2025, 1.6% in 2026.

                    Full ECB statement here.

                    Gold retreats on Dollar rebound, 1820 could provide key support

                      By
                      ActionForex.com
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                      Gold drops sharply in US session and breaks 1882.07 minor support. That should confirms short term topping at 1916.00, on bearish divergence condition in 4 hour MACD. The development should also double confirm underlying momentum in the greenback.

                      Anyway, deeper pull back is now likely in Gold, towards 55 day EMA (now at 1820.12), which is close to 38.2% retracement of 1676.65 to 1916.06. As long as this level holds, we’d hold on to the bullish view that correction from 2075.18 has completed with three waves down to 1676.65. That is, rise from 1676.65 should resume sooner rather than later to retest 2075.18 high.

                      However, sustained break of the EMA will open up the case that correction from 2075.18 is extending with another falling leg. Deeper fall would be seen towards 1676.65 low instead.

                      ECB Lagarde: Increase in market rates poses a risk to wider financing conditions

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                        ActionForex.com
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                        In the post meeting press conference, ECB President Christine Lagarde acknowledged that ” market interest rates have increased since the start of the year, which poses a risk to wider financing conditions.”

                        “Banks use risk-free interest rates and sovereign bond yields as key references for determining credit conditions,” she explained. “If sizeable and persistent, increases in these market interest rates, when left unchecked, could translate into a premature tightening of financing conditions for all sectors of the economy”.

                        “This is undesirable at a time when preserving favourable financing conditions still remains necessary to reduce uncertainty and bolster confidence, thereby underpinning economic activity and safeguarding medium-term price stability.”

                        In the baseline scenario of the new economic projections, Eurozone GDP growth is expected to be at 4.0% in 2021, 4.1% in 2022, and 2.1% in 2023. Outlook is “broadly unchanged” comparing to December projections. Risks over medium term “have become more balanced” even though downside risks remains in the near term.

                        Annual inflation is projected to be at 1.5% in 2021, 1.2% in 2022, and 1.4% in 2023. The outlook for 2021 and 2022 was revised up, “largely due to temporary factors and higher energy price inflation.

                        NIESR expects UK GDP growth to stall in Sep, slow to 1.3% in Q4

                          By
                          ActionForex.com
                          -

                          NIESR expects UK GDP growth to “stop” in September, bringing total Q3 growth to 15%. For Q4, with the background of a likely widening of lockdown restrictions, a winding down of government support schemes, and return of extensive Brexit related uncertainty, pace of recovery will be even slower, forecast to be at just 1.3%.

                          “Today’s ONS estimates suggest that GDP grew by 8 per cent in the three months to August. Although the latest estimates also signal a fourth consecutive monthly increase, with growth of 2.1 per cent in August itself, output is still about 9 per cent below the levels seen in February. These numbers would suggest that the UK could grow by about 15 per cent in the third quarter of 2020. However, there is further cause for concern ahead with the likely re-imposition of lockdown measures, the winding down of government support measures, and Brexit uncertainty. We expect the economy at the end of this year to be some 8.5 per cent below its level at the end of 2019.” Dr Kemar Whyte Senior Economist – Macroeconomic Modelling and Forecasting.

                          Full release here.

                          Bitcoin rejected by 4H 55 EMA, extending triangle pattern with last leg

                            By
                            ActionForex.com
                            -

                            Bitcoin rebounded to as high as 34899 but was rejected by 4 hour 55 EMA and reversed. Break of 31741 minor support suggests that such rebound is completed. Corrective pattern from 41964 should be still in progress. It’s now likely a five-wave defending triangle pattern, in the last leg.

                            Bitcoin should now have another take on 30k handle, and will likely overcome it for a while. Ideally, it should breach lower trend line (now at 28541) briefly and complete the triangle pattern there and rebound. We’ll see how it goes.

                            BoJ Kuroda: Mindful of banks’ engagement in excessive risk taking

                              By
                              ActionForex.com
                              -

                              BoJ Governor Haruhiko Kuroda noted in a speech that amid a persistent low interest rate environment, “possible changes in the risk appetite and risk profile of banks … is an issue” that BOJ is “highly attentive to”. And, in the short term, “as downward pressure on banks’ profits continues, we need to be mindful of the possible consequences of banks’ engagement in excessive risk taking.”

                              For banks with “abundant capital bases”, risk taking “provides financial support to firms’ production activities, thereby contributing to economic expansion”. However, without appropriate risk management measures, continued decline in profits would lead to to “insufficient capital bases”, and sharply higher credit costs. The stability of the financial system “could be threatened” in the event of a “large exogenous shock”. Based on October’s Financial System Report, the system has been maintaining stability on the whole.

                              On monetary, Kuroda repeated the same rhetoric that BoJ will continue with the current loose monetary policy. And, he’s confident that BoJ inflation will eventually move back to target.

