Daily Market Updates & Trading Signals By Option Banque

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EUR/USD Records The Biggest Rally In Over Six Years

The euro enjoyed its strongest one-day move against the dollar in more than six years erasing all of its losses from last month’s swoon, as the European Central Bank sent an early Christmas gift to the single currency with a shocking monetary policy decision on Thursday.

In a widely unexpected move, the ECB’s governing council left several key interest rates unchanged and opted not to increase the pace of its €60 billion a month quantitative easing program as many expected heading into the closely-watched meeting. Instead, ECB president Mario Draghi unveiled only modest changes to the bond buying program, including a plan to extend it by six months through March, 2017.

Hours later, Federal Reserve chair Janet Yellen pushed the dollar down even further with hawkish comments at a Congressional hearing on the increasing likelihood that the U.S. central bank will raise short-term interest rates when it meets again in the middle of the month. As a result, the dollar tumbled more than 3% against the euro – its worst one-day fall since March, 2009.

EUR/USD traded in a broad range between 1.0525 and 1.0980 before settling at 1.0936, up 3.08% on the session. Last month, the euro tumbled more than 4.25% against its American counterpart to near eight-month lows, amid strong signals of forthcoming divergence between the major central banks. The dollar’s rally prompted some Wall Street analysts to forecast euro-dollar parity as early as the winter of 2016, the first in more than 10 years. The euro, though, rebounded on Thursday to reach its highest level against the greenback since early-November, days before a robust U.S. jobs report bolstered the chances of a rate hike by the Fed for the first time in nearly a decade.

In testimony before the Joint Economic Committee on Capitol Hill, Yellen said the economy needs to add fewer than 100,000 jobs a month to absorb the losses of those who fell out of the labor market in recent years. In November’s U.S. employment report, which will be released by the Department of Labor on Friday morning, analysts expect the unemployment rate to hold steady at 5.0% and expect to see solid job gains of 190,000. For the year, nonfarm payrolls have increased on average by more than 200,000 a month. While speaking at a luncheon at the Economic Club of Washington on Wednesday, Yellen said the labor market has met the Fed’s expectations with its steady progress since the U.S. central bank last met in October.

 

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After The Unprecedented EUR/USD Rally, What’s Next?

The EUR/USD pair recovered in one day almost all what it lost in the previous four weeks, following, and maintained its bullish tone this Friday, despite the release of US positive employment data for November.

The shocking decision made by the ECB last Thursday has not only disappointed investors, but also generate another bout of uncertainty. Mario Draghi fell short of market expectations, by cutting further into negative territory the deposit rates, but maintaining the monthly amount of bond purchases intact, when the market had largely priced in a 10/20B extension.

From a technical perspective, the pair is now favored higher into next week, as it has broken, and found buyers on pullbacks, to the 38.2% retracement of the October/November decline around 1.0880. In the same chart, the technical indicators are stabilizing well above their mid-lines, still in their way to neutralize the effects of a 480 daily rally. Also, the 100 and 200 DMAs converge in the 1.1080 region, whilst the 61,8% retracement of the mentioned decline stands at 1.1120, making of the region a critical resistance area, and where selling interest is expected to resume.

Weekly basis, the pair remains below its 20 SMA, while the technical indicators have bounced sharply from oversold readings, but remain in negative territory, suggesting the current movement is corrective. Nevertheless, and advance beyond 1.1120 will likely confirm a bullish continuation in term.

The main support is now 1.0830, and a break below it should expose the pair to a test of the 1.0720 region, whilst below this last 1.0660 comes next.

 

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Aussie Looks Vulnerable Despite Positive Data

The Aussie traded weaker despite strong business survey results last month and the yen held stronger on Tuesday in Asia despite disappointing third quarter growth figures.

USD/JPY changed hands at 123.27, down 0.10%, while AUD/USD traded at 0.7258, down 0.14%.

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 Y1.458 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 survey rose to 5 in November from 2 in the previous month, while the business survey rose to 10 from 9.

“This is basically another strong result for the NAB survey which, in conjunction with signs of improvement in the labor market, means we can put more faith in the building non-mining sector recovery,” NAB chief economist Alan Oster said.

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 0.01% at 98.73.

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.

