Forex Afternoon Wrap for December 30th

Posted on
December 30th

Key Notes for December 30th:

  • UK Nationwide HPI m/m 0.2% vs. 0.3% forecasts
  • Spain Flash CPI y/y -1.1% vs. -0.7% forecast
  • Eurozone M3 money supply y/y 3.1% vs. 2.6%
  • Eurozone private loans y/y -0.9%
  • US S&P/CS composite 20 HPI y/y 4.5% vs. 4.4%

The official last trading day for the year went down without any major surprises with most of the currency pairs trading off the broader themes. The Greenback ends the year on a high note but remains near the key resistance level which could indicate a minor correction in the New Year before the bullish rally resumes. Euro is weak and looks poised to test the 1.206 lows as indicated in our daily analysis.

The Aussie and Kiwi Dollars were trading higher as speculation is rife of a possible monetary policy easing from the PBOC, ahead of the manufacturing PMI data due for tomorrow and on the 1st of January.

The economic calendar during today’s European trading session was very light with no major market impacting events. UK’s Nationwide survey on housing prices showed a modest slowdown to 0.2%, below 0.3% estimates, while Spain’s inflation, year to date fell below expectations, coming in weaker at -1.1% against -0.9% estimates, technically ‘deflation’, something which Draghi and team are sure to make note of as more CPI data from other regions across Eurozone will be released in the coming weeks.

The Euro was considerably weaker across the board with speculation that the ECB could possibly launch an aggressive QE sovereign bond purchase program sooner than later, in light of the political developments in Greece and to possibly mute any contrarian views on the viability of the Euro. In this light, Draghi’s “whatever it takes” statement comes to the forefront again as most countries in Eurozone head to polls next year.

The Cable continued its gradual descent after staging a rally to the daily pivot level of 1.55369 as noted in our daily analysis. The declines could possibly continue with the pair poised to test the lows of 1.5486 levels, where price bounced off few days ago. A close this level could be seen as very bearish for the Cable setting the stage for even further declines in the coming year.

The Japanese Yen dropped down to the major support/resistance level at 119.66, again as noted in our daily analysis. A bounce from this support could help to push the Greenback to new highs in the coming weeks. Alternatively, a break of the support could see the USDJPY test the next major level at 118.974.

Trading is expected to drastically slow down for the next two days as the markets remain closed across most regions, leading to low volumes and giving rise to potentially risky choppy market movements in the run up to the New Year.

The US S&P-Case Shiller composite-20 housing price index beat estimates rising 4.5% on an annual basis while rising 0.8%, above estimates of 0.4% on a monthly basis. The Dollar index managed to break to a new high of 90.66 before easing back on the gains and settling at 90.23 at the time of writing. The only other release from the US today will be the CB consumer confidence following which tomorrow and the day after will see quiet trading sessions.

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