Daily Market Analysis by CapitalStreetFX

[CapitalStreetFX]

Japanese Yen, Aussie Dollar Slide Down Ahead of Key Data

Japanese yen was slightly weaker ahead of a slew of key data on Friday. USD/JPY changed hands at 122.60, up 0.03%, while AUD/USD traded at 0.7220, down 0.08%. In Japan, the big data day includes household spending for October, seen up 0.1% year-on-year and 1.1% month-on-month. Closely watched national core consumer prices are seen down 0.1% year-on-year for October and the unemployment rate is seen steady at 3.4%.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.04% at 99,87. Overnight, the U.S. dollar edged higher against its Canadian counterpart on Thursday, hovering close to a two-month peak as expectations for a December rate hike by the Federal Reserve continued to support the greenback. The greenback remained broadly supported after a string of upbeat U.S. data on Wednesday added to expectations that the Federal Reserve will raise interest rates next month.
The U.S. Commerce Department reported on Wednesday that new home sales rose by 10.7% to 495,000 units last month, compared to expectations for a gain of 6.0% to 500,000. The report came shortly after the U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending November 21 declined by 12,000 to 260,000 from the previous week’s revised total of 272,000. Data also showed that U.S. durable goods orders jumped by 3.0% last month, easily surpassing forecasts for 1.5%, while core durable goods orders, which exclude volatile transportation items, rose 0.5% in October, compared to expectations for an increase of 0.3%.

 

[CapitalStreetFX]

Crude Oil Pulls Back As OPEC Meeting Looms

Crude oil rebounded in Asia on Monday with an OPEC meeting this week in focus for statements on demand and supply in the coming year, though no cut to production levels is expected for now.

On the New York Mercantile Exchange, crude oil for delivery in January rose 0.35% to $41.86 a barrel.

In Japan, industrial production for October rose 1.4% month-on-month, below the 1.9% gain seen, while retail sales jumped 1.8%, well above the 0.8% year-on-year increase expected.

In the week ahead, investors will focus on Friday’s U.S. nonfarm payrolls report for November, the last jobs report before the Federal Reserve decides on interest rates at its December 15-16 meeting.

The outcome of Thursday’s European Central Bank meeting will also be in focus amid speculation the central bank could ramp up its monetary stimulus program.

On Monday in the euro area, Germany is to release preliminary data on inflation as well as a report on retail sales.

The U.S. is to publish a report on manufacturing activity in the Chicago region as well as private sector data on pending home sales.

Last week, oil prices fell sharply in low-volume trade on Friday, as concerns about a global supply glut continued to pressure prices. The possibility of higher interest rates in the U.S., a stronger U.S. dollar and slower global economic growth, especially in China, further weighed.

The U.S. Energy Information Administration said that crude oil inventories rose by 961,000 barrels last week, the ninth straight weekly gain. Total U.S. crude oil inventories stood at 488.2 million barrels, remaining near levels not seen for this time of year in at least the last 80 years.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for January delivery sank 60 cents, or 1.32%, on Friday to close the week at $44.86 a barrel.

 

[CapitalStreetFX]

EUR/USD Tests 1.0615-10 Support Area

The single currency has resumed its downside vs. the greenback on Wednesday, taking EUR/USD to the 1.0615/10 band.

The pair’s upbeat momentum has run out of legs in the vicinity of 1.0640 at the beginning of the week, sparking the current leg lower to the 1.06 neighbourhood as the greenback shrugs off the initial weakness.

Spot will remain under pressure nonetheless, as preliminary inflation figures for the month of November are due in the euro area, preceding the ADP employment report across the pond (190K exp.) and Chairwoman J.Yellen’s speech.

As of writing the pair is losing 0.21% at 1.0609 facing the next support at 1.0519 (low Apr.13) en route to 1.0500 (psychological level) and then 1.0456 (2015 low Mar.16). On the other hand, a break above 1.0805 (monthly lows May and July) would expose 1.0829 (high Nov.12) and then 1.1013 (55-day sma).

