Daily Market Reviews

Economic Calendar for January 12, 2017

Time (GMT) Currency Event Previous Forecast
06:00 JPY Economy Watchers Sentiment 48.6 49.3
11:00 EUR Industrial Production m/m -0.1% 0.5%
13:30 EUR ECB Monetary Policy Meeting Accounts
14:30 CAD NHPI m/m 0.4% 0.3%
14:30 USD Unemployment Claims 235K 266K
14:30 USD Import Prices m/m -0.3% 0.8%

 

Global Market Overview

The Euro was mixed on Wednesday in a choppy session that only calmed once U.S. president-elect Donald Trump concluded his speech.  The Pound was equally mixed on the day, reversing some early weakness, especially versus the USD, which was broadly softer against rivals as the Trump speech gave few clues to upcoming fiscal and economic policy from the new administration.  The Yen firmed broadly for the day, gaining on some remaining safe haven demand due to continued uncertainties over the U.S.  Gold moved to a seven week high and is ready to test the $1,200 level as these uncertainties and a weak USD helped lift the yellow metal.  Crude shot higher in response to news that OPEC production fell for the first time in seven month, reassuring traders that the group is serious about its agreement to cut production.

Daily Currency Pair Analysis

EUR/USD – The pair fell continuously ahead of the Trump speech, dropping all the way to the 1.0452 level.  It rebounded sharply following the speech however, rising above the 1.0600 level briefly before settling back slightly below this handle as it hit the resistance we’ve seen recently at that 1.0600 level.  There could be additional volatility from the pair in the coming days as traders analyze and dissect the Trump speech and come to their own conclusions regarding future U.S. economic and fiscal policy, and its impact on Europe as well as the U.S. of course.  The fact that the pair was once again unable to get through the 1.0600 level indicates that it could hold as resistance, keeping the pair from rising further.

USD/JPY – This pair also showed volatility following the Trump speech and after rising steadily throughout the session it plunged during and immediately following the speech before rebounding off a low of 114.21 and trading back above the 115.00 handle.  Earlier in the session the pair had traded nearly to the 117.00 level, making for a daily range of 265 pips for the pair.  Now that the Trump speech is out of the way it does appear that the 115.00 level is going to hold as support for the pair, as there was little in the speech that should change current thinking, or rather uncertainties, about the future pace of U.S. interest rate hikes, or the feasibility of additional Japanese business investment in the U.S.

USD/CAD – Not surprisingly given the combination of U.S. dollar weakness and rising crude prices this pair dropped solidly for the day.  It did find support as it approached the 1.3100 level and bounced to finish closer to the 1.3200 level, but there was still a loss of 78 pips for the day, and earlier the pair traded nearly to the 1.3300 level, giving it a daily range of 179 pips.  With the news out of OPEC crude is likely to continue rallying higher, which should lead to lower levels for this pair.  The area between the 1.3100 and 1.3000 levels should provide some support for the pair, so there is a chance it will get caught up there unless crude trades above $60 a barrel.

GBP/USD – Another USD pair and more volatility during and after the Trump speech.  After trading all the way down to the 1.2033 level ahead of the speech, the pair rebounded to trade all the way up to the 1.2271 handle before pulling back to end the session with a modest gain right at the 1.2200 level.  This level could hold as support going forward, but there are still hard Brexit fears among traders, so we could get a grind lower from here.  If the level does hold as support we imagine the pair will turn sideways and trade between the 1.2200 and 1.2400 levels.

 

Commodity Update

Gold – Gold marched higher on Wednesday in response to a weaker U.S. dollar.  By the close the precious metal was at a seven week high as it approached the $1,200 level.  It appears pretty certain that gold will be testing this $1,200 level soon, and it is also possible it will trade above that level as uncertainties regarding U.S. fiscal and economic policy persist.  The U.S. dollar remains under pressure recently, which also helps gold as it trades inversely with USD strength or weakness.

Oil – Crude gained nearly 3% on Wednesday, reversing its recent weakness after OPEC reported that its output fell in December for the first time in seven months.  The report confirmed trader hopes for OPEC production cuts, and verified that the group is sincere in its agreement to cut production this year in an effort to stabilize crude pricing.  The news should keep a bullish slant on crude for the upcoming sessions, and this could mean that $60 a barrel is now within reach for crude.