It has been a volatile session for the markets, with the US ISM data underpinning thoughts that the US economy is continuing its upwards trajectory, raising the possibility of another near-term rate hike. The ISM manufacturing data jumped to 54.7 in December, above expectation of 53.7, reaching its highest level since December 2014. Price paid surged to 65.5 while the employment figure also improved to 53.1. November construction spending data also easily outplayed expectations, rising by 0.9% (exp 0.5%). This all comes ahead of today’s FOMC Minutes, which could propel the dollar higher still following the Feds decision to raise rates in December, when they also outlined the chances of another 3 hikes in the coming year. A strong NFP on Friday would add further fuel to the fire.
Although the dollar liked the data, it did not take long for profit taking to set in, and a general slide to the downside saw an acceleration lower, particularly against the Yen, which fell to the day’s lows (117.20). The dollar’s reversal has allowed a recovery in the price of the metals, although oil is lower, after making 18 month highs, due to increased stockpile figures.
The commodity bloc currencies made their own recovery from their recent lows but generally remain choppy at close to their Christmas levels.
In notable features today:
The Euro fell to a new 14 year low, taking out the December low of 1.0351 and heading to a low of 1.0339 before a late bounce to 1.0400.
US$Jpy climbed to the descending trend resistance at 118.60 before reversing sharply to session lows of 117.20, ending the day not too far removed from 24 hours ago. US$Jpy needs a daily close above 118.65 in order to provide enthusiasm for further gains.
Sterling looks heavy, but currently holds on to the previous 1.2200 support.
The Dollar Index (DXY) briefly reached a high of 103.82, last seen in December 2002, before reversing quite sharply, to currently sit at 103.25.
WTI saw a new 19 month high of 55.21 before collapsing, to 52.11, on word of a large inventory build ahead of today’s API Weekly Crude Oil Stock Inventory and Thursday’s EIA Crude Oil Stocks Weekly Change. Technically, WTI has made a key day reversal lower and may be a warning to long positions.
US stocks gave up early gains on the back of the fall in the oil price and closed the day up around 0.5%.
Gold and Silver, both soft early on, took advantage of the late slide in the dollar and headed to levels last seen in early December.
In terms of Economic data, today’s main events will be:
W: Markit EU Services/Composite PMIs, EU Provisional CPI (exp 0.8%mm, 1.0%yy), FOMC Minutes
The rest of the week will focus on the:
T: ECB Minutes
F: EU Economic Sentiment Indicator, Industrial Confidence, Services Sentiment, Business Climate, US Jobs/NFP/Average Hourly Earnings data (December; exp 4.7%, +175K, +0.3%), Trade Balance (Nov; exp -$42bio)
We will be running a partial service this week with full technical analysis to begin next week. Until then, any directional bias can be found in the trending table.
|INDICES / COMMODITIES|
|ASX SPI: 5704|
|OIL (WTI): 52.48|