 

[CapitalStreetFX]

Cable Falls Below 1.5000 After UK Construction PMI News

The GBP/USD pair trades lower this Wednesday, with the pair plunging to a fresh daily low below the 1.5000 handle after the release of the UK Construction PMI, down to 55.3 in November against previous 58.8 and expectations of 58.2. The negative surprise adds to recent concerns over the slowing pace of economic growth in the UK, which will ultimate result in a delay in a rate hike.

Later today, the US will release the ADP private survey, and some minor employment figures for November, which will be quite relevant ahead of the Nonfarm Payroll report to be released this Friday.

Technically, the bearish potential is increasing, as in the 4 hours chart, the pair has accelerated below a bearish 20 SMA, whilst the technical indicators have turned south around their mid-lines. Should the price extend below 1.5000, the decline can extend down to 1.4960, while below this last, the next bearish target stands at 1.4920.

Only above 1.5090 the pair may recover its shine, with the price then able to rally up to the 1.5130/40 price zone.

 

[CapitalStreetFX]

Gold Rises Ahead of Nonfarm Payroll Release

Gold edged mildly higher in Asia on Friday with the focus on U.S. nonfarm payrolls as the last major piece of the data puzzle before the Federal Reserve meets later this month on rates.

Analysts expect the U.S, unemployment rate to hold steady at 5.0% and expect to see solid job gains of 190,000. In a robust October report, nonfarm payrolls jumped by 271,000 while the unemployment rate ticked down by 0.1 to 5.0%.

Overnight, gold for February delivery rose 0.08% to $1,062.40 a troy ounce. Silver futures for March delivery rose 0.21% to $14.105 a troy ounce and copper futures for March delivery rose 0.05% to $2.059 a pound.

Overnight, gold rallied as the dollar suffered one of its worst sessions of the year, after the European Central Bank sent shockwaves through global foreign exchange markets by instituting limited easing measures on Thursday that fell far short of market expectations.

 

[CapitalStreetFX]

USD/JPY Technical Outlook 7-Dec-2015

USD/JPY Gained a fraction last week as both countries reported mostly mixed economic numbers. The week began with the pair gaining on Monday after Japan Retail Sales increased +1.8% y/y versus +0.9% expected, and Preliminary Industrial Production, which rose +1.4% compared to +1.9% anticipated.

Also on Monday, BOJ Governor Kuroda said that, “Looking at recent economic developments, the slowdown in emerging economies, particularly China, has affected Japan’s exports and production. Nevertheless, as years ago, the underlying trend in inflation has also been improving steadily.

Quantitative and qualitative monetary easing (QQE), which the Bank introduced in April 2013, has been exerting its intended effects toward overcoming deflation.” The rate then declined on Tuesday after Japanese Capital Spending increased +11.2% q/y versus +2.3% expected.

Wednesday saw the pair make its weekly high of 123.66 after a better than expected U.S. ADP Non-Farm Employment number. The rate then declined sharply on Thursday after a lower than expected U.S. ISM Non-Manufacturing PMI print. On Friday, the pair gained after a better than expected U.S. Non-Farm Payrolls number. USD/JPY closed at 123.10, with a gain of +0.3% for the week.

 

[CapitalStreetFX]

Japanese Yen Rises Despite Weak Growth Data

The yen held stronger on Tuesday in Asia despite disappointing third quarter growth figures in a busy regional data day.

USD/JPY changed hands at 123.25, down 0.11%, while AUD/USD traded at 0.7258, down 0.13%.

In Japan, bank lending rose 2.3% as expected year-on-year in November, while the current account for October came in at a surplus of ¥1.458 trillion, slightly narrower than the expected ¥1.659 trillion surplus.

Also in Japan, third quarter GDP slumped 0.8% year-on-year compared to a 0.2% fall seen and fell 0.2% quarter-on-quarter compared to a 0.1% drop expected.