                              Ifo: German economy could shrank -1.5% this year in better case scenario

                                By
                                ActionForex.com
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                                Ifo institute said in its spring forecast that the global economy is “collapsing” as a result of coronavirus pandemic. Global GDP would grow only 0.1% this year, comparing with 2.6% last year. World trade would see a decline of -1.7%. There are also “considerable” downside risks in the forecast.

                                German economy could shrink by -1.5% this year. That could reduce growth rate by almost -3%, comparing with a situation without the outbreak. The full effect of the coronavirus crisis will be seen in Q2, leading to -4.5% contraction in GDP. By first half of 2021, production of goods and services should then “gradually return to a normal level”. In a second scenario, which includes bigger production restrictions, economic output will shrink by -6%

                                Responses on tariffs: Trump did not heed American warnings

                                  By
                                  ActionForex.com
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                                  Here are some responses from the industry on Trump’s tariffs on China:

                                  The U.S. Chamber of Commerce president and CEO Thomas Donohue said in a statement, “today’s decision makes clear that the administration did not heed the numerous warnings from American consumers and businesses about rising costs and lost jobs on Main Street, in factories, and on farms and ranches across the country. ”

                                  Dean Garfield, president of the Information Technology Industry Council said in a statement, “President Trump’s decision to impose an additional $200 billion is reckless and will create lasting harm to communities across the country.”

                                  Hun Quach, the Retail Industry Leaders Association’s s vice president for international trade said in a statement, “we are extremely discouraged by the Administration’s announcement to levy tariffs on millions of products American consumers buy every day.” “We are disappointed to see that warnings from importers and exporters representing every sector of the U.S. economy have not been heeded with no time for mitigation.”

                                  Jay Timmons, National Association of Manufacturers (NAM) President and CEO, said in a statement “more U.S. tariffs and Chinese retaliation risk undoing that progress and moving our economy in the wrong direction.” “Now is the time for talks—not just tariffs”.

                                  US Empire state manufacturing dropped to 2, future optimism waned

                                    By
                                    ActionForex.com
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                                    US Empire State Manufacturing Survey general business conditions index dropped to 2.0 in September, down from -4.8 and missed expectation of 4.0. 27% of respondents reported that conditions had improved over the month, but 25% said conditions had worsened. Number of employees index jumped sharply from -1.6 to 9.7, back in positive territory. The index for future business conditions fell -12 points to 13.7, suggesting that “optimism about future conditions waned”.

                                    Full release here.

                                    CHF/JPY resumes up trend towards 140

                                      By
                                      ActionForex.com
                                      -

                                      CHF/JPY’s up trend resumes this week on diverging monetary policy of SNB and BoJ. SNB surprised the markets by announcing a 50bps rate hike yesterday, and indicated that more is coming. However, BoJ just kept policy unchanged today, with yield cap maintained at 0.25% too. At the same time, risk aversion is supporting both, making things even.

                                      For the new term, outlook in CHF/JPY will stay bullish as long as 134.00 support holds. Next target is 61.8% projection of 127.48 to 137.77 from 134.00 at 140.35, and then 100% projection at 144.29.

                                      Also, note that CHF/JPY is extending a healthy long term up trend that started at 101.66, still in acceleration mode. 2015 high at 151.22 is a feasible target is policy of SNB and BoJ continues to diverge.

                                      BIS: Central banks have to work out the implications of rising bond yields

                                        By
                                        ActionForex.com
                                        -

                                        The Bank for International Settlements said, with the release of its quarterly review, that “prospects of a more robust economic recovery buoyed risky asset prices, with signs of exuberance reflected in the behaviour of retail investors.” And, “sovereign yield curves steepened as investors priced in higher inflation and fiscal support.” Also, “sentiment towards emerging market assets remained favourable, in particular in East Asia.”

                                        “The recent market jitters confirm that the back-up in bond yields and reflation trade are casting the financial market outlook in a completely new light,” said Claudio Borio, Head of the BIS’ Monetary and Economic Department. “People just saw low rates for as far as the eye could see, whereas now they have started having doubts about how long these conditions would last.”

                                        Central banks “will have to work out what the implications of that (rising bond yields) for their objectives and respond accordingly,” Borio added.

                                        Full release here.

                                        Swiss KOF rose to 104.5 in Dec, driven by manufacturing and private consumption

                                          By
                                          ActionForex.com
                                          -

                                          Swiss KOF Economic Barometer rose to 104.3 in December, up from 103.7, above expectation of 100.5. The barometer reached a value above the long-term average back in August, and was able to maintain throughout the second half of the year.

                                          KOF noted: “The slight increase is driven by bundles of indicators from the manufacturing sector and private consumption. An additional positive signal is sent by indicators for the financial and insurance service sector. By contrast, negative impulses are coming from indicators for foreign demand.”

                                          Full release here.

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