Key Forex Afternoon Notes for 6th January:
- Japan monetary base y/y 38.2% vs. 34.3% forecasts
- Australia trade balance -0.93bn vs. -1.59bn
- China HSBC services PMI 53.4 vs. 53 previously
- Spain services PMI 54.3 vs. 52.9
- Italy services PMI 49.4 vs. 51.4
- Eurozone final services PMI 51.6 vs. 51.9
- UK services PMI 55.8 vs. 58.9
Asian commodity currencies, the Aussie and the Kiwi dollar continued their gradual gains against a weaker US Dollar, in lieu with rising Gold futures as well. The Aussie dollar was back to trading above the 0.81 handle, while the Kiwi was comfortably higher above 0.77 levels. The Japanese Yen was stronger across the board and gaining against the Greenback, dipping to intraday session lows of 118.66 region, boosted by a better than expected monetary base data and an overall mixed theme in the currency markets ahead of the US services and non-manufacturing PMI data releases later today.
The main risk for the Kiwi dollar will be the global dairy prices, which last month saw an unexpected increase to 2.4% after declining for three consecutive months. A better than expected dairy price could help lift the Kiwi dollar higher ahead of the next resistance at 0.78 levels.
The European session was marked by services PMI data from Spain and Italy and the Eurozone composite PMI data. While Spain’s services PMI managed to beat estimates, Italy’s services PMI posted contraction printing 49.4. The final services PMI from the Eurozone was softly below estimates at 51.6. The Euro continued to remain bearish after staging a modest rally to hit an intraday session high of 1.1968 but failed to cap its gains, declining to lows of 1.895 region.
The British Pound was also weaker with the services PMI falling below estimates to 55.8 the lowest level since the past 19 months, indicating that the UK economy likely experienced a slowdown across the manufacturing, construction and services sector. The Cable failed to hold on to modest gains made during early Asian trade making a fresh low to 1.5176 with the likelihood of falling to 1.48 handle should future economic data continue to fall below estimates.
The Canadian dollar was weak starting today’s trading losing ground against most of its peers amidst continued declines in Oil prices ahead of tomorrow’s Ivey PMI data and the monthly jobs report later on Friday.
Gold futures were back to trading above the 1200 handle, hitting an intraday session high to 1210 and remains well supported for further upside gains as long as the major support at 1190-1185 region holds any declines. The precious metal looks bullish with the potential to rally as much as to 1235 levels ahead of the crucial jobs report expected this Friday.
The US Dollar remains mixed, strong against weaker currencies such as the Canadian Dollar, Euro and the British Pound, but weaker against the Yen, Aussie and the Kiwi dollar. Markets will be looking to the services and non-manufacturing PMI prints today. While the services PMI is expected to be modestly higher than previous month, non-manufacturing ISM PMI is forecasted to be lower at 58.2. Also on the agenda is the monthly factory orders which is forecasted to decline by as much as -0.3%.