 

[Option_Banque]

EURJPY Technical Analysis 9 Dec 2015

The EUR/JPY pair continues trading range bound, ending the day slightly higher amid EUR’s strength, although with the pair still unable to firm up above the 134.00 figure.

The intraday technical readings have finally erased the distortions of last week, and the 1 hour chart shows that the price continues consolidating well above its 100 and 200 SMAs, with the shortest accelerating its advance below the current price.

In the same chart the technical indicators post tepid advances in positive territory, but fail to confirm an upward continuation at the time being. In the 4 hours chart, the RSI indicator heads higher around 64, but the Momentum indicator lacks directional strength around its mid-line, suggesting some further consolidation ahead. An advance above 134.20 should favor some further gains, pointing then to a test of the 135.00 region.

Support levels: 133.65 133.30 132.80

Resistance levels: 134.20 134.60 135.00

 

[Option_Banque]

Gold Plunges As Fed Looks Set For A Rate Hike

Gold prices fell in Asia with markets increasingly confident of a Federal Reserve rate hike next week

On the Comex division of the New York Mercantile Exchange, gold for February delivery fell 0.33% to $1,072.90 a troy ounce.

Silver futures for March delivery eaed 0.06% to $14.180 a troy ounce, while copper futures for March delivery rose 0.12% to $2.068 a pound.

In Asia, Japan reported corporate goods prices for November fell 0.1% month-on-month, the eighth straight monthly drop, compared to a fall of 0.3% seen.

Australia said employment data showed a 71,400 jobs gain in November, compared to a drop of 10,000 jobs seen at a participation rate of 65.3%, above the 65% expected, for an unemployment rate of 5.8%, well below the 6% expected.

Also in Australia, annual MI Inflation expectations for December came in at 4.0%, up from 3.5% in November.

Separately, the New Zealand dollar held gains Thursday after a cut in the official cash rate of 25 basis points to 2.5% as investors mulled whether the next step was up.

Overnight, gold futures inched up amid a sharply weaker dollar, as investors continued to prepare for next week’s critical Federal Reserve meeting where the U.S. central bank is largely expected to raise short-term interest rates for the first time in nearly a decade.

After reaching near one-month highs in the U.S. morning session, gold fell back amid a wave of profit taking before turning positive just before the close of trading. The precious metal still remains near six-year lows from last week, as commodity traders brace for a likely rate hike from the Federal Open Market Committee at its two-day meeting on December 15-16.

A rate hike is viewed as bearish for gold, which is not attached to interest rates and struggles to compete with high-yield bearing assets.

 

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Asian Stocks Undergo High Volatility Amid Fed Rate Decision

Shares in Asia were narrowly mixed on Friday in a thin regional data day with the focus on next week’s Federal Reserve meeting.

The Nikkei 225 gained 0.96%, while the S&P/ASX 200 fell 0.31% and the Shanghai Composite eased 0.84%.

Overnight, U.S. stocks ended a sharp three-day losing streak on Thursday, amid a rally in the energy sector even as crude prices dropped to fresh seven-year lows on the session.

The Dow Jones Industrial Average gained 82.45 or 0.47% to 17,574.75, while the NASDAQ Composite index added 22.30 or 0.44% to 5,045.17 on a bullish day for stocks. The S&P 500 Composite index, meanwhile, rose 4.61 or 0.23% to 2,052.23, as stocks in eight of 10 sectors closed in the green. Stocks in the Health Care, Energy and Technology sectors led, while stocks in the Utilities and Basic Materials industries lagged.

In recent weeks, a plethora of Fed members, including Fed chair Janet Yellen have sent strong indications that the Fed will raise rates at the meeting, as headwinds restraining economic growth continue to fade and the labor market nears maximum employment.

The Federal Funds Rate, the Fed’s benchmark rate offered on interbank, overnight loans, has remained at its current level between zero and 0.25% since December, 2008, shortly after the start of the Financial Crisis. Any increase of the targeted range for the Federal Funds Rate is expected to be modest at 25 -basis points. The FOMC last approved a rate hike in June, 2006.

 

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Copper Continues Losing Streak Amid Key Releases

Steady industrial figures out of Japan and China failed to lift copper in Asia on Monday, while gold prices dipped as all eyes turn to a widely expected Federal Reserve rate hike this week, which would be the first in nearly a decade.

