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Gold surges, U.S. dollar sells off versus main peers in late trade, USD-JPY slumps as Japan’s inflation rises

Dec 28 • Morning Roll Call • 471 Views • No Comments

As the FX markets reopened on Boxing Day, liquidity and consequently the trading in currencies was significantly reduced, as many institutional traders at major banks and funds remained out of the markets, or on holiday. Many currency pairs experienced whipsawing conditions during the trading sessions, which provided both challenging conditions and opportunities for many retail FX day traders. Certain global stock markets were also closed, therefore the impact of any significant economic calendar news proved to be benign.

For example, the news circulating that USA shoppers may have generated their best shopping figures in over a decade, did little to boost U.S. equity markets, despite the underpinning revelation that confidence must be high in the USA, for consumers to take on more debt and spend. Perhaps wealthier Americans are also spending their 2018 tax refund in advance. The most prominent bullish currency mover throughout the day was the Canadian dollar, the reaction of the commodity currency presumably came as a consequence of oil producers citing an increase in demand and supply over the coming years.

In terms of USA economic calendar news the Case Shiller 20 city composite house price index revealed a rise of 6.38% YoY, whilst the MoM figure showed a 0.7% rise. The Dallas manufacturing index smashed the forecast of 20, by coming in at 29.7, suggesting that the tropical storm devastation witnessed in the state earlier in the year, has now receded. The DJIA and SPX closed the day down (but close to flat), whilst Europe’s equity markets were closed.

However, one economic release that did appear to effect FX markets was the latest Japanese CPI figure, revealing that inflation has risen by 0.9% YoY and 1% in Tokyo. Consumer spending has also risen considerably, beating the forecast of 0.5% by some distance, by coming in at 1.7% annually. These encouraging figures, suggesting that the BOJ is beginning to witness the benefits of its monetary policy and that the wider economy is seeing the benefits of the government’s fiscal policy, encouraged traders to bid up the value of yen versus the dollar. USD/JPY fell by circa 1% on the day and through the third level of support. The yen rise, versus its other peers, was tempered by the publication of the latest dovish monetary policy minutes from the BOJ, which revealed that the central bank is still committed to its loose monetary policy programme.

With European equity markets closed for Boxing Day and no Brexit news, the U.K. pound sterling selling pressure and whipsawed price action, was entirely due to other issues and the lack of trading volume and liquidity, which may have been responsible for the flash crash of the euro experienced over the last 24hrs which saw EUR/USD collapse by circa 3% at one stage during the proceedings.

EURO.

EUR/USD traded in a wide whipsawing range of over 1% throughout Tuesday’s trading sessions, crashing through S3, before recovering to breach R1, to then fall back through the daily PP to close the day out near S1, down approx. 0.3%, at 1.186. EUR/GBP breached R2, up over 0.6% at one stage, before receding to close out down circa 0.2%, at 0.886.

U.S.DOLLAR.

USD/JPY breached S3 before recovering to end the day at circa 113.1, as yen made positive gains versus many of its peers during the day’s trading sessions. USD/CAD fell by circa 1%, through S3 at one stage, ending the day at approx. 1.268. USD/CHF whipsawed through a wide range with a bias to the upside throughout the trading sessions, rising in the morning, before reversing and giving up the gains, to then once again recover closing out at 0.989.

STERLING.

Similar to several major currency pairs GBP/USD whipsawed in a wide range on Tuesday, falling through the first level of support, then rising to approach R2, before giving up some gains to end the day up at circa 1.337. The U.K. pound experienced similar price action behaviour versus the majority of its peers.

GOLD.

XAU/USD reached a high of 1283, rising through R2 on the day up over 0.6%. Closing the day out at circa 1282 the precious metal has made considerable gains since its 1236 December low which (with the benefit of hindsight) now looks oversold. Having breached the 200 DMA to the upside last week, the next target could be the 1290 handle, or the 100 DMA sited at 1287.

EQUITY INDICES SNAPSHOT FOR DECEMBER 26th.

•    DJIA closed down 0.03%.
•    SPX closed down 0.11%.
•    NASDAQ closed down 0.34%.

KEY ECONOMIC CALENDAR EVENTS FOR DECEMBER 27th.

•    GBP BBA Loans for House Purchase (NOV).

•    USD Consumer Confidence Index (DEC).

•    USD Pending Home Sales (YoY) (NOV).

•    JPY Retail Trade (YoY) (NOV).

•    JPY Large Retailers’ Sales (NOV).

•    JPY Industrial Production (YoY) (NOV P).

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