Another Quiet Day on the Economic Calendar Leaves COVID-19 and Capitol Hill in Focus

Earlier in the Day:

It’s was another relatively quiet start to the day on the economic calendar this morning. The Japanese Yen was in action in the early part of the day, with economic data from UK also in focus.

For the Japanese Yen

The current account surplus narrowed from ¥2.145tn to ¥1.878tn in November. Economists had forecast a narrowing to ¥1.551tn.

The Japanese Yen moved from ¥104.162 to ¥104.144 upon release of the figures. At the time of writing, the Japanese Yen was flat at ¥104.26 against the U.S Dollar.

From the UK

In December, the BRC Retail Sales Monitor increased by 4.8%, following a 7.7% jump in November, year-on-year.

The Pound moved from $1.35245 to $1.35174 upon release of the figures. Lockdown measures overshadowed the further rise in retail sales.

Elsewhere

At the time of writing, the Aussie Dollar was down by 0.01% to $0.7696, with the Kiwi Dollar down by 0.03% to $0.7161.

The Day Ahead:

For the EUR

It’s another quiet day ahead on the economic calendar. There are no material stats to provide the EUR with direction.

The lack of stats will leave COVID-19 news in focus.

At the time of writing, the EUR was down by 0.07% to $1.2143.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out later today to provide the Pound with direction.

On the monetary policy front, BoE MPC Member Broadbent is scheduled to speak., however Expect any forward guidance to influence.

Away from the economic calendar, the focus will be on COVID-19 rate of infections and progress towards the vaccination of priority groups.

At the time of writing, the Pound was down by 0.03% to $1.3514.

Across the Pond

It’s a quiet day ahead on the economic calendar. JOLTs job openings for November are due out later today.

While we expect some influence from the numbers, stimulus hopes will likely mute the effect of any disappointing numbers.

Away from the economic calendar. Any stimulus news would be the key driver.

At the time of writing, the Dollar Spot Index was up by 0.14% to 90.589.

For the Loonie

It’s a quiet day on the economic data front, with no material stats due out to provide the markets with direction.

The lack of stats will leave the Loonie in the hands of market risk sentiment on the day.

At the time of writing, the Loonie was down by 0.02% to C$1.2787 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

NZD/USD Forex Technical Analysis – Main Trend Changes to Down on Trade Through .7153

The New Zealand Dollar fell more than 0.7% against the U.S. Dollar to a one-week low as the greenback extended last week rebound on Monday. Investors are booking profits after a more than two month rally in reaction to sharp gains in U.S. Treasury yields and hopes for more stimulus to boost the world’s largest economy.

At 05:45 GMT, the NZD/USD is trading .7188, down 0.0050 or -0.69%.

Last week, the yield on the benchmark 10-year Treasury note and 30-year Treasury bond rose to their highest levels not seen since March 2020.

In addition to the rising yields, Kiwi traders will also be focused on the prospect of more fiscal stimulus, as the January 20 inauguration of President-elect Joe Biden gets closer. Yields are moving higher as investors bet the new Democratic majority in Congress will move quickly and that it could consider a package of $1 trillion or more.

With Democrats now in control of the Senate and House, the incoming administration of President-elect Joe Biden is expected to deliver an even bigger stimulus package than had been expected with a divided Congress. Biden said Friday the total will be in “the trillions of dollars.”

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .7153 will change the main trend to down. A move through .7316 will signal a resumption of the uptrend.

The minor range is .7153 to .7316. Its 50% level at .7235 is resistance.

The short-term range is .7003 to .7316. Its 50% level at .7159 is the next potential downside target.

The main range is .6589 to .7316. If the main trend changes to down then its retracement zone at .6952 to .6867 will become the primary downside target.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Monday will be determined by trader reaction to the 50% level at .7235. The Forex pair is currently trading on the weak side of this level so there is an early downside bias.

Bearish Scenario

A sustained move under .7235 will indicate the presence of sellers. The first two downside targets are the 50% level at .7159 and the main bottom at .7153.

Taking out .7153 will change the main trend to down. The daily chart indicates there is plenty of room to the downside so we could see an acceleration to the downside with the next major targets .7003 and .6952.

Bullish Scenario

A sustained move over .7235 will indicate the presence of buyers. This could lead to a retest of the main top at .7316. Taking out this level could trigger an acceleration into the April 13, 2018 main top at .7395.

Side Notes

Three days down from the main top overbalanced time. This is a sign of developing weakness.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD and NZD/USD Fundamental Weekly Forecast – Ripe for Near-Term Correction Amid Rising U.S. Yields

The Australian and New Zealand Dollars closed up last week, but most of those gains occurred early in the week. The second half of the week left the Aussie and Kiwi vulnerable to a near-term correction as a surge in U.S. Treasury yields quickly turned the beaten and bruised U.S. Dollar into a more desirable investment.

We don’t expect to see a major change in trend, but we’re not going to be surprised by a meaningful correction since some of the weak longs have probably been waiting for any excuse to lighten up on the long side and book some profits following a more than two-month rally.

Last week, the AUD/USD settled at .7765, up 0.0066 or +0.85% and the NZD/USD finished at .7238, up 0.0054 or +0.75%.

Focus Shifts from Demand for Risk to Federal Reserve Policy

Pressure started to increase on the Aussie and Kiwi about mid-week as investors speculated on when the U.S. Federal Reserve might taper its asset buying, sending longer-dated Australian yields to six-month highs. Earlier in the week, the Australian Dollar hit a 2-1/2 year peak and the New Zealand Dollar reached its highest level since mid-2015.

According to Reuters, dealers said speculators pared some short positions in the U.S. Dollar on speculation the Fed would not now increase its bond buying program, given the rollout of coronavirus vaccines had improved the economic outlook for later in the year.

Instead, some officials had talked about tapering the purchases late in 2021, sooner than many in the market had anticipated.

That combined with talk of more fiscal stimulus as Democrats took control of the Senate to push longer-term Treasury yields higher and gave the U.S. Dollar a lift after weeks of losses.

Jump in US Yields Drag Aussie Yields Higher

Australian 10-year yields followed almost in lock step to reach 1.09% and keep the spread with the U.S. around zero. That left yields up 11 basis points for the week and at the highest level since June.

Three-year yields remain pinned near the Reserve Bank of Australia’s (RBA) target of 0.10%, thus widening the spread with 10-year paper to 98 basis points which, barring a brief spike last March, is the steepest since mid-2015.

Weekly Forecast

There are no major reports from Australia and New Zealand this week. In the U.S., the potential market moving events are a speech from Federal Reserve Chairman Jerome Powell on Thursday and Friday’s U.S. Retail Sales report.

Traders will be looking at Powell for any comments on Federal Reserve bond purchases.

The RBA is probably hoping that rising U.S. Treasury yields pressure the Australian Dollar. This is because an expensive Aussie could weigh on Australian exports. The rising Australian Bond yields could serve as a tightening mechanism that will probably encourage the RBA to continue to extend its A$100 billion bond buying program in coming months.

Furthermore, if the RBA decides to taper some of its Quantitative Easing (QE) or if it adjusts its 3-year bond target then the Australian Dollar could surge to the upside. This is not what the RBA wants to see.

For a look at all of today’s economic events, check out our economic calendar.

A Lack of Economic Data Leaves Capitol Hill and the Greenback in Focus

Earlier in the Day:

It’s was a relatively quiet start to the day on the economic calendar this morning. The Aussie Dollar was in action in the early part of the day, with economic data from China also in focus.