Gold for February delivery on the Comex division of the New York Mercantile Exchange fell 0.36% to 1.071.80 a troy ounce.

Also on the Comex, silver futures for March delivery gained 0.26% to $13.920 a troy ounce. Elsewhere in metals trading, copper for March delivery eased 0.03% to $2.111 a pound.

In Japan, the Tankan manufacturing index for large firms was steady at plus-12 for the fourth quarter, while the large non-manufacturing index dipped to plus-18 from plus-19. A positive figure indicates the majority of firms see better business conditions.

China on Saturday said that industrial production in November rose 6.2% year-on-year, while retail sales gained 11.2% and fixed investment increased 10.2%.

The Asian nation is the world’s largest copper consumer, accounting for nearly 45% of world consumption.

All three economic indicators published by the National Bureau of Statistics beat estimates of economists, with industrial output growth standing out with a far better performance than expected.

After lending and imports topped forecasts earlier in the week, November has ended up offering some signs that the country’s economic slowdown is stabilizing after the government’s additional monetary and fiscal stimulus this year.

In the week ahead, investors will be focusing their attention on Wednesday’s outcome of the final Fed meeting of 2015. U.S. economic reports on inflation, manufacturing activity and industrial production will also be closely watched ahead of the rate announcement.

Wednesday’s survey data on euro zone private sector growth will be scrutinized by market watchers for signs of a recovery in the region.

On Monday, European Central Bank President Mario Draghi is to speak at an event in Italy.

 

[Option_Banque]

Gold Rises Moderately Ahead Of Fed Rate Decision

Gold traded narrowly higher in Asia on Tuesday with investors largely on the sidelines ahead of this week’s Federal Reserve meeting widely expected to hike interest rates.

On the Comex division of the New York Mercantile Exchange, gold for February delivery inched 0.08% up to $1,064.20 a troy ounce.

Silver futures for March delivery gained 0.07% to $13.705 a troy ounce, while copper futures for March delivery rose 0.02% to $2.106 a pound.

Overnight, gold futures fell sharply amid a relatively flat dollar, as investors continued to brace for a likely interest rate hike by the Federal Reserve at its two-day meeting starting on Tuesday.

Gold remained near six-year lows from earlier this month when it dipped below $1,050. After opening the year around $1,185 an ounce in January, gold futures have fallen by nearly 10% in 2015. The precious metal is sharply below its 12-month high of $1,303.50 from January 21.

Gold likely gained support at $1,046.20, the low from Dec. 3 and was met with resistance at $1,092.40, the high from Nov. 16.

Investors have had ample time to price in a rate hike after a host of major policymakers, including Fed chair Janet Yellen, began to send strong signals last month that the U.S. central bank could raise short-term interest rates for the first time in nearly a decade.

The Federal Open Market Committee opted to leave rates at near-zero levels earlier this fall amid severe global economic struggles, but will likely reverse course on Wednesday as the headwinds restraining economic growth continue to fade. A succession of strong employment data over the last two months has also prompted a wave of hawkish comments from key FOMC members.

 

[Option_Banque]

JPY, AUD Slide Down After Fed’s Landmark Rate Hike

The yen and Aussie held weaker in Asia Thursday after the first Federal Reserve rate hike in nearly a decade and trade data out of Tokyo better than expected with little to suggest sharp market reactions in the region.

USD/JPY traded down 0.18% to 122.44, while AUD/USD eased 0.33% to 0.7206. NZD/USD traded at 0.6765, down 0.48%.

In Asia, Japan reported its trade balance for November was a deficit of ¥380.0 billion, narrower than the deficit of ¥446 billion seen. Earlier, New Zealand said third quarter GDP rose 0.9% quarter-on-quarter, a tad better than the 0.8% pace expected.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.03% to 98.38.

Overnight, the Federal Reserve, as expected, voted to raise the target range of its benchmark Federal Funds Rate on Wednesday, ending a zero interest rate policy implemented by the U.S. central bank shortly after the Financial Crisis aimed at rescuing the world’s largest economy from arguably its biggest catastrophe in more than 70 years.

In a unanimous decision, the Federal Open Market Committee (FOMC), lifted the Fed 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. The Federal Funds Rate is the rate offered by institutions on overnight, interbank loans held at the Fed.