In Australia, the NAB business confidence and business surveys for November are due. In China, key trade data for November is expected at a surplus of $63.30 billion.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.02% at 98.72.

Overnight, the dollar remained broadly higher against the other major currencies in quiet trade on Monday, as Friday’s strong U.S. jobs data continued to fuel expectations for a December rate hike by the Federal Reserve, supporting demand for the greenback.

The dollar strengthened broadly after the Labor Department reported on Friday that the U.S. economy added 211,000 jobs last month, after increasing an upwardly revised 298,000 in October.

The unemployment rate held steady at 5% in November. Economists had forecast jobs growth of 200,000 and no change in the unemployment rate.

The report hardened expectations that the Fed will hike interest rates for the first time since 2006 at its upcoming meeting on December 15-16. Higher U.S. interest rates would make the dollar more attractive to yield-seeking investors.

 

[CapitalStreetFX]

GBP/USD Technical Analysis 9 Dec 2015

The GBP/USD pair edged lower for a third day in-a-row, having fell down to 1.4955 before recovering the 1.5000 level before the US close. The British Pound was weighed by falling oil prices, and worse-than-expected UK factory output, down in October by 0.1%.

Industrial Production grew slightly above expected, not enough, however, to help the currency advance. The pair enters the Asian session correcting its short term oversold readings, but maintaining a bearish tone, given that in the 1 hour chart, the technical indicators have bounced from extreme readings, but are now losing upward strength below their mid-lines, whilst the price remains well below a bearish 20 SMA.

In the 4 hours chart, the price is below the 20 SMA, while the technical indicators are aiming higher from near oversold territory, but remain well into negative territory and unable to confirm a clear directional strength. Support levels: 1.4950 1.4920 1.4880 Resistance levels: 1.5010 1.5050 1.5090

 

[CapitalStreetFX]

Kiwi Dollar Rises Even After RBNZ Rate Cut

The New Zealand dollar gained on Thursday despite a cut in the official cash rate of 25 basis points to 2.5% as investors mulled whether the next step was up.

NZD/USD traded at 0.6737, up 0.28%, while AUD/USD traded at 0.7228, up 0.01%. USD/JPY changed hands at 121.56, up 0.11%

“Monetary policy needs to be accommodative to help ensure that future average inflation settles near the middle of the target band,” Governor Graeme Wheeler said in a statement announcing the decision.

“We expect to achieve this at current interest rate settings, although the Bank will reduce rates if circumstances warrant. We will continue to watch closely the emerging flow of economic data.”

Those circumstances could include global reaction to matters such as the anticipated tightening of U.S. Federal Reserve monetary policy, which is expected to begin next week, and any effect it has on the New Zealand exchange rate.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was quoted flat at 97.33.

Overnight, the dollar pushed lower against the other major currencies in quiet trade on Wednesday, as recovering oil prices lent strength to commodity-linked currencies, although expectations for a U.S. rate hike this month continued to support the greenback.

The dollar remained broadly supported after Friday’s strong U.S. employment data fuelled further expectations that the Federal Reserve will hike interest rates for the first time since 2006 at its upcoming meeting on December 15-16.

Trade in the euro remained subdued after last Thursday’s rally when the latest round of European Central Bank easing measures fell short of market expectations.

 

[CapitalStreetFX]

Australian Dollar Plunges Ahead of Fed’s Monetary Policy

The Aussie held weaker in a light data day in Asia on Friday with investors in wait-and-watch mode on U.S. interest rates.

AUD/USD traded at 0.7269, down 0.16%, while USD/JPY changed hands at 121.65, up 0.05%.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.02% to 97.89.

Overnight, the dollar held gains against the other major currencies on Thursday, after data showed that U.S. jobless claims rose more than expected last week, as hopes for a U.S. rate hike next week continued to support demand for the greenback.

