January 13th Morning Update
The US$ under pressure, oil prices flat, equity markets are mixed while US yields firm after US inflation hits 4-decade highs. The US$ weakness continues to 2-month lows as investors cut ‘long’ US$ positions as traders do not see the current high inflation levels shifting an already hawkish Fed Reserve too much with at least 3 hikes already priced into the market. Markets shift their focus to US PPI & Initial Jobless Claims and then on Friday’s Key Retail Sales & Michigan Consumer Sentiment index which will provide direction to the US$ which is down almost 2% since Monday. In other news. Fed Governor Brainard “the feds most important task” is to control inflation and “we are seeing the strongest rebound in growth and decline in unemployment of any recovery in the past 5-decades” in prepared comments to be delivered to the Senate banking committee today. US Senate Dems unveil Russia sanctions bill to bolster Ukraine. Nickel hits 10-year highs as electric vehicle production ramps up. Covid. French teachers strike over chaotic covid strategy for schools. The UK health minister to address lawmakers amid debate over covid isolation period. In currency markets. The US$ weakness saw Euro spike up almost 1%, GBP hits almost 12-week highs, while Russian Rub remains under pressure down 4.3% in the last 3-months on geopolitical concerns. CNY extends gains up 0.05% while Asian currencies are flat on average vs US$. Trading currencies are mixed with JPY up 0.15%, AUD & CHF firm 0.25%, NZD strengthens 0.5%, while NOK is flat, MXN falls 0.2% vs US$ and ZAR weakens 0.35% vs US$.
Current level US$ Index 94.880 Down 0.05%
Oil prices are steady with Brent crude holding near US$85pb with milder than expected impact on demand from omicron and colder weather in North America continues to support oil demand. C$ extends its gains vs US$ to 2-month highs, rallying almost 3.5% in the last 3-weeks driven by strengthening oil prices and a weakening US$. Intraday focus will be on oil prices & US economic data for intraday direction. Bias remains for longer term C$ strength, but current levels provide opportunities to buy US$ for any short-term US$ needs. Support resets to 1.2440, if breached look for a test of 1.2383 (Nov 10th) while resistance lowers to 1.2535.
Current level US$/C$ 1.2480 Down 0.25%
Euro rallies to 2-month highs on US$ weakness. The US$ took a beating on Wednesday as markets unwound bullish US$ positions. The ECB policymakers adopted a hopeful tone despite ongoing domestic covid woes, intraday focus will be on ECB’s De Guindos speech. Current levels provide a good Euro selling opportunity as our bias remains for a weaker Euro vs US$ in 2022. Support rises to 1.1370 while resistance resets to 1.1500.
Current level EUR/US$ 1.1463 up 0.18%
EURGBP holds near 2-year lows on speculation of further BoE rate hikes and despite domestic political issues in the UK. Support resets to .8280 (1.2077) while resistance resets at .8400 (1.1905)
Current level EUR/GBP .8349 (1.1974) Flat
GBP remains resilient at near 3-month highs despite Brexit, covid and political uncertainty. The UK hosts the EU Brexit negotiator ahead of expected tough Northern Ireland protocol talks. UK reports 129,587 new covid cases and nearly 400 virus linked deaths today, but top scientists believe the UK could be the first country to emerge from the pandemic. The UK PM apologizes for attending a lockdown party and fights to hold on to his job as he faces calls to resign. The pound vs US$ could come under fresh selling pressure as the US$ consolidates. Support resets at 1.3675 while resistance rises to 1.3800.
Current level GBP/US$ 1.3729 Up 0.2%
Other Ccy levels vs C$ - EURCAD 1.4302 GBPCAD 1.7127 AUDCAD.9107 CADCHF.7304 CADJPY 91.72 CADTHB 26.62 CADCNY 5.0988 CADNOK 6.9402 CADSEK 7.1558 CADDKK 5.2002 CADZAR 12.3277
Other Ccy levels vs US$ - JPY 114.40 CHF.9110 AUD.7300 NZD.6874 CNY 6.3607 MXN 20.3871 INR 73.9400 PLN 3.9530 CZK 21.282 ZAR 15.3843 ILS 3.1109 AED 3.6726 KWD 0.30152
Other Major X levels – EURCHF 1.0448 EURJPY 131.19 EURSEK 10.2380 EURNOK 9.9271 GBPCHF 1.2511 EURAUD 1.5700 GBPAUD 1.8804 AUDCHF .6653 AUDJPY 83.54 CHFJPY 125.56