For the Aussie Dollar

Retail sales jumped by 7.1% in November versus a forecasted and prelim 7.0%, according to finalized figures. In October retail sales had risen by 1.6%.

According to the ABS,

  • A first full month of trading in Melbourne, following the lockdown, drove the jump in retail sales. Sales in the state of Victoria surged by 22.4%.
  • Excluding Victoria, retail sales rose by a more modest 2.6%.
  • Household goods retailing and other retailing rose by 12.7% and by 7.9%, with cafes, restaurants, and takeaway food services rising by 6.7%.
  • Clothing, footwear, and personal accessory retailing soared by 26.7%, with department stores retailing jumping by 21.1%.
  • Compared with November 2019, retail sales were up by 13.3%.

The Aussie Dollar moved from $0.7722 to $ 0.77180 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.80% to $0.7695.

Out of China

Inflation figures were in focus this morning.

In December, consumer prices rose by 0.7%, partially reversing a 0.6% slide from November. As a result of the pickup, inflationary pressures returned in December. Year-on-year, consumer prices were up by 0.2%, partially reversing a 0.5% decline from November.

Wholesale deflationary pressures eased at the end of the year. The Producer Price Index fell by 0.4%, following a 1.5% slide in November.

The Aussie Dollar moved from $0.77143 to $0.77100 upon release of the figures.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.24% to ¥104.19 against the U.S Dollar, with the Kiwi Dollar down by 0.83% to $0.7182.

The Day Ahead:

For the EUR

It’s a quiet day ahead on the economic calendar. There are no material stats to provide the EUR with direction.

The lack of stats will leave COVID-19 news in focus.

On the monetary policy front, ECB President Lagarde is scheduled to speak late in the session. Expect any monetary policy talk to provide direction.

At the time of writing, the EUR was down by 0.37% to $1.2173.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. A lack of stats leaves the Pound in the hands of COVID-19 news.

Progress on vaccinations and the number of new cases will be the main areas of focus.

At the time of writing, the Pound was down by 0.47% to $1.3504.

Across the Pond

It’s a quiet day ahead on the economic calendar. There are no material stats due out of the U.S to provide the markets with direction.

The lack of stats will leave the markets to focus on Capitol Hill.

There’s the talk of a Trump impeachment and the markets will also be looking for further details of Biden’s stimulus plans.

At the time of writing, the Dollar Spot Index was up by 0.34% to 90.401.

For the Loonie

It’s a quiet day on the economic data front, with no material stats due out to provide the markets with direction.

The lack of stats will leave the Loonie in the hands of market risk sentiment on the day.

From the Bank of Canada, the BoC Business Outlook Survey will draw interest later in the day, however.

At the time of writing, the Loonie was down by 0.39% to C$1.751 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – Economic Data, COVID-19, and Capitol Hill in Focus

On the Macro

It’s a quieter week ahead on the economic calendar, with 42 stats in focus in the week ending 15th January. In the week prior, 61 stats had been in focus.

For the Dollar:

It’s a quieter week ahead on the economic data front.

In the 1st half of the week, JOLTs job openings and inflation figures are due out.

The numbers are unlikely to have a material impact on the Dollar and market risk sentiment, however.

Expectations are for labor market conditions and consumption to improve as the U.S government administers vaccinations.

In the 2nd half of the week, it gets a little busier.

The weekly jobless claims figures will draw attention on Thursday.

At the end of the week, consumer sentiment and industrial production will also provide direction.

On the monetary policy front, FED Chair Powell could move the dial on Thursday.

Away from the economic calendar, expect chatter from Capitol Hill and COVID-19 news to also influence.

The Dollar Spot Index ended the week up by 0.18% to 90.098.

For the EUR:

It’s a quiet week ahead on the economic data front.

Industrial production and trade data for the Eurozone are due out on Wednesday and Friday.

We would expect the industrial production figures to garner the greatest interest.

Finalized December inflation figures for Spain and France are also due out. These are likely to have a muted impact on the EUR, however.

On the monetary policy front ECB President Lagarde has 2 scheduled speeches in the 1st half of the week. Expect any forward guidance to influence. On Thursday, the ECB’s monetary policy meeting minutes are also due out but should have a muted impact.

The EUR ended the week up by 0.02% to $1.2218.

For the Pound:

It’s a relatively busy week ahead on the economic calendar. Key stats include November industrial and manufacturing production, and GDP figures for November.

December retail sales and November trade figures are also due out but would likely have a muted impact on the Pound.

Away from the economic calendar, expect COVID-19 news to also influence. With the UK in lockdown, strong progress towards the vaccination of priority groups should ease pressure on the Pound.

The Pound ended the week down by 0.76% to $1.3568.

For the Loonie:

It’s a particularly quiet week ahead.

There are no material stats to provide direction in the week.

The lack of stats will leave the Loonie in the hands of crude oil inventory numbers and COVID-19 news updates.

OPEC’s monthly report will also provide direction.

The Loonie ended the week up by 0.20% to C$1.2702 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively quiet week on the economic data front.

November retail sales figures are due out on Monday along with consumer sentiment numbers on Tuesday

With no other stats to consider, expect plenty of interest in the numbers. For the RBA, consumer consumption remains key to any economic recovery.

Away from the economic calendar, COVID-19 news will remain a key driver in the week.

The Aussie Dollar ended the week up by 0.82% to $0.7757.

For the Kiwi Dollar:

It’s a relatively quiet week ahead on the economic calendar.

Key stats include building consent figures and electronic card retail sales figures.

Expect electronic card retail sales figures to have the greatest impact in the week.

Away from the calendar, COVID-19 will continue to provide direction. Any supply hiccups issues would test support for the Kiwi Dollar.

The Kiwi Dollar ended the week up by 0.75% to $0.7242.

For the Japanese Yen:

It is a particularly quiet week ahead.

Economic data is limited to November current account figures that are likely to have a muted impact on the Yen.

The focus will remain on COVID-19 updates and sentiment towards the economic outlook. A spike in new COVID-19 cases in Japan will be of concern, with the economy continuing to struggle.

The Japanese Yen ended the week down by 0.72% to ¥103.94 against the U.S Dollar.

Out of China

It’s a relatively busy week ahead.

December inflation and trade figures are due out on Monday and Thursday.

While inflation figures will influence, expect trade data to have the greatest impact.

The Chinese Yuan ended the week up by 0.81% to CNY6.4746 against the U.S Dollar.

Geo-Politics

U.S Politics

U.S politics will likely remain the key drive in the week ahead.

Following the scenes on Capitol Hill, the Democrats are looking to oust Trump from office.

Trump is unlikely to go quietly, however. His actions have split the Republican Party. He has also united the Democrats, who now have control of both Houses.

With Inauguration Day approaching, the markets will be looking for Biden’s early goals.

News of plans to deliver further stimulus details this week should support riskier assets further.

NZD/USD Forex Technical Analysis – Overbalancing Time Will Be First Sign of Weakness

A second day of profit-taking drove the New Zealand Dollar lower on Friday as investors continued to speculate on when the U.S. Federal Reserve might taper its asset buying. The Kiwi still managed to close up 0.75% for the week.

Dealers said speculators pared some short positions in the U.S. Dollar on speculation the Fed would not now increase its bond buying program, given the rollout of coronavirus vaccines had improved the economic outlook for later in the year.

On Friday, the NZD/USD settled at .7238, down 0.0020 or -0.28%.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .7316 will reaffirm the uptrend. Taking out .7153 changes the main trend to down.

The minor range is .7153 to .7316. Its 50% level at .7234 is currently being tested.