The U.S. Department of Labor reported that the number of individuals filing for initial jobless benefits in the week ending December 4 increased by 13,000 to 282,000 from the previous week’s total of 269,000. Analysts expected jobless claims to hold steady at 269,000 last week.

Demand for the dollar continued to be underpinned by expectations that the Fed is on track to raise interest rates for the first time since 2006 at its upcoming meeting on December 15-16.

Higher interest rates would make the dollar more attractive to yield-seeking investors.

The euro remained supported however, after the latest round of easing announced by the European Central Bank fell well short of market expectations.

 

[CapitalStreetFX]

[b] All Eyes On Fed…. [/b]

December of this year was never going to be a quiet affair. Central banks shackled market volatility for years and when it was time to let go; it was bound to give way to a more uncertain trading environment.

The European Central Bank (ECB) was the first monetary policy divergence event scheduled on the last month of the year. The communication of the central banks intentions via the comments from President Mario Draghi turned out to be poor.

The market was expecting a strong show of force and full commitment to quantitative easing. A bold request? Maybe, but Mr. Draghi had used similar language to that used during the Greek Crisis. Strong words built anticipation for strong actions. The ECB did not follow through failing to significantly add to its amount of bond purchases and it later blamed the market on misunderstanding when it did enough, but the reality is that it did not fully commit.

The U.S. Federal Reserve has teased the arrival of higher interest rates for almost two years. The end of quantitative easing that came with a slow tapering process was reached at the end of 2014 and for a whole year every FOMC the market has weighed the probability of a rate hike. The Fed shifted from the transparency of forward guidance towards the uncertainty of data dependency.

The June and September meetings were heavy favoured candidates but now after a sentence in the October statement the market is awaiting the announcement and the rate to be < 0.50 percent.

The Fed will release its FOMC statement on Wednesday, December 16 at 2:00 pm EST. A press conference with Chair Janet Yellen will follow at 2:30 pm EST. The knowledge that the Fed was going to hike rates has already been priced in given the long preamble, investors are warned about volatile price action following the announcement, specially given the situation after the ECB meeting has further sparked uncertainty on market reactions on heavily anticipated events.

 

[CapitalStreetFX]

Crude Oil Continues Downside Move Amid Massive Supply

Crude oil prices in Asia on Tuesday failed to hold gains from the U.S. as investors continued to monitor massive over supply.

On the New York Mercantile Exchange, WTI crude for January delivery fell 0.185% to $36.25 a barrel. Ahead on Tuesday, the American Petroleum Institute will release estimates of U.S. crude and refined product stockpiles held last week. That will be followed Wednesday by more closely-watched figures from the U.S. Department of Energy.

Overnight, U.S. crude futures rallied in afternoon trading amid heavy profit taking, after briefly dropping below $35 a barrel earlier in Monday’s session to fall to fresh multi-year lows.

With the strong gains, U.S. crude futures ended a seven-day losing skid when they plummeted by roughly 13% to six-year lows. WTI crude is approaching its lowest level since the Financial Crisis when it slumped to $32.40 in December, 2008.

On the Intercontinental Exchange (ICE), Brent crude for January delivery wavered between $36.76 and $38.68 a barrel, before closing at $38.15, down 0.17 or 0.49% on the day. North Sea Brent futures are close to falling to their lowest level since mid-2004 when they traded at $36.20.

Investors continued to digest bearish forecasts from last week, as energy market worldwide remained oversaturated by a glut of excess supply. On Friday, the International Energy Agency (IEA) projected that global demand growth will slow considerably over the next year, increasing the gap in the supply-demand imbalance worldwide.

 

[CapitalStreetFX]

EUR/USD Plunges After Fed’s Rate Hike Decision

EUR/USD fell mildly on Wednesday reversing territory late in the session, after the Federal Reserve met market expectations by approving its first interest rate hike in nearly a decade.

