Session close: Settled at 1.22835 down 33 ticks
Fundamentals: The euro retreated sharply from session highs this afternoon to trade back to its Sunday night open. Yes, there is positive jawboning behind a budget deal, but we believe this reversal to be more technical-led. The high in the euro and the double bottom in the Dollar Index came shortly before an upbeat Beige Book at 1:00 CT.
Chicago Fed President Evans didn’t do much to support the dollar, but he was a rate hike dissenter in December. Much of his call for a pause in rate hikes so that inflation can gain steam is priced in. Dallas Fed President Kaplan is worried about overheating the economy and is adamant about three or possibly four hikes this year. Eurozone CPI was in line with expectations today. U.S Industrial Production was much better. Tomorrow we look to U.S Building Permits, Housing Starts, weekly Jobless Claims and Philly Fed all at 7:30 am CT.
Technicals: We remain unequivocally long-term bullish the euro, however, this run is well overdue for a consolidation period.
Session close: Settled at .9029, down 66.5 ticks.
Fundamentals: The yen fell out of bed this afternoon though it had already retreated from its overnight high. The S&P traded to a new all-time and about 1.5% from yesterday’s low. As equity markets stabilized and accelerated higher the Yen held ground about as well as it could. When the Dollar Index firmed up from its double bottom, that was all she wrote for the Yen. Japan saw very strong Machine Order data last night which helped push it to a new swing high.
Tonight has Industrial Production at 10:30 pm CT along with a 30-year JGB auction at 9:45 which should be interesting given last week’s announcement from the BoJ that they will trim purchases in longer-dated bonds. Overnight we have GDP, Fixed Asset Investment and Industrial Production from China. These are key reads and if better than expected should continue to put pressure on the yen.
Technicals: As with the euro, we are unequivocally long-term bullish. However, this is a pretty hard failure against major three-star resistance in the yen.
Session close: Settled at .8007 up 49 ticks
Fundamentals: The Aussie reversed sharply from the highest level since September as the Dollar began its recovery. The Aussie’s setup is a little different heading into this evening than others as there is a gauntlet of data to tread. New Home Sales is at 6:00 pm CT, a critical number for a country being led by a housing boom (or bubble).
Employment data is due at 6:30 pm CT and Chinese data is due shortly after midnight. The major focus for the Chinese reads is GDP, however, fixed asset investment is a number that we remind readers each month that we watch very closely. Industrial Production is also key for the Aussie and especially as commodity prices have been a key catalyst for this rally.
Technicals: Price action traded to a high of .8022 midsession before reversing about half a penny ahead of tonight’s data. Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.
Session close: Settle at .8066, up 14 ticks.
Fundamentals: The Bank of Canada raised rates by a quarter point as expected this morning. This comes despite uncertainty surrounding the NAFTA talks and the impact that a new deal could have. The BoC also raised their growth forecast for 2018 from 2.1 to 2.2 and from 1.5 to 1.6 in 2019. This move was largely priced in after the month of December proved to show strong growth and job creation. Further stability in commodity prices, especially crude oil, also paved the way. However, traders are cautious to look too much into the future for the next hike. As with other currencies, the Canadian paired some of its gains due to USD strength.
Technicals: We are neutral the Canadian because we do not see much downside from here.