The short-term range is .7003 to .7316. Its 50% level at .7159 forms a support cluster with the main bottom at .7153. If this area fails as support then look for a potential acceleration to the downside.

Short-Term Outlook

At first glance, the pivot at .7234 is the level to watch on Monday. Trader reaction to this level is likely to set the tone for the session.

A sustained move over this level could generate enough upside momentum to challenge last week’s high at .7316, but in order to get there, Treasury yields are going to have to come down.

A sustained move under .7234 will signal the presence of sellers. This could create the momentum needed to drive the NZD/USD into .7159 to .7153.

If .7153 fails to hold then prepare for an acceleration to the downside with .7084 the next likely target later next week.

Time has also become a factor. The last four breaks have lasted two trading sessions. If we get a lower low on Monday then this will be the third session down from the recent top. This will be the first sign of weakness because time is overbalancing. We may or may not get a steep plunge on this move, but the chart pattern will be a warning that the selling is getting stronger or the buying weaker at current price levels.

For a look at all of today’s economic events, check out our economic calendar.

The Weekly Wrap – U.S Politics, Stats, and COVID-19 Vaccine News were Key Drivers

The Stats

It was a particularly busy week on the economic calendar, in the week ending 8th January.

A total of 61 stats were monitored, following 15 stats from the week prior.

Of the 61 stats, 23 came in ahead forecasts, with 33 economic indicators coming up short of forecasts. There were 5 stats that were in line with forecasts in the week.

Looking at the numbers, 20 of the stats reflected an upward trend from previous figures. Of the remaining 41 stats, 34 reflected a deterioration from previous.

For the Greenback, it was a mixed week. After falling to a week low 89.209, the U.S Dollar Spot Index rebounded to end the week up by 0.18% to 90.098. The weekly gain marked a 3rd gain in 8-weeks. In the week prior, the Dollar Spot Index had fallen by 0.32% to end the week at 89.937.

In the week, the Democrats won the Senate race, delivering expectations of substantial fiscal support. Optimism towards the economic outlook was also fueled by COVID-19 vaccine news.

Out of the U.S

It was a relatively busy week on the economic data front.

Private sector PMI and labor market numbers were the key drivers in the week.

In December, the ISM Manufacturing PMI rose from 57.6 to 60.7, with the Services PMI climbing from 55.9 to 57.2.

A 123k fall in nonfarm payrolls in December, according to the ADP failed to spook the markets ahead of the official government figures.

In the week ending 1st January, initial jobless claims slipped from 790k to 787k.

At the end of the week, nonfarm payrolls fell by 140K in December, partially reversing a 336k increase in November.

In spite of the fall, the unemployment rate held steady at 6.7%, with the participation rate holding steady at 61.5%.

In the equity markets, the S&P500 and Dow rose by 1.61% and by 1.83% respectively. The NASDAQ led the way, however, rallying by 2.43%.

Out of the UK

It was a relatively quiet week on the economic data front.

Finalized manufacturing and service sector PMI and Construction PMI figures for December were in focus.

The stats were skewed to the negative, with services PMI, composite PMI, and construction PMI coming up short of expectations.

An upward revision to December’s manufacturing PMI was brushed aside, with service sector activity key.

At the end of the week, December house price figures numbers had a muted impact.

With stats skewed to the negative, a reintroduction of lockdown measures added further pressure on the Pound in the week.

Ongoing vaccinations, following the approval of the AstraZeneca vaccine limited the downside, however.

In the week, the Pound fell by 0.76% to $1.3568. In the week prior, the Pound had risen by 0.85% to $1.3672.

The FTSE100 ended the week up by 6.39%, reversing a 0.64% loss from the previous week.

Out of the Eurozone

It was a particularly busy week on the economic data front.

Private sector PMI figures for Italy and Spain and finalized figures for France, Germany, and Italy were in focus.

From Germany, retail sales, unemployment, factory orders, industrial production, and trade figures also influenced.

French consumer spending numbers also drew interest at the end of the week.

Eurozone unemployment, retail sales, trade data, and inflation figures had a muted impact on the EUR and European majors, however.

It was a mixed bag on the economic data front.

Manufacturing sector activity picked up in December, supported by another sharp increase in new orders.

Service sector conditions improved, though not enough for the sector to return to expansion.

Economic data from Germany was also impressive.

Retail sales saw an unexpected rise in November, with unemployment seeing a surprise fall to leave the unemployment rate at 6.1%.

Factory orders and industrial production also saw further upside in November, while trade data disappointed. In November, Germany’s trade surplus narrowed from €18.2bn to €16.4bn.

French consumer spending also disappointed, with lockdown measures in November weighing. Spending tumbled by 18.9% in November, reversing a 3.9% rise from October.

While economic data from Germany impressed, an extension to lockdown measures in Germany limited the impact of dated numbers.

France was also considering a reintroduction of lockdown measures, adding further pressure on the EUR.

Approval of the Moderna Inc. vaccine, however, limited the impact of planned containment measures in the week.

For the week, the EUR rose by 0.02% to $1.2218. In the week prior, the EUR had risen by 0.18% to $1.2215.

For the European major indexes, it was another bullish week. The EuroStoxx600 rallied by 3.04%, with the CAC40 and DAX30 gaining 2.80% and 2.41% respectively.

U.S politics and vaccine approvals contributed to the upside for the majors in the week.

For the Loonie

It was a relatively busy week on the economic data front. November trade and December Unemployment figures were key stats in the week.

In November, the trade deficit narrowed from C$3.73bn to C$3.34bn.

Employment figures were skewed to the negative, however, with employment falling by 62.6K. As a result of the decline, Canada’s unemployment rate ticked up by 8.5% to 8.6%.

Other stats in the week included RMPI and Ivey PMI numbers that had a muted impact in the week.

Supporting the upside for the Loonie, however, was a jump in crude oil prices and hopes of more U.S stimulus.

In the week ending 8th January, the Loonie rose by 0.20% to C$1.2702. In the week prior, the Loonie had risen by 1.06% to C$1.2728.

Elsewhere

It was a bullish week for the Aussie Dollar and the Kiwi Dollar, following solid gains from the previous week.

In the week ending 8th January the Aussie Dollar rose by 0.82% to $0.7757 with the Kiwi Dollar ending the week up by 0.75% to $0.7242.

For the Aussie Dollar

It was a quiet week on the economic calendar.

November building approvals and trade data were in focus in the week.

It was a mixed bag on the economic data front, however. While building approvals were on the rise, Australia’s trade surplus narrowed from A$7.456bn to A$5.022bn.

In spite of the narrowing, the Aussie Dollar found strong support on optimism towards the economic outlook.

Expectations of more U.S stimulus and the ongoing COVID-19 vaccinations delivered support for riskier assets.

For the Kiwi Dollar

It was also a particularly quiet week on the economic calendar.

There were no material stats from New Zealand to provide the Kiwi Dollar with direction.

The lack of stats left the Kiwi in the hands of COVID-19 news and U.S politics in the week.

For the Japanese Yen

It was a relatively busy week on the economic calendar. Finalized privates sector PMI figures for December were in focus, along with November household spending data.

The stats were mixed. While the manufacturing and service sector PMIs saw upward revisions, household spending disappointed.

In November, household spending slid by 1.8%, reversing a 2.1% rise from October.

A jump in new COVID-19 cases in Japan added to the negative sentiment in the week.

The Japanese Yen fell by 0.72 % to ¥103.94 against the U.S Dollar. In the week prior, the Yen had risen by 0.22% to ¥103.20.

Out of China

Private sector PMIs for December were in focus in the first half of the week, with the stats skewed to the negative.