The dollar held gains seen after the release of strong U.S. housing sector data. The U.S. Commerce Department said that housing starts jumped 10.5% to hit 1.173 million units last month from October’s total of 1.062 million units. Analysts had expected a rise 6.6% to 1.135 million. Meanwhile, the number of building permits issued rose by 11.0% to 1.289 million units from October’s total of 1.161 million, easily surpassing market expectations for a decline of 1.0% to 1.150 million units.

A separate report showed that U.S. industrial production decreased 0.6% last month, disappointing expectations for a decline of 0.1 Most investors expect the U.S. central bank to raise interest rates for the first time since June 2006 at the conclusion of its meeting on Wednesday.

 

[Option_Banque]

USD/MXN Slides Down After Bank Of Mexico Rate Hike

USD/MXN fell mildly on Thursday as the Bank of Mexico lifted interest rates for the first time since 2008, in a move that was considered inevitable after the Federal Reserve abandoned its seven-year zero interest rate policy one day earlier.

The currency pair traded between 16.9172 and 17.1612 before settling at 17.0427, down 0.0047 or 0.03% on the session. In early-December, the Mexico peso fell to record-lows versus the dollar as the likelihood of a Fed rate hike became more apparent. The peso is down by approximately 15% against its American counterpart this year, as investors flocked to safer assets north of the border.

On Thursday, the Bank of Mexico increased its overnight interest rate by 25 basis points to 3.25%, moving it off record-lows for the first time since the Financial Crisis. For a 10-year period beginning in 2005, the rate averaged 5.5%, hitting an all-time high of 9.25% in October of that year.

Many analysts regarded the move as a necessity, as the nation faces severe headwinds from slow economic growth and declining inflation. In November, inflation in Mexico fell to a record-low of 2.21%, amid low gas prices and mobile phone rates. The Bank of Mexico slashed interest rates four times since the Financial Crisis to offset reduced inflationary pressures, the last coming 18 months ago.

Following the Fed’s historic move on Wednesday, Mexico risked even sharper depreciations in the peso had it left rates unchanged. In a unanimous decision, the Federal Reserve, lifted its benchmark Fed Funds Rate on Wednesday by 25 basis points to a range between 0.25 and 0.50%. Nearly a decade had passed since the Fed last raised short-term rates.

 

[Option_Banque]

Crude Oil Crashes To Seven-Year Low

West Texas Intermediate oil prices crashed to a fresh seven-year low on Friday, after data showed that rigs drilling for oil in the U.S. rose last week, underlining concerns over robust domestic production.

On the New York Mercantile Exchange, crude oil for delivery in January shed 22 cents, or 0.63%, to close the week at $34.73 a barrel. It earlier touched $34.29, the lowest since February 2009. The more actively traded February contract ended at $36.06.

For the week, New York-traded oil futures declined 89 cents, or 2.49%, the third straight weekly loss. U.S. oil futures are down nearly 35% so far this year amid worries over ample domestic supplies.

The U.S. Energy Department Wednesday reported an unexpected 4.8 million-barrel increase in U.S. crude stockpiles last week. At 490.7 million barrels, U.S. oil inventories remain 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 February delivery dipped 18 cents, or 0.49%, on Friday to close the week at $36.88 a barrel. Prices slumped to $36.14 on December 14, a level not seen since the depths of the 2008 global financial crisis.

On the week, London-traded Brent futures dropped 97 cents, or 2.77%, the third consecutive weekly decline. Brent oil prices are on track to post an annual decline of 36% in 2015, as oversupply concerns dominated market sentiment for most of the year.

Oil futures have fallen sharply this month after the Organization of the Petroleum Exporting Countries failed to agree on output targets to reduce a glut of oversupply on global energy markets.

Global crude production is outpacing demand following a boom in U.S. shale oil and after a decision by OPEC last year not to cut production in order to defend market share.

Meanwhile, the spread between the Brent and the WTI crude contracts stood at $2.15 a barrel, compared to $2.11 by close of trade on Thursday.

The price gap between the two benchmarks narrowed to the smallest level in 11 months earlier this week, following Congress’ decision to lift a ban on domestic oil exports, signaling that the U.S. oil market is likely to grow tighter, while a global glut gets worse.

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.