The currency pair traded in a broad range between 1.0866 and 1.1011 before settling at 1.087, down 0.0042 or 0.39% on the session. With the minor losses, the euro fell to its lowest level against the dollar in a week. The dollar is up slightly against the euro since plunging by more than 3% on December 3 after the European Central Bank rattled global foreign exchange markets by only implementing limited easing measures to its comprehensive asset-purchasing program.

EUR/USD likely gained support at 1.0538, the low from Dec. 3 and was met with resistance at 1.1496, the high from Oct. 15.

In a unanimous decision, the Federal Open Market Committee (FOMC), lifted its benchmark Federal Funds Rate by 25 basis points to a range between 0.25 and 0.50%. Before Wednesday’s decision, the FOMC had held short-term interest rates at near zero levels for 56 consecutive meetings, a streak which dated back to December, 2008. In making its decision, the FOMC judged that it has seen considerable improvements in labor market conditions while it is reasonably confident that inflation will rise over its 2% objective over the next several years. The FOMC lowered short-term rates to a zero-bound range seven years ago in an effort to stimulate the economy months after the start of the Financial Crisis.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged by more than 0.80% to settle at 98.29. Yellen also noted that although a number of countries throughout the world have suffered slowing growth due to the rout in commodity prices, she added that the Fed has seen a rebound in Emerging Markets of late. On Wednesday, the iShares MSCI Emerging Markets Index (N:EEM) ETF gained 0.65 or 2% to 33.20.

Yields on the U.S. 10-Year inched up one basis point to 2.28%, while yields on the {{23693|Germany 10-Year} }rose four basis points to 0.68%.

 

[CapitalStreetFX]

Crude Oil Continues Losing Streak Amid Supply Outlook

Crude oil prices dipped further in Asia on Friday as the supply outlook and a stronger dollar weigh.

On the New York Mercantile Exchange, WTI crude for January delivery eased 0.37% to $34.82 a barrel.

Ahead, U.S. rig count data from Baker Hughes Incorporated (N:BHI) will set the tone.

Overnight, U.S. crude futures fell considerably on Thursday extending losses from a massive sell-off in the prior session, as investors continued to digest a sizable inventory build from last week.

Earlier this week, the front month contract for WTI crude dipped below $35 a barrel for the first time since 2008, as the aftershocks from OPEC’s meeting at the start of the month continued to be felt. U.S. crude has closed in the red in eight of the last 10 trading days.

On the Intercontinental Exchange (ICE), Brent crude for February delivery wavered between $36.95 and $37.92 a barrel before closing at $37.06, down 0.33 or 0.88%. North Brent Sea futures have closed in the green in only three sessions during the month of December.

When OPEC met in Vienna on December 4, the world’s largest oil cartel intensified the prolonged downturn in oil prices when it decided to delay a possible move to reduce production at least six months until it meets next in June. Both the international and U.S. domestic benchmarks of crude have plunged by more than 15% since OPEC’s decision.

Elsewhere, Russia president Vladimir Putin said on Thursday that business activity nationwide has stabilized amid signals that the price of oil has bottomed. Putin opened his annual year-end press conference at the Kremlin by telling reporters that the Russian government had been accustomed to seeing oil prices near $100 a barrel, its level from 18 months ago.

 

[CapitalStreetFX]

Gold Loses Momentum As Narrow Trading Week Kicks off

Gold prices dipped in Asia on Monday as investors head into a holiday-thinned trading week expecting continued downward pressure on the precious metal.

Gold for February delivery on the Comex division of the New York Mercantile Exchange fell 0.14% to $1,063.50 a troy ounce. Also on the Comex, silver futures for March delivery dropped 0.33% to $14.050 a troy ounce. Elsewhere in metals trading, copper for March delivery gained 0.35% to $2.117 a pound. The Asian nation is the world’s largest copper consumer, accounting for nearly 45% of world consumption.

In the week ahead, trading volumes are expected to remain light due to the Christmas holiday and as many traders already closed books before the end of the year, reducing liquidity in the market and increasing the volatility.