In December, the Caixin Manufacturing PMI fell from 54.9 to 53.0, with the services PMI falling from 57.8 to 56.3

While the stats were on the weaker side, the private sector continued to expand at a solid pace.

On the negative, however, was news of U.S plans to delist Chinese entities from the NYSE.

In the week,  the Chinese Yuan rose by 0.81% to CNY6.4746. In the week prior, the Yuan had risen by 0.22% to CNY6.5272.

The CSI300 rallied by 5.45%, with the Hang Seng ended the week up by 2.38%.

U.S Nonfarm Payrolls Put the Greenback in Focus

Earlier in the Day:

It’s was another relatively quiet start to the day on the economic calendar this morning. The Japanese Yen was in action in the early part of the day.

Away from the economic calendar, riskier assets found support following the moves across European and the U.S on Thursday.

Expectations of substantial stimulus, in the wake of the Democrats taking control of the Senate, supported riskier assets.

For the Japanese Yen

Household spending figures were in focus in the early part of the day.

Household spending fell by 1.8% in November, month-on-month, following a 2.1% increase in October. Economists had forecast a 1.3% decline.

Year-on-year, household spending increased by 1.1%, following a 1.9% rise in October. Economists had forecast a 2.5% increase.

The Japanese Yen moved from ¥103.812 to ¥103.810 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.09% to ¥103.90 against the U.S Dollar,

Elsewhere

At the time of writing, the Aussie Dollar was down by 0.21% to $0.7753, with the Kiwi Dollar down by 0.03% to $0.7253.

The Day Ahead:

For the EUR

It’s another busy day ahead on the economic calendar. German industrial production and trade figures are due out along with French consumer spending figures.

Of less influence will be Eurozone unemployment numbers that are due out later in the day.

Away from the economic calendar, COVID-19 news and vaccine updates will also influence. There has been the talk of France having to reintroduce lockdown measures…

At the time of writing, the EUR was down by 0.20% to $1.2247.

For the Pound

It’s another relatively quiet day ahead on the economic calendar. House price figures for December and 3rd quarter labor productivity figures are due out later today.

The numbers are unlikely to have a material impact on the Pound, however.

COVID-19 news and vaccine updates will remain the key area of focus, with the UK in its 3rd lockdown. Good progress towards vaccinating priority groups would ease pressure on the Pound.

At the time of writing, the Pound was down by 0.13% to $1.3550.

Across the Pond

It’s a busy day ahead on the economic calendar. December’s nonfarm payrolls and unemployment rate will be the key drivers later today.

Expect plenty of sensitivity to the numbers.

Away from the economic calendar, COVID-19 and news from Washington will also need monitoring.

At the time of writing, the Dollar Spot Index was up by 0.13% to 89.946.

For the Loonie

It’s a busy day on the economic data front, with unemployment figures in focus.

Away from the economic calendar, COVID-19 news and U.S politics will also influence.

Optimism towards the economic outlook and upward trend in crude oil prices remain Loonie positive.

At the time of writing, the Loonie was up by 0.01% to C$1.2690 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

Economic Data Puts the EUR and USD in the Spotlight, with U.S Politics also in Focus

Earlier in the Day:

It’s was a relatively quiet start to the day on the economic calendar this morning. The Aussie Dollar was in action in the early part of the day.

Away from the economic calendar, updates from Capitol Hill garnered plenty of interest. Protests broke out, leading to violence before President-Elect Biden was certified as the next U.S President.

The protests coincided with the Democrats taking control of the Senate. With the Democrats now in control of both houses, expectations are for more stimulus to support the U.S economic recovery, which supported riskier assets early on.

For the Aussie Dollar

Building approvals and trade data were in focus this morning.

In November, building approvals rose by 2.6%, following on from a 3.8% jump in October. Economists had forecast a 2.5% increase.

According to the ABS,

  • Private sector house approvals rose by 6.1%.
  • By contrast, private sector dwellings excluding houses slid by 3.9%.
  • Year-on-year, building approvals were up by 15.0%, with a 33.6% jump on private sector house approvals delivering the upside.
  • Private sector dwelling, excluding houses, fell by 13.0% year-on-year.

In November, Australia’s trade surplus narrowed from A$7.456bn to A$5.022bn. Economists had forecast a narrowing to A$6.000bn.

According to the ABS,

  • Goods and services credits increased A$1,214m (+3%) to A$36,393m.
  • Goods and services imports rose A$2,774m (+10%) to A$31,370m.

The Aussie Dollar moved from $0.78027 to $0.77928 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.01% to $0.7801.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.07% to ¥103.11 against the U.S Dollar, with the Kiwi Dollar down by 0.03% to $0.7292.

The Day Ahead:

For the EUR

It’s another busy day ahead on the economic calendar. German factory orders and Eurozone retail sales figures are in focus later this morning.

Other stats include German construction figures and inflation numbers for Italy and the Eurozone.

Barring particularly dire numbers, however, these stats are unlikely to have a material impact on the EUR.

On the monetary policy front, the ECB’s Economic Bulletin will also draw interest later today.

Away from the economic calendar, COVID-19 news and vaccine updates will also influence.

At the time of writing, the EUR was up by 0.06% to $1.2335.

For the Pound

It’s another relatively quiet day ahead on the economic calendar. December’s construction PMI is due out later today.

The numbers are unlikely to have a material impact on the Pound, however.

Expect market sentiment towards the latest lockdown measures and COVID-19 vaccine news to continue to influence.

At the time of writing, the Pound was up by 0.13% to $1.3626.

Across the Pond

It’s a relatively quiet day ahead on the economic calendar. The market’s preferred ISM Services PMI and jobless claims figures are due out.

Expect market sensitivity to both sets of figures.

Away from the economic calendar, COVID-19 news and chatter from Capitol Hill to also provide direction.

At the time of writing, the Dollar Spot Index was down by 0.19% to 89.357.

For the Loonie

It’s a relatively quiet day on the economic data front. December’s Ivey PMI is due out later today.

With little else for the markets to consider, expect a Loonie response to today’s figures.

Away from the economic calendar, U.S politics and COVID-19 news will also provide direction.

At the time of writing, the Loonie was up by 0.02% to C$1.2675 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

Economic Data Puts the EUR and the Dollar in Focus, with the Georgia Runoffs also in the Spotlight

Earlier in the Day:

It’s was a relatively busy start to the day on the economic calendar this morning. Key stats included service sector PMI figures from Japan and China.

Away from the economic calendar, updates from the Georgia runoffs weighed on demand for riskier assets early in the session.

For the Japanese Yen

The finalized services PMI came in at 47.2 for December, which was in line with a prelim 47.2, while down from a November 47.8. In November, the PMI had risen from 47.7 to 47.8.

According to the December survey,

  • Incoming new business fell for an 11th consecutive month, while the pace of decline eased.
  • A 3rd wave of the COVID-19 pandemic weighed on demand at the end of the year.
  • Export orders were particularly subdued.
  • Employment levels stabilized, with an increase in the hiring of skilled staff being offset by further retirements.
  • Firms remained confident that activity would expand in the coming year. Business expectations were positive for a 4th month in a row, with hopes of an end to the pandemic driving optimism.

The Japanese Yen moved from ¥102.606 to ¥102.640 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.10% to ¥102.82 against the U.S Dollar.

From China

The Caixin Manufacturing PMI fell from 57.8 to 56.3 in December. In November, the PMI had risen from 56.8 to 57.8.