 

[Option_Banque]

EUR/USD Holds Range Ahead Of US Growth, Inflation Figures

EUR/USD ticked up on a light day of trading, as investors awaited key U.S. GDP and inflation data later this week for further hints on the gradual path of tightening the Federal Reserve could take over the next year.

The currency pair traded between 1.0849 and 1.0939 before settling at 1.0915, up 0.0048 or 0.44% on the session. EUR/USD is relatively flat since the Fed voted unanimously to abandon its zero-interest rate policy at a closely-watched meeting last week. During a volatile month of trading, the euro is up more than 3.25% against its American counterpart.

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.

Investors continue to digest last week’s historic decision by the Federal Open Market Committee (FOMC) to raise short-term interest rates for the first time since June, 2006. Citing improved labor market conditions and expectations that long-term inflation will move back toward its 2% objective, the FOMC increased the target range on its benchmark Federal Funds Rate by 25 basis points to a level between 0.25 and 0.50%. The Federal Funds Rate previously remained at record-lows in a zero-bound range for seven consecutive years since the height of the Financial Crisis.

Following the announcement, Fed chair Janet Yellen faced a barrage of questions on how the FOMC could respond to changes in inflationary pressures as it normalizes monetary policy. Echoing sentiments from September, the FOMC does not project that long-term inflation will reach 2% until the end of 2018. While Yellen noted that market-based measures of inflation compensation remain near historically-low levels, she emphasized that the declines over the past 18 months may reflect changes in “risk and liquidity premiums, rather than an outright decline in inflation expectations.”

Inflation has remained under the Fed’s targeted goal for every month over the last three years.

Sunday, Spanish 10-year government bond yields reached their highest level in five weeks after an indecisive election left prime minister Mariano Rajoy with limited governing options to form a majority.

The U.S. Dollar Index, which measures the strength of the greenback against a basket of six other major currencies, fell by more than 0.35% to an intraday low of 98.30 before closing at 98.73, down 0.05% on the session. Earlier this month, the index eclipsed 100.00, reaching its highest level on the calendar year.

 

[Option_Banque]

US Stocks Rally After A Rebound In Oil Prices

U.S. stocks closed broadly higher on Tuesday, as crude futures bounced from multi-year lows in a brief respite from a cascading downward spiral that has sent oil price plunging in recent weeks.

U.S. crude futures rallied by nearly 1% in Tuesday’s session to close above $36 a barrel, rebounding from six year lows in the previous trading day. Investors continued to react to last week’s repeal of a 40-year ban on U.S. crude exports that has erased the premium on brent crude against its American counterpart.

At Tuesday’s close of trading, the price of WTI crude settled two cents higher than the international benchmark, marking the first time U.S. crude futures have closed above brent since August, 2010. Dragged down by a massive glut of oversupply on global markets, dwindling crude prices have contributed to a 25% decline in major energy stocks this year.

The Dow Jones Industrial Average surged 165.65 or 0.96% to 17,417.27, while the NASDAQ Composite index added 32.19 or 0.65% to 5,001.11, extending gains from Monday’s session. The S&P 500 Composite index, meanwhile, gained 17.82 or 0.88% to 2,038.97, as all 10 sectors closed in the green. Stocks in the Basic Materials, Industrials and Energy industries led, each gaining more than 1%. Basic Materials stocks have slumped by more than 10% on the year.

Volatility remained high as the Dow posted its eighth consecutive 100 point move and 14th in the last 16 sessions. The major indices are on pace for their most volatile month of December in recent memory.

 

[Option_Banque]

EUR/USD Outlook – 24th December 2015

EUR/USD fell mildly on Wednesday halting a three-day winning streak, as currency traders reacted to a flurry of mixed data on both sides of the Atlantic.

The currency pair traded in a broad range between 1.0871 and 1.0958, before settling at 1.0910, down 0.0047 or 0.43% on the session.

EUR/USD has been virtually flat since the Federal Reserve ended a seven-year zero interest rate policy last Wednesday when it approved its first rate hike in nearly a decade. During a volatile month of trading, the euro has gained more than 3.25% in value against is American counterpart.

EUR/USD likely gained support at 1.0538, the low from December 3 and was met with resistance at 1.1352, the high from Oct. 22. Not to mention, EURJPY also hit some key levels as we mentioned on different forex forums.