The U.S. is to release key reports on gross domestic product, durable goods orders, home sales and jobless claims. Last week, gold bounced back from the prior session’s two-week low on Friday, boosted by a weaker U.S. dollar, as markets continued to digest the Federal Reserve’s decision to raise interest rates for the first time in nearly a decade. In a unanimous decision, the Fed raised interest rates to a range of 0.25% to 0.50% from a range of 0% to 0.25%, as widely expected, following the conclusion of its policy meeting on Wednesday.

Speaking at a press conference following the announcement, Fed Chair Janet Yellen vowed that the FOMC will not be mechanical in its approach to normalize monetary policy and that future rate hikes would be gradual and data dependent. In its latest median projections, the FOMC anticipates that the Fed Funds Rate will reach 1.375% by the end of 2016, implying four quarter-point hikes next year. The Fed funds futures currently suggests there will be just two rate hikes in 2016, one in June and one in December.

 

[CapitalStreetFX]

Oil Crashes to 11-Year low Amid Low Demand

Brent oil cratered to its lowest price in more than 11 years on Monday, as demand for heating oil slumped on warmer-than-normal temperatures and traders tested for a bottom.

U.S. crude remained above its 2009 low and settled up a penny a barrel as traders squared positions ahead of the January contract’s expiration. The February contract declined and analysts expect stockpiles to build again this week, signaling further oversupply in already glutted market.

Concerns about swelling global crude supply and slow demand sparked by economic weakness in China have been recurring themes during this year’s rout. Analysts said the market was still testing for a bottom.

Heating oil futures weighed down the crude complex, hitting a new July 2004 low warmer-than-expected temperatures have hit seasonal demand.

Global oil production is running close to record highs. With more barrels poised to enter the market from nations such as Iran and Libya, the price of crude is set for its largest monthly percentage decline in seven years.

Brent’s premium over U.S. crude narrowed further after President Barack Obama signed a law on Friday that will lift a 40-year ban on U.S. crude oil exports.

U.S. crude futures settled up 1 cent at $34.74 a barrel in the last day of trading on the January contract, before declining slightly in post-settlement trading.

Brent futures were down 53 cents at $36.35, falling as much as 2 percent during the session to a low of $36.04, their weakest since July 2004.

Brent has dropped nearly 19 percent this month, its steepest fall since the collapse of failed U.S. bank Lehman Brothers in October 2008.

While consumers have enjoyed lower fuel prices, the world’s richest oil exporters have been forced to revalue their currencies, sell off assets and even issue debt for the first time in years as they struggle to repair their finances.

 

[CapitalStreetFX]

EURUSD Rises Amid Soft US Growth Data

EUR/USD rose moderately on Tuesday on a thin day of trading, as soft U.S. GDP data weighed heavily on a steadily weakening dollar.

The currency pair traded in a tight range between 1.0902 and 1.0984 before settling at 1.0954, up 0.0039 or 0.36% on the session. The euro is enjoying a modest three-day winning streak versus the dollar and is up by 0.26% against its American counterpart since the Federal Reserve raised short-term interest rates for the first time in nearly a decade last week.

More broadly, the euro is up by more than 3.20% against the dollar since the European Central Bank rattled global currency markets by only instituting limited easing measures with comprehensive asset-purchasing program at a closely-watched meeting at the start of the month. The dollar is currently down by nearly 2% against a basket of rivals in December, suffering its worst month since April.

EUR/USD likely gained support at 1.0538, the low from December 3 and was met with resistance at 1.1496, the high from Oct. 15 as per candlestick patterns.

On Tuesday morning, the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) said real gross domestic product in the third quarter increased at a rate of 2.0%, down sharply from annual GDP growth of 3.9% in the second quarter of 2015.

The BEA’s third estimate released on Tuesday also fell slightly from its second estimate of 2.1% growth issued last month. Real GDP measures the value of the goods and services produced by a nation’s economy minus the goods and services used up in production, adjusted for price changes.