According to the Caixin survey,

  • New business expanded at a softer pace, with new export sales seeing only a modest increase.
  • Firms continued to hire, leading to a fall in backlogs. The pace of hiring was modest, however, after having hit a decade high in November.
  • Optimism reached its highest level since April 2011, with optimism towards the global economic outlook providing support.

The Aussie Dollar moved from $0.77508 to $0.77541 upon release of the figures. At the time of writing, the Aussie Dollar down by 0.27% to $0.7738.

The Majors

At the time of writing, the Kiwi Dollar was down by 0.15% to $0.7141.

The Day Ahead:

For the EUR

It’s another particularly busy day ahead on the economic calendar. Service and composite PMIs for Italy and Spain are due out along with finalized PMIs for France, Germany, and the Eurozone.

We would expect the Eurozone’s services and composite PMIs to have the greatest impact on the EUR.

December inflation figures for Germany are also due out but would likely have a muted impact in the day.

Away from the economic calendar, COVID-19 news and vaccine updates will also influence.

At the time of writing, the EUR was down by 0.09% to $1.2287.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. Finalized service and composite PMI figures are due out later today.

Expect any revisions to the services PMI to influence the Pound.

Ultimately, however, expect COVID-19 vaccine news to be the key driver following the reintroduction of lockdown measures.

At the time of writing, the Pound was down by 0.19% to $1.3601.

Across the Pond

It’s a busy day ahead on the economic calendar. Finalized Markit service and composite PMIs, ADP nonfarm employment change, and factory order figures are due out.

Barring any marked revisions to the services PMI, the ADP figures will likely garner the greatest interest.

On the monetary policy front, the FOMC meeting minutes will also draw attention late in the day.

Away from the economic calendar, however, COVID-19 and the Georgia runoffs will also provide direction.

At the time of writing, the Dollar Spot Index was up by 0.21% to 89.630.

For the Loonie

It’s a quiet day on the economic data front, with no material stats to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of crude oil inventory numbers and market risk appetite.

At the time of writing, the Loonie was down by 0.16% to C$1.2689 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

NZD/USD Forex Technical Analysis – Trader Reaction to .7251 Should Set the Tone

The New Zealand Dollar, a barometer of risk appetite, closed higher on Tuesday, putting it back on track for an eventual test of its April 13, 2018 main top at .7395. The Kiwi may have also been indirectly supported by the sharp rise in the Chinese Yuan.

Earlier in the day, China announced its decision to lift its official Yuan exchange rate by its highest margin since it abandoned a dollar peg in 2005. China’s central bank set the official Yuan midpoint at 6.4760 per dollar before the market opened, up 1% from the previous fix, the biggest adjustment higher since 2005.

On Tuesday, the NZD/USD settled at .7252, up 0.0076 or +1.07%.

The Kiwi also recovered from a two day setback as traders made bets for a strong global economic recovery. Investors also looked ahead to two key elections in Georgia, which will determine whether Republicans can hold on to control in the Senate.

Bullish traders are hoping for a Democratic Party victory since this could create an opportunity for a bigger and faster spending package, which would put further pressure on the U.S. Dollar.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed on Tuesday when buyers took out the previous main top at .7241. A trade through .7153 will change the main trend to down.

Short-Term Outlook

Wednesday’s direction is likely to be determined by the outcome of the Georgia runoff elections.

A Democratic victory could trigger a spike to the upside with the next target .7395. A Republican win could trigger a break with .7153 the first downside target. Taking out this level will change the trend to down.

Additionally, due to the prolonged move up in terms of price and time, traders should watch for a potentially bearish closing price reversal top formation. Taking out Tuesday’s high at .7260 then turning lower for the session could encourage investors to book profits, increasing the possibility of a near-term change in trend to down.

For a look at all of today’s economic events, check out our economic calendar.

NZD/USD Forex Technical Analysis –Near-Term Strength Over .7197, Weakness Under .7122

The New Zealand Dollar is trading higher against its U.S. counterpart on Tuesday, clawing back the previous day’s losses as traders renew support for a quick economic recovery in 2021 once coronavirus vaccinations are widely distributed. The early price action has put the Kiwi within striking distance of its 2-1/2 year high at .7241 reached last week.

At 08:31 GMT, the NZD/USD is trading .7220, up 0.0045 or +0.63%.

The Kiwi, a liquid proxy for risk, has been buoyed by rising commodity prices and their countries’ success in containing the coronavirus pandemic.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .7241 will signal a resumption of the uptrend. The main trend will change to down on a move through the nearest main bottom at .7003.

The minor trend is down. It turned down on Monday when sellers took out .7199. A trade through .7241 will change the minor trend to up. A trade through .7152 will reaffirm the downtrend.

The first minor range is .7241 to .7153. Its 50% level at .7197 is new support.

The second minor range is .7003 to .7241. Its 50% level at .7122 is additional support.

Daily Swing Chart Technical Forecast

The direction of the NZD/USD on Tuesday is likely to be determined by trader reaction to the first pivot at .7197.

Bullish Scenario

A sustained move over .7197 will indicate the presence of buyers. If this creates enough upside momentum then look for a drive into .7241. Taking out this level will signal a resumption of the uptrend and put the NZD/USD on a path toward the April 13, 2018 main top at .7395.

Bearish Scenario

A sustained move under .7197 will signal the presence of sellers. If this move generates enough downside momentum then look for a test of the second pivot at .7122. Breaking this level could trigger a move into the next minor bottom at .7084.

For a look at all of today’s economic events, check out our economic calendar.

Economic Data Puts the EUR in Focus, with the Senate Race and COVID-19 also Key Drivers

Earlier in the Day:

It’s was a quiet start to the day on the economic calendar this morning. There were no material stats to provide the markets with direction early in the day.

Away from the economic calendar, a continued spike in new COVID-19 cases and market sentiment towards the U.S Senate race will influence.

The Majors

A the time of writing, the Japanese Yen was up by 0.01% to ¥103.12 against the U.S Dollar, with the Aussie Dollar up by 0.08% to $0.7671. The Kiwi Dollar was down by 0.03% to $0.7174.

The Day Ahead:

For the EUR

It’s another particularly busy day ahead on the economic calendar. German retail sales figures for November and unemployment figures for December are due out later this morning.

While retail sales figures will influence, expect unemployment change numbers to have the greatest impact on the EUR.

Away from the economic calendar, COVID-19 vaccine updates and new cases will also influence. On the geopolitical front, expect the Senate race to also provide direction.

At the time of writing, the EUR was up by 0.02% to $1.2251.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out today to provide the Pound with direction.

COVID-19 containment news will likely be the key driver on the day.

At the time of writing, the Pound was up by 0.04% to $1.3576.

Across the Pond

It’s a relatively quiet day ahead on the economic calendar. The market’s preferred ISM manufacturing PMI figures are due out later today.

Expect some sensitivity to the numbers.

Ultimately, however, the Georgia runoffs for the Senate race will decide the fate of the Dollar.

The Dollar Spot Index slipped by 0.05% to 89.891 on Monday.

For the Loonie

It’s a relatively quiet day on the economic data front. November’s RMPI is due out later today.

Barring particularly dire numbers, however, don’t expect too much influence from the numbers.

COVID-19 news and U.S politics will be the key driver of the day. There will also be some interest in the outcome of the OPEC plus meeting that extended into a 2nd day without an agreement.

At the time of writing, the Loonie was down by 0.03% to C$1.2782 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

Manufacturing PMIs and U.S Politics to Put the EUR and the Greenback in Focus

Earlier in the Day:

It’s was a relatively busy start to the day on the economic calendar this morning. The Japanese Yen was in action, with economic data from China also in focus.