The dollar held onto gains from the morning session amid a weak batch of data in the euro zone. In France, third quarter GDP was revised down by 0.1% to 1.1% annually, providing a harbinger of potential slowing economic growth in the final quarter of the year.

The subdued reading was accompanied by downbeat data in the U.K. where GDP increased by 2.1% annually in the third quarter, decelerating from yearly growth of 2.3% in the previous quarter. It marked the worst third quarter in the U.K. since 2013.

In the U.S, the Department of Commerce’s Bureau of Economic Analysis (BEA) said U.S. personal income ticked up by 0.3% in November, marking the eighth consecutive month that the figure moved higher. Analysts forecasted gains of 0.2% last month, following a robust increase of 0.4% in October.

It came amid an acceleration in wages and salaries for government workers and an $11.6 billion bonus paid to United Auto Workers employees, one of the nation’s largest unions.

 

[Option_Banque]

Oil Prices Rally In Thin Trading Sessions

U.S. oil prices rose to a more than two-week high in a holiday-shortened session on the eve of Christmas on Thursday, as an unexpected decline in domestic oil stockpiles boosted sentiment.

On the New York Mercantile Exchange, crude oil for delivery in February tacked on 60 cents, or 1.6%, to close the week at $38.10 a barrel. It earlier rose to $38.28, the most since December 9.

On Wednesday, Nymex prices soared $1.36, or 3.76%, after weekly supply data showed that U.S. oil stockpiles fell 5.9 million barrels last week. Market analysts’ expected a crude-stock gain of 1.1 million barrels.

Also Wednesday, industry research group Baker Hughes (N:BHI) said that the number of rigs drilling for oil in the U.S. decreased by three to 538 last week, the fifth decline over the past six weeks.

For the week, New York-traded oil futures surged $3.52, or 9.7%, the biggest weekly rise since early October. The steep gains were likely related to thin year-end trade, which increased volatility and heightened the severity of market moves.

Despite last week’s strong gains, U.S. oil futures are still down nearly 26% in 2015 amid worries over ample domestic supplies. Prices fell to $34.29 earlier this month, the lowest since February 2009.

 

[Option_Banque]

European Bonds Rise Amid Plunging Commodity Prices

Euro-area government bonds advanced as falling commodity prices weighed on the outlook for consumer-price growth, boosting demand for fixed-income assets.

The decline in commodity prices since May makes it increasingly challenging for the European Central Bank to achieve its inflation goal of just below 2 percent. This may underpin the ECB’s quantitative-easing program and support sovereign bonds. West Texas Intermediate crude slid from its highest level in three weeks and Brent, the benchmark for more than half the world’s oil, is poised to end 2015 with the lowest annual average price in 11 years. Inflation erodes the value of the fixed-income payments offered by bonds.

German 10-year bunds rose alongside their French and Italian peers on Monday. European bond markets resumed trading having closed on Dec. 23, with the U.K. remaining shut for a holiday.

Benchmark German 10-year bund yields fell seven basis points, or 0.07 percentage point, from the Dec. 23 close to 0.56 percent as of 4:05 p.m. London time. The 1 percent security due in August 2025 rose 0.66, or 6.60 euros per 1,000-euro ($1,098) face amount, to 104.115. Similar-maturity Italian bond yields slipped five basis points from Dec. 23 to 1.61 percent, while those on French 10-year debt declined seven basis points to 0.91 percent.

The annual rate of inflation in the euro area was 0.2 percent in November, data released this month showed. The forward inflation-swap rate that gauges consumer-price growth expectations in the currency bloc for a five-year period beginning five years from now was at 1.67 percent. It fell to 1.65 percent on Dec. 24, the lowest close in more than two months.

 

[Option_Banque]

Oil Prices Slide Down Half A Dollar Amid Slow Demand

Crude oil futures fell around half a dollar early on Wednesday as the market remained under pressure from slowing demand and high supplies, while forecasts that a cold snap in Europe and the United States would be short-lived also hurt prices.

Crude prices have plunged by two-thirds since mid-2014 as soaring output from the Organization of the Petroleum Exporting Countries, Russia and the United States led to a global surplus of between half a million and 2 million barrels per day.

