Talking Points:
Return of Year-Capital Flows May Reboot Pre-FOMC Price Action Trends
Yen Down, Aussie and NZ Dollars Higher as Risk Appetite Swells Overnight
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The safe-haven Japanese Yen slumped while the sentiment-geared Australian and New Zealand Dollar advanced as risk appetite firmed overnight. The MSCI Asia Pacific regional benchmark stock index rose 1.1 percent in a move that appeared to reflect follow-on momentum from a sharp rally on Wall Street. S&P 500 futures are pointing firmly higher head of the opening bell in Europe, hinting at more of the same through the end of the trading week.
Seasonal factors complicate continued improvement in sentiment however. The markets went into this week’s top event risk – the FOMC monetary policy announcement – gripped by a year-end push to take profits on trades reflecting the dominant themes prevalent in 2014. While the outcome of the sit-down disrupted this process, liquidation may return as the dust settles and traders reconsider the implications of what the Fed delivered.
Swelling risk appetite – embodied by a relentless push upward by US share prices – and a firming US Dollar have been the defining features of the macro landscape in 2014. The resumption of profit-taking on these trades as the onset of 2015 approaches would imply another parallel downturn in the greenback and sentiment-geared assets.
Renewed USDJPY weakness seems to best embody both sides of another push in year-end capital flows. On one hand, risk aversion points to the unwinding of frequently Yen-funded carry trades. On the other, a market-wide reversal of Fed-inspired US Dollar buying is likely to put potent downward pressure on the pair considering its sensitivity to shifts in the expected yield differential.
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Asia Session
GMT
CCY
EVENT
ACT
EXP
PREV
21:00
NZD
ANZ Job Advertisements (MoM) (NOV)
-0.1%
–
-0.3%
21:45
NZD
Net Migration s.a. (NOV)
5010
–
5240
0:00
NZD
ANZ Activity Outlook (DEC)
37.3
–
41.7
0:00
NZD
NBNZ Business Confidence (DEC)
30.4
–
31.5
0:05
GBP
GfK Consumer Confidence Survey (DEC)
-4
-1
-2
2:00
NZD
Credit Card Spending (MoM) (NOV)
0.3%
–
1.5%
2:00
NZD
Credit Card Spending (YoY) (NOV)
5.2%
–
6.8%
3:28
JPY
BOJ Annual Rise in Monetary Base (¥)
80T
80T
80T
4:30
JPY
All Industry Activity Index (MoM) (OCT)
-0.1%
0.0%
1.4%
5:00
JPY
Coincident Index (OCT F)
104.5
–
110.2
5:00
JPY
Leading Index (OCT F)
109.9
–
104
5:00
JPY
Nationwide Dept Store Sales (YoY) (NOV)
-1.0%
–
-2.2%
5:00
JPY
Tokyo Dept Store Sales (YoY) (NOV)
0.3%
–
-0.1%
6:30
JPY
BOJ Policy Statement, Kuroda Press Conf
–
–
–
European Session
GMT
CCY
EVENT
EXP
PREV
IMPACT
7:00
EUR
German Producer Prices (MoM) (NOV)
-0.2%
-0.2%
Low
7:00
EUR
German Producer Prices (YoY) (NOV)
-1.1%
-1.0%
Low
7:00
EUR
German GfK Consumer Conf (JAN)
8.8
8.7
Medium
9:00
EUR
Eurozone Current Account s.a (€) (OCT)
–
30.0B
Low
9:00
EUR
Eurozone Current Account n.s.a. (€) (OCT)
–
31.0B
Low
9:30
GBP
Public Sector Net Borrowing (£) (NOV)
14.8B
7.1B
Low
9:30
GBP
PSNB ex Banking Groups (£) (NOV)
15.1B
7.7B
Low
9:30
GBP
Public Finances (PSNCR) (£) (NOV)
–
-2.6B
Low
9:30
GBP
Central Government NCR (£) (NOV)
–
-3.7B
Low
11:00
GBP
CBI Reported Sales (DEC)
30
27
Low
Critical Levels
CCY
Supp 3
Supp 2
Supp 1
Pivot Point
Res 1
Res 2
Res 3
EURUSD
1.2128
1.2215
1.2251
1.2302
1.2338
1.2389
1.2476
GBPUSD
1.5376
1.5504
1.5587
1.5632
1.5715
1.5760
1.5888
— Written by Ilya Spivak, Currency Strategist for DailyFX.com
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Source: Daily fx