For the Japanese Yen

In December, the finalized manufacturing PMI came in at 50.0. Rising from a prelim 49.7 and November’s 49.0.

According to the December Markit survey,

  • The move through to 50.0 at the end of the year brought to an end a run of 19 consecutive months of decline.
  • Manufacturers reported that production volumes were unchanged on the month for the first time in 2-years. This ended a run of 23 consecutive monthly declines in output.
  • As a result of more stable conditions, manufacturers increased hiring for the first time in 10-months.
  • On the negative, however, were new orders that were reduced to the least marked extent of the past 2-years.

The Japanese Yen moved from ¥103.113 to ¥103.045 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.13% to ¥103.07 against the U.S Dollar.

From China

Private sector PMIs were back in focus this morning.

In December, the Caixin Manufacturing PMI fell from 54.9 to 53.0. Economists had forecast a decline to 54.8.

According to the December survey,

  • While the manufacturing sector continued to expand, the rate of expansion was the softest for 3-months.
  • The pace of expansions in both output and total new work remained steep, though slower on the month.
  • Export sales rose modestly, with firms taking a more cautious approach to hiring, leaving employment levels unchanged.
  • Optimism slipped to a 3-month low, while companies remained optimistic that output would increase over the next year.

The Aussie Dollar moved from $0.77112 to $0.77146 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.30% to $0.7717.

Elsewhere

At the time of writing, the Kiwi Dollar was up by 0.18% to $0.7201. New Zealand is on holiday at the start of the week.

The Day Ahead:

For the EUR

It’s a particularly busy day ahead on the economic calendar. December manufacturing PMI numbers for Italy and Spain are due out later this morning. Finalized PMIs for France, Germany, and the Eurozone are also due out.

Barring a marked revision to prelim figures, Italy and the Eurozone’s PMI numbers will likely have the greatest influence.

Away from the economic calendar, COVID-19 news will also provide direction.

At the time of writing, the EUR was up by 0.32% to $1.2254.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. Finalized manufacturing PMI figures for December are due out later today.

Barring a marked revision to prelim figures, however, the numbers are unlikely to have a material impact on the Pound.

Progress on the COVID-19 vaccine front and post-Brexit updates will provide direction on the day.

At the time of writing, the Pound was up by 0.10% to $1.3686.

Across the Pond

It’s a relatively quiet day ahead on the economic calendar. Finalized manufacturing PMI figures are due out later today.

The numbers are unlikely to have a material impact on the Dollar, however.

Expect chatter from Capitol Hill and updates on COVID-19 to continue to drive the Greenback. Key in the early part of the week is the Senate race, with Georgia’s runoff tomorrow

For the Loonie

It’s a quiet day on the economic data front. There are no material stats due out to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of the private sector PMI numbers from China and COVID-19 news.

At the time of writing, the Loonie was up by 0.17% to C$1.2707 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD and NZD/USD Fundamental Weekly Forecast – Labor Market Biggest Concern for RBA, RBNZ in 2021

The Australian and New Zealand Dollars finished the year with a strong up trend. If you subscribe to the belief that a trend in motion is likely to remain in motion until acted upon by a strong force then you’ll be going into 2021 with a strong upside bias because the strongest force that could derail the rally in the Aussie and Kiwi is the U.S. Dollar itself and all forecasts point to it continuing to lose value due to burgeoning deficit spending.

Last week, the AUD/USD settled at .7700, up 0.0100 or +1.32% and the NZD/USD finished at .7184, up 0.0061 or +0.85%.

In 2021, the Aussie and Kiwi are most likely to be supported by a number of factors but most hinge on control of the coronavirus. So far both Australia and New Zealand have done well in successfully controlling the spread of the killer virus by the use of good contact tracing methods to mitigate further outbreaks. Optimism in a full recovery of the economy will rise if there is a successful rollout of the vaccines.

Additional help in the form of government stimulus is also providing support. Meanwhile, the U.S. economy is expected to falter with it lagging behind the other majors. Additionally, political risks are expected to rise and the Fed is expected to keep printing money. All of which will be detrimental to the U.S. Dollar.

China’s economic growth is also expected to improve, raising demand for Australian commodities such as iron ore. This is one of the reasons why the Australian Dollar should outperform the New Zealand Dollar in 2021.

RBA Expects Recovery to Be Uneven and Drawn Out

At its recent policy meeting in December, the Reserve Bank of Australia (RBA) said it was not expecting to raise the cash rate for at least 3 years, but is prepared to do more if necessary. It also said it will keep the size of the bond purchase program under review.

The RBA also said addressing high unemployment is a national priority and that fiscal and monetary support would be required for some time.

As far as its forecasts are concerned, the RBA said positive news on the vaccine front should support recovery of the global economy, and that the Australian economic recovery is underway and recent data have generally been better than expected. However, the recovery is still expected to be uneven and drawn out and it remains dependent on significant policy support. The RBA also warned that a further rise in the unemployment rate is still expected.

RBNZ Unveiled New Lending Tool in Late 2020

At its last monetary policy meeting in mid-November, the Reserve Bank of New Zealand unveiled a new monetary policy tool that will reduce borrowing costs for lenders, while holding the benchmark rate at a record low and signaling its readiness to deploy negative rates.

As we head into 2021, New Zealand Dollar traders will be on the outlook for any clues on the RBNZ’s move to zero rates or a negative OCR, although stronger than expected data has given the RBNZ room to stick to its guidance of not lowering rates until March next near.

New Zealand’s success in containing the community spread of COVID-19 has allowed the economy to bounce back faster than most other countries, but with more job losses expected in coming quarters, inflation weak and the economy in recession, the RBNZ is expected to continue its monetary support.

Weekly Outlook

The outlook for the Australian Dollar in 2021 is more positive than negative compared to the New Zealand Dollar. The big concern for both economies in 2021 will be the labor market.

As far as New Zealand is concerned, the outlook remains a little more uncertain. According to ANZ, “Closed borders mean a smaller economy and recessionary impacts of this are unavoidable.” Negative rates starting in March are still a possibility if the economy starts to take an unexpected turn.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – Post-Brexit, the Senate Race, and Economic Data in Focus

On the Macro

It’s a busy week ahead on the economic calendar, with 58 stats in focus in the week ending 8th January. In the week prior, just 15 stats had been in focus.

For the Dollar:

It’s a relatively busy week ahead on the economic data front.

December ISM Manufacturing and Service PMI figures for December are due out on Tuesday and Thursday.

While we expect sensitivity to the manufacturing numbers, the Services PMI will be the key driver.

Expect initial jobless claims figures on Thursday to also draw attention ahead of December NFP numbers on Friday.

With labor market numbers in focus, expect nonfarm payroll figures and the unemployment rate to have the greatest impact.

Other stats include ADP nonfarm employment change, finalized Markit private sector PMI numbers, and factory orders.

The Dollar Spot Index ended the week down by 0.32% to 89.937.

For the EUR:

It’s a particularly busy week ahead on the economic data front.

December manufacturing PMI figures for Spain and Italy are due out at the start of the week.

Expect Italy’s manufacturing PMI to draw the greatest interest. With finalized manufacturing from France, Germany, and the Eurozone also due out, any revisions will also provide direction.

On Tuesday, the focus shifts to retail sales and unemployment figures from Germany.

With consumption key to economic recovery, both will provide the EUR with direction.

On Wednesday, Service sector PMIs for Italy and Spain are due out along. Barring dire numbers, however, the focus will be on finalized numbers from France, Germany, and the Eurozone.

Through the 2nd half of the week, the German economy remains in the spotlight.