More recently, a slowing demand outlook, especially in Asia but also Europe, has started dragging on prices.

Front-month U.S. West Texas Intermediate crude futures (CLc1) were trading at $37.18 per barrel at 0140 GMT, down 69 cents or 1.82 percent from their last settlement. Brent futures (LCOc1) were down 47 cents, or 1.24 percent, to $37.32 a barrel.

Traders said the price falls were largely a result of a weak outlook for next year and the closing of 2015 trade books.

Forecasts that an upcoming cold weather in Europe will only be short-lived could also hurt crude prices.

U.S. crude and Brent had both rallied about 3 percent in the previous session on hopes that a drop in temperatures would buoy demand for oil for heating purposes.

But weather data in Thomson Reuters Eikon shows that average continental European temperatures are expected to drop from around 5 degrees Celsius currently toward and slightly below the seasonal norm of 2.4 degrees by Jan. 3 before rising to as high as 6-8 degrees by Jan. 7.

For most of the United States, a brief cold period is also not expected to last for much more than a week.

 

[Option_Banque]

AUD/USD Outlook 31st December 2015

AUD/USD keeps the bid tone alive on the final trading day of this year and amid thin Asian markets, reversing a temporary dip seen in the previous session.

Currently, the AUD/USD pair trades 0.20% higher at fresh session highs of 0.7301, having bottomed around 0.7270 in early trades. The Aussie remains firmer and looks poised to book third straight monthly gain as we head towards 2015 end, with most traders already out on New Year celebrations. Thus, resulting in low volumes and exaggerated intraday volatility.

Calendar-wise, we had a second-tier data in the Australian Private Sector Credit m/m, which came in at 0.4% versus 0.6% expected and lower than 0.7% previous. The pair was indifferent to the data as markets are mostly following oil prices, which seems to have stabilized in Asia after falling more than 3% on Wednesday.

In the day ahead, trading activity is likely to be limited as Japan is already out while most major European markets are also closed on account of New Year’s Eve celebrations, leaving the Aussie to the mercy of the last US economic releases due for 2015.

The pair heads higher and finds the immediate resistance at 0.7312 (Dec 25 High) above which gains could be extended to the next hurdle located at 0.7342 (200-DMA). On the flip side, the immediate support located at 0.7272/71 (1h 100-SMA/ daily low). Selling pressure is likely to intensify below the last, dragging the Aussie to 0.7230/29 (1h 200-SMA/ 20-DMA).

 

[Option_Banque]

Attention Turns To Yellen Testimony In Coming Week

World’s largest currency hoard, Chinese foreign currency reserves shrunk by $99.5 billion to $3.23 trillion in January according to People’s Bank of China (PBOC) statement released on Sunday . The stockpile declined to the lowest since 2012 as China started selling Dollars to control the Yuan depreciation and to stem the capital outflow. However, the figure of $3.23 trillion is slightly better than the forecasted $3.21 trillion by the economic analysts.

The number of new jobs created in US increased by 151,000 in January which came lower than the forecast for 189,000, while the unemployment rate fell to the almost 8 year low at 4.9 percent against the forecast of 5 percent according to the released statement of US ‘Bureau of Labor Statistics’ .The average hourly earnings m/m rose by 0.5% against the forecast 0.3 percent. This signals a resilience in the current U.S. job market .It also helps stabilize the outlook for inflation and growth going forward, given that wage rate growth can act as a precursor to income and consumer spending growth.

Argentina has made a $6.5 billion cash offer to holders of the bonds that the country defaulted on in 2002. Argentina has been shut out of the global bond markets, since it defaulted on $100 billion of sovereign debt it owed at the time. Legal battled between the country and the investors(including large US hedge funds) has continued over the years. New Argentinian President Mauricio Macri has indicated a willingness to resolve the protracted dispute in a bid to bring the Argentinian economy back into the international fold.

Investors and traders shall be keenly awaiting any statements from a key meeting between Venezuelan Oil Minister Eulogio Del Pino and Saudi Oil Minister Ali – Al Naimi, following discussions between the Venezuelan, Omani and Qatari ministers earlier in the past week. The oil markets have been trading in a volatile range over the past few sessions based on perceptions of an emergency meeting or an OPEC led production agreement between OPEC and non-OPEC producers. The importance of this