 

[CapitalStreetFX]

Britain’s Economy Grows Less Than Estimates

The U.K. economy expanded less than previously estimated in the past two quarters in a sign growth is losing some momentum.

Gross domestic product rose 0.4 percent between July and September instead of the 0.5 percent previously estimated, the Office for National Statistics in London said on Wednesday. Growth in the second quarter was revised down by 0.2 percentage points to 0.5 percent. According to forex calendar the data remained below expectations.

The revisions indicate a loss of momentum in an economy that continues to rely heavily on consumers and domestic demand. While the economy is seen growing 2.3 percent next year, almost matching 2015’s pace, economists in a Bloomberg survey published Tuesday highlighted a British exit from the European Union as a potential threat to the U.K. outlook.

The performance in the latest three months matched the weakest since 2012 and compared with quarterly growth that averaged 0.7 percent last year. The Bank of England held its benchmark interest rate at a record-low 0.5 percent this month and officials have indicated they are in no hurry to follow the Federal Reserve, which raised the key U.S. rate for the first time in almost a decade last week.

 

[CapitalStreetFX]

Financial Markets Outlook – 28th Dec 2015

Asian stocks were steady in quiet trade on Monday, drawing heart after a rebound in crude oil that took prices away from multi-year lows. Investors across asset markets were without some of the usual leads as markets in Europe and North America were closed on Friday for Christmas.

MSCI’s broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) was flat. The index was on track for an 11 percent loss this year. Japan’s Nikkei (N225) was also up 0.1 percent. The Nikkei, lifted in part by Japanese Prime Minister Shinzo Abe’s reflationary policies, was headed for its fourth straight year of gains. U.S. crude gained last week thanks to falling inventories, reduced drilling and the lifting of a ban on most U.S. crude exports. U.S. crude (CLc1) nudged down 0.4 percent to $37.93 a barrel after jumping nearly 9 percent last week and away from $33.98, lowest since February 2009. Brent crude (LCOc1) also rose nearly 3 percent last week, moving away from an 11-year trough. Still, the warmer-than-usual winter affecting many parts of the world, attributed to the El Nino weather pattern, meant potentially less crude demand for heating purposes.

Analysts also In currencies, the dollar fetched 120.315 yen, wobbling near a two-month low of 120.05 struck on Friday. The dollar has lost some steam, with investors locking in profits after the Federal Reserve this month hiked interest rates for the first time in nine years. Late last week, a weaker-than-expected U.S. index on employment cost also weighed on the greenback. The currency market will be keeping an eye on coming U.S. data to gauge if the world’s largest economy is strong enough to withstand further rate hikes in 2016. The euro inched down 0.1 percent to $1.0962 after spending Friday confined to a very narrow range.

The Australian dollar was down 0.1 percent at $0.7276 but still within distance of a two-week peak of $0.7295 scaled on Friday when relatively high Australian yields worked in favor of the currency.

 

[CapitalStreetFX]

NZDUSD Outlook – 29-Dec-2015

NZD/USD remains at the prevailing highs and toys with the mid-point of the 0.68 handle. The price remains in recovery and within the ascending channel from middle of November lows of 0.6431.

We are light on data this week as the final trading for 2015 and volumes are expected to remain low. There are no domestic events for the pair to end the year, but focus will turn to Chinese non-manufacturing and NBS manufacturing PMI’s for December. There has been some volatility however in the commodities market and with the uncertainty around, light volatility might be expected. The New Year will focus on the commodities, RBNZ and whether the Fed can indeed continue to normalise the economy’s monetary policy.

Technically, the 200 DMA at 0.6853 is key although the price remains within the broader bearish trend from 0.7600. A break of the psychological 0.70 handle is key and this will close the gap at 0.7107 and could be bullish. A continuation to the downside looks in at the 20 DMA at 0.6726 below S3 at 0.6791.