November factory orders, industrial production, and trade data are due out on Thursday and Friday.

On Friday, French consumer spending figures for November will also draw attention.

While there will be sensitivity to the stats, the markets may be in a forgiving mood.

The ongoing vaccinations across the EU and beyond and optimism towards the economic outlook will likely limit the impact of any disappointing numbers.

Other stats due out include inflation figures from Germany and Italy and retail sales and unemployment numbers for the Eurozone.

These stats are unlikely to have an impact on the EU, however.

The EUR ended the week up by 0.18% to $1.2215.

For the Pound:

It’s a relatively quiet week ahead on the economic calendar. Key stats include finalized private sector PMI numbers for December and construction PMI figures.

Expect any revisions to the services PMI to have the greatest influence.

Other stats include December house price and 3rd quarter labor productivity figures. We would expect the numbers to have a muted impact on the Pound, however.

COVID-19 and updates from Europe on Britain’s 1st week away from the EU will influence.

The Pound ended the week up by 0.83% to $1.3672.

For the Loonie:

It’s a relatively busy week ahead on the economic calendar.

November’s RMPI is in focus on Tuesday ahead of trade data and December’s Ivey PMI on Thursday.

While we expect some influence from the numbers, December employment figures on Friday will likely have the greatest impact.

From elsewhere, private sector PMIs will influence sentiment towards the economic outlook. The knock-on effects on crude oil prices would also provide the Loonie with direction.

The Loonie ended the week up by 1.06% to C$1.2728 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively quiet week on the economic data front.

November building approval and trade figures are due out on Thursday.

With no other stats to consider, expect the trade figures to garner the greatest interest.

From elsewhere, private sector PMI numbers will also influence market risk sentiment and the Aussie Dollar.

The Aussie Dollar ended the week up by 1.17% to $0.7694.

For the Kiwi Dollar:

It’s another particularly quiet week ahead on the economic calendar. There are no material stats due out to provide the Kiwi Dollar with direction.

Private sector PMIs through the week will influence, however.

The Kiwi Dollar ended the week up by 1.00% to $0.7188.

For the Japanese Yen:

It is a relatively quiet week on the economic calendar.

Finalized private sector PMI figures for December are due out on Monday and Wednesday.

The numbers are unlikely to have any impact on the Yen, however.

At the end of the week, November household spending will draw interest, however.

The Japanese Yen ended the week up by 0.42% to ¥103.20 against the U.S Dollar.

Out of China

It’s a quiet week ahead on the economic data front.

December private sector PMI numbers are due out on Monday and Wednesday.

While service sector numbers will influence, Monday’s Manufacturing PMI will garner the greatest interest.

The Chinese Yuan ended the week up by 0.22% to CNY6.5272 against the U.S Dollar.

Geo-Politics

U.S Politics

U.S politics will likely remain front and center in a relatively busy week ahead on the economic data front.

The Senate race will draw plenty of interest, with the Georgia runoff on 5th January. A Democrat victory would give the Democrats control of both houses of Congress. While the markets would expect more pandemic aid support, other Biden policies could be a concern.

There’s also Trump lingering in the background…

Brexit

It is Britain’s first week outside of the EU. There’s likely to be plenty of news hitting the wires. Some EU member states are likely to attempt to cause as much disruption as possible.

Border controls and trade will be the main area of focus. Any disruption could test support for the Pound.

One other area of interest will be whether some EU states look to forge bilateral ties with Britain.

The Weekly Wrap – Britain Leaves the EU, amidst Optimism towards 2021

The Stats

It was a particularly quiet week on the economic calendar, in the week ending 1st January.

A total of 15 stats were monitored, following 32 stats from the week prior.

Of the 15 stats, 7 came in ahead of forecasts, with 8 economic indicators coming up short of forecasts. There were no stats that were in line with forecasts in the week.

Looking at the numbers, 7 of the stats reflected an upward trend from previous figures. Of the remaining 8 stats, all 8 reflected a deterioration from the previous.

For the Greenback, it was back into the red to mark a 5th weekly loss in 7-weeks. The Dollar Spot Index fell by 0.32% to end the week at 89.937. In the week prior, the Dollar had risen by 0.27% to 90.257.

Out of the U.S

It was a relatively busy week on the economic data front.

Key stats included November goods trade data, Chicago PMI, and weekly jobless claims figures.

In December, the Chicago PMI rose from 58.2 to 59.5, while the goods trade deficit widened from $80.42bn to $84.82bn.

Also positive was a fall in jobless claims figures. In the week ending 25th December, U.S jobless claims fell back from 806k to 787k.

The jobless claims figures supported the U.S equity markets on the final day of the year.

Other stats included housing sector figures that also failed to move the dial.

In the equity markets, the S&P500 and Dow rose by 1.43% and by 1.35% respectively. The NASDAQ saw a more modest 0.65% gain in the week.

Out of the UK

It was a quiet week on the economic data front.

House price figures for December were the only stats from the UK in the week.

In spite of an uptick in house prices, the numbers had a muted impact on the Pound.

Support came from the Brexit deal and the House of Commons and House of Lords vote in favor of the Bill.

In the week, the Pound rose by 0.85% to $1.3672. In the week prior, the Pound had risen by 0.27% to $1.3560

The FTSE100 ended the week down by 0.64%, reversing a 0.27% loss from the previous week.

Out of the Eurozone

It was also a quiet week on the economic data front.

Key stats included job seeker figures from France and prelim December inflation figures from Spain.

Neither had an impact on the EUR, however, with optimism towards a 2021 economic recovery supporting the EUR.

The combination of a Brexit deal and the rollout of vaccines across the bloc were key drivers.

For the week, the EUR rose by 0.18% to $1.2215. In the week prior, the EUR had fallen by 0.52% to $1.2193.

For the European major indexes, it was a bullish week. The CAC40 and EuroStoxx600 rose by 0.53% and by 0.77% respectively, with the DAX30 gaining 0.97%.

For the Loonie

It was a particularly quiet week on the economic data front. There were no key stats from Canada to provide the Loonie with direction.

Optimism towards a 2021 economic recovery supported crude oil prices and the Loonie in the week.

U.S stimulus, monetary policy, and the rollout of the COVID-19 vaccines were positive for market risk appetite.

Private sector PMI numbers from China failed to impact, in spite of a marginal softening in private sector activity.

In the week ending 1st January, the Loonie rose by 1.06% to C$1.2728. In the week prior, the Loonie had fallen by 0.60% to C$1.2865.

Elsewhere

It was a bullish week for the Aussie Dollar and the Kiwi Dollar, which reversed losses from the week prior.

In the week ending 1st January, the Aussie Dollar rallied by 1.17% to $0.7694, with the Kiwi Dollar ending the week up by 1.00% to $0.7188.

For the Aussie Dollar

It was a particularly quiet week on the economic calendar.

There were no material stats from Australia to provide the Aussie Dollar with direction in the week.

The lack of stats left the Aussie Dollar in the hands of market risk sentiment.

COVID-19 vaccinations across key economies and expectation of further relief packages in the US drove demand for riskier assets. Commodity prices were also on the rise in the week as a result. The Bloomberg Commodity Index rose by 1.34% in the week.

For the Kiwi Dollar

It was also a particularly quiet week on the economic calendar.

There were no material stats from New Zealand to provide the Kiwi Dollar with direction.

The lack of stats left the Kiwi in the hands of market risk sentiment.

For the Japanese Yen

It was a relatively quiet week on the economic calendar. Prelim industrial production figures for November were in focus.

Following an impressive 4% rise in October, production stalled in November.

