Frances Cheung, head of macro strategy at Westpac, explains that the markets are focusing on the stimulus measures, shrugging off the weak China trade numbers and hopes for an improvement in US-China trade relationship.
“This mentality of weak activities triggering stimulus and pushing for a trade agreement may go on for another couple of weeks, supporting risk assets. Another pressure point may come as we get nearer 1 March. Support for USD/CNY is at the 61.8% retracement of 6.6967, while resistance is at 6.8039.”
“Before December the trend in China’s trade flows had been front-loading of exports and weak imports of upstream goods. The December data suggest that the boost from front-loading faded and it needs some actual reduction in tariffs or concrete improvement in trade-relation to revive external demand.”
“An easing monetary backdrop should keep CNY rates and points soft. Offshore CNH points have fallen rapidly, despite still limited offshore CNH liquidity. With the current offshore-onshore point spreads, back-end CNH points are unlikely to rebound before CNY points do.”
• The pair struggled to build on the overnight strong upsurge to two-month tops and started retreating from a four-month-old descending trend-line resistance.
• The mentioned trend-line has acted as a key hurdle and capped every attempted up-move beyond 100-day SMA on several occasions since late-September.
GBP/USD daily chart
• Meanwhile, slightly overbought conditions on the 1-hourly chart seemed to be one of the key factors prompting traders to take some profits off the table.
• However, bullish oscillators on 4-hourly/daily chart might now attract some dip buying interest near the 1.2930 horizontal resistance break-point turned support.
• This is closely followed by the 1.2900 handle (100-DMA) and 100-hour SMA, around the 1.2880 region, which should act as key support in the near-term.
• Failure to defend the said support levels would reinforce the descending trend-line barrier and prompt some aggressive technical selling around the major.
Today Last Price: 1.2951
Today Daily change: -37 pips
Today Daily change %: -0.285%
Today Daily Open: 1.2988
Daily SMA20: 1.275
Daily SMA50: 1.2752
Daily SMA100: 1.2892
Daily SMA200: 1.3099
Previous Daily High: 1.3002
Previous Daily Low: 1.2832
Previous Weekly High: 1.2866
Previous Weekly Low: 1.2704
Previous Monthly High: 1.284
Previous Monthly Low: 1.2477
Daily Fibonacci 38.2%: 1.2937
Daily Fibonacci 61.8%: 1.2897
Daily Pivot Point S1: 1.288
Daily Pivot Point S2: 1.2771
Daily Pivot Point S3: 1.271
Daily Pivot Point R1: 1.3049
Daily Pivot Point R2: 1.311
Daily Pivot Point R3: 1.3219
Analysts at Danske Bank note that the global market sentiment was initially lifted by headlines that the US administration is considering rolling back some of the tariffs on Chinese imports but the rally was short-lived as the US Treasury denied the story soon after.
“In addition, the story was probably not as interesting as the headlines suggested, as the story states that the proposal comes from Treasury Secretary Steven Mnuchin (a China dove), while the US Trade Representative Robert Lighthizer (China hawk) opposes the idea. Nonetheless, we still interpret the story as another sign that a US-China trade deal is moving closer and markets probably do as well.”
Karen Jones, analyst at Commerzbank, suggests that the GBP/USD pair remains bid following the break through its downtrend recently.
“The market recently sold off to and recovered from a 5 month support line, today located at 1.2420.”
“We regard the slide to 1.2444 charted recently as the end of the down move and we look for gains to the 200 day ma at 1.3096. Dips will find initial support at the 55 day ma at 1.2781. Below 1.2444/25 targets the 78.6% retracement at 1.2109.”
“Only a rise above the July, September and October highs at 1.3258/1.3363 would put the June high at 1.3473 on the cards.”
According to analysts at Danske Bank, UK retail sales for December are set to provide an insight into whether consumer spending in the UK stayed robust at the end of 2018 despite the Brexit turmoil.
“Watch out for any headlines on US-China trade talks after The Wall Street Journal’s story that the US administration is considering reduce tariffs on Chinese imports.”
“Despite the sharp fall in ISM manufacturing, US industrial production probably registered another increase in December, according to consensus. In light of the ongoing US government shutdown, it will also be interesting to see whether consumer confidence from the University of Michigan for January shows the first signs of any negative repercussions. The weekly consumer confidence index from Bloomberg has moved lower recently.”
“New York Fed President John Williams is also scheduled to speak in the afternoon and we will again look out in particular for any hints on the future strategy around the balance sheet.”
Analysts at TD Securities suggest that despite some weak indicators for the Christmas shopping period, they are expecting last month’s retail sales of UK economy to hold unchanged on the volumes front (mkt: -0.8%), locking in on November’s gains.
“The wildcards will be if and by how much Black Friday purchases ate into December shopping, and how much discounting retailers did to shift volumes in December (even if nominal revenues were weak).”
Crude markets are finding some more lift on Friday with WTI barrels ticking up into 52.75 on rising market confidence to cap off a restrained trading week.
Various US energy reserves, from crude stockpiles to gasoline buildups, continue to flip back and forth between new stockpile highs under record US production, which tipped the scales at 11.9 million barrels per day, and frequent downside swings as demand eats away at supply, but the overall trend continues to lean into overproduction. OPEC+ production cuts continue to remain a key bolstering factor for energy markets, but further moves to the upside will require a continued improving in overall market sentiment to keep pushing commodity prices higher.
Crude prices continue to price in a bullish correction from late December’s bottoms, but the current upmove will need to mount January 11th’s peaks near 53.30 before oil markets can officially start a new leg higher, while bearish pressure from further US supply buildups or a resurgence in US-China trade tensions will see broader markets head lower once again, taking commodities with it.
WTI Technical Levels
Today Last Price: 53.04
Today Daily change: 53 pips
Today Daily change %: 1.03%
Today Daily Open: 52.5
Daily SMA20: 48.8
Daily SMA50: 50.96
Daily SMA100: 59.86
Daily SMA200: 64.2
Previous Daily High: 52.89
Previous Daily Low: 51.29
Previous Weekly High: 53.57
Previous Weekly Low: 48.33
Previous Monthly High: 54.68
Previous Monthly Low: 42.45
Daily Fibonacci 38.2%: 51.9
Daily Fibonacci 61.8%: 52.28
Daily Pivot Point S1: 51.56
Daily Pivot Point S2: 50.63
Daily Pivot Point S3: 49.96
Daily Pivot Point R1: 53.16
Daily Pivot Point R2: 53.83
Daily Pivot Point R3: 54.76
Analysts at TD Securities note that New Zealand’s, Dec PMI increased to 55.1 from 53.7 in Nov, largely driven by gains in production +3.8, finished stocks +3.3 and deliveries +5.5.
“It was an 8m high and above the long-term average of 53.4. NZGBs held offshore declined further from 56.2% to 54.6% in Dec, ending 2018 at the lowest ratio since mid-2004.”
According to the Westpac-McDermott Miller Regional Economic Confidence survey for NZ economy, regional economic confidence picked up in the December 2018 quarter, notes the research team at Westpac.
“All eleven regions posted an improvement in regional economic confidence.”
“Households in New Zealand’s most southern regions and on the east coast of the North Island are the most confident.”
“Consumer confidence, which measures households’ views of their personal economic circumstances, rose in ten of eleven regions, with households reporting an increased appetite for spending.”