Impact on the Yen was limited, however, as Dollar support waned in the week.

The Japanese Yen rose by 0.22% to ¥103.20 against the U.S Dollar. In the week prior, the Yen had fallen by 0.13% to ¥103.43.

Out of China

Private sector PMIs for December were in focus late in the week.

On Thursday, the NBS Manufacturing PMI fell from 52.1 to 51.9, with the services PMI falling from 56.4 to 55.7. As a result, the Composite PMI fell from 55.7 to 55.1.

The impact on the markets was relatively muted with a number of key markets closed on the day.

In the week ending 1st January, the Chinese Yuan rose by 0.22% to CNY6.5272. In the week prior, the Yuan had fallen by 0.03% to CNY6.5418.

The CSI300 rallied by 3.36%, with the Hang Seng ended the week up by 3.20%.

NZD/USD Forex Technical Analysis – Closing Price Reversal Top May Be Indicating Momentum Shift

Profit-taking ahead of the long holiday weekend drove the News Zealand Dollar lower on Thursday as investors wrapped up the new year with a solid 7.35% gain. Sellers helped form a closing price reversal top chart pattern that could be an early sign of a shift in momentum to the downside.

On Thursday, the NZD/USD settled at .7183, down 0.0023 or -0.32%.

Heading into the new year, investors will be watching runoff elections in Georgia for two Senate seats the first week in January. If the Republicans win one or both of the Georgia seats, they will retain a slim majority in the chamber and can block Biden’s legislative goals and judicial nominees.

If the Democrats win then it should be smooth sailing for Biden’s agenda, which includes more measures to support the U.S. economy after he is inaugurated on January 20. This should continue to pressure the U.S. Dollar.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, the formation of the closing price reversal top may be an indication of an impending shift in momentum.

A trade through .7182 will confirm the closing price reversal top. This could trigger the start of a 2 to 3 day break or a 50% correction of the current rally. A trade through .7241 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through .7003.

The minor trend is also up. A trade through .7084 will change the minor trend to down. This will confirm the shift in momentum.

The minor range is .7003 to .7241. Its 50% level at .7122 is the first downside target.

Short-Term Outlook

Although the main trend is up, traders may have decided to take a little off the top on Thursday with the formation of a closing price reversal top.

We’ll be looking for a confirmation of the chart pattern on a trade through .7182. This won’t change the main trend to down, but it could trigger the start of a 2 to 3 correction. A test of the pivot at .7122 could attract new buyers since the main trend is up.

If .7122 fails then look for the selling to possibly extend into .7084. Taking out this level will change the minor trend to down, signaling the selling pressure is getting stronger.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD and NZD/USD Fundamental Daily Forecast – US Deficit Issues Continue to Drive Bull Market

The Australian and New Zealand Dollars are edging higher this last day of trading in 2020. Volume is light, however, as both countries are on a bank holiday. Buyers continued to be driven by the weaker U.S. Dollar, which is expected to remain under pressure in 2021 due to forecasts calling for higher deficits and even more stimulus measures.

At 09:41 GMT, the AUD/USD is trading .7700, up 0.0014 or +0.18% and the NZD/USD is at .7220, up 0.0014 or +0.20%.

Positive news from China also helped boost the outlook for its biggest customer. China announced a trade deal with the European Union and that factory activity expanded in December.

There are potential headwinds for Australia, however, as the government announced stricter COVID-19 restrictions due to the outbreak of fresh coronavirus cases in their capital cities.

Aussie, Kiwi Bulls Zeroing in on Widening US Deficits

Aussie and Kiwi bulls are celebrating the resurrection of the “twin deficits” problem in the United States, an issue that gives investors an excuse for shorting the dollar. It is caused by an explosion in the budget and trade deficits, which usually leads to more dollars being printed and moved abroad.

According to Reuters, from this perspective the new U.S. stimulus bill is dollar negative as it adds to the nation’s debt, and President-elect Joe Biden is promising a lot more next year.

The country is also hemorrhaging dollars on its trade account where the deficit on goods hit a record $84.8 billion in November as imports surged past pre-pandemic levels.

Likewise, the current account deficit widened to a 12-year high in the third quarter and there was a large shortfall in net financial transactions as Americans borrowed more from abroad.

China Announces Trade Deal with EU, Factory Expansion Activity

The European Union and China agreed on Wednesday to an investment deal that will give European companies greater access to Chinese markets and help redress what Europe sees as unbalanced ties.

The agreement was negotiated for nearly seven years and is likely to take at least another year to enter into force. It forms part of a new relationship with China, which the EU views as both a partner and a systemic rival.

Additionally, China on Thursday said its factory activity expanded in December. The country’s official manufacturing Purchasing Managers’ Index (PMI) for December came in at 51.9, according to data from the National Bureau of Statistics.

The Chinese economy is expected to expand around 2% for the full year, leading a recovery that beats other major economies.

Aussie Economy Facing Headwinds?

Australia will ring in the new year with harsher restrictions on movement, gatherings and internal borders as the country’s two largest states battle to quash fresh COVID-19 cases in their capital cities.

Though cases slightly eased in the most populous state of New South Wales (NSW), authorities described the situation as “very volatile”.

For a look at all of today’s economic events, check out our economic calendar.

Chatter from Capitol Hill and U.S stats to Keep the Greenback in Focus

Earlier in the Day:

It’s was a relatively busy start to the day on the economic calendar this morning. Economic data from China was in focus.

Away from the economic calendar, news hit the wires of the U.S introducing tariffs on French and German wine and aircraft parts from Europe. Also negative for the markets early on was news that plans to raise the aid checks to $2,000 had also failed overnight.

The overnight news from the U.S failed to provide U.S Dollar support early on, however.

From China

Private sector PMIs were in focus this morning.

In December, the NBS Manufacturing PMI fell from 52.1 to 51.9, with the Non-Manufacturing PMI declining from 56.4 to 55.7.

As a result of the softening in private sector activity, the NBS Composite PMI fell from 55.7 to 55.1.

The Aussie Dollar moved from $0.77012 to $0.77066 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.22% to $0.7703

Elsewhere

At the time of writing, the Kiwi Dollar was up by 0.35% to $0.7228, with the Japanese Yen up by 0.05% to ¥103.14 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a particularly quiet day ahead on the economic calendar. There were no material stats due out of the Eurozone to provide the EUR with direction.

The lack of stats will leave the EUR in the hands of market risk sentiment on the day.

COVID-19 and chatter from Capitol Hill remain key drivers following the House of Commons Brexit vote on Wednesday. With a number of EU markets closed for the day, volumes will be on the lighter side, however.

At the time of writing, the EUR was up by 0.04% to $1.2303.

For the Pound

It’s also a particularly quiet day ahead on the economic calendar. There were no material stats to provide the majors with direction.

The lack of stats will leave the Pound in the hands of COVID-19 news and sentiment towards the economic outlook.

At the time of writing, the Pound was up by 0.15% to $1.3645.

Across the Pond

It’s a relatively quiet day ahead on the economic calendar. Weekly jobless claims figures for the week ending 25th December are in focus late in the day.

With the U.S continuing to struggle as a result of the COVID-19 pandemic, another pickup in claims would support the Dollar.

Away from the calendar, expect news from Capitol Hill and COVID-19 to continue to influence.

At the time of writing, the Dollar Spot Index was down by 0.15% to 89.548.

For the Loonie

It’s another quiet day on the economic data front. There are no material stats due out to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of the private sector PMI numbers from China and COVID-19 news.

At the time of writing, the Loonie was up by 0.10% to C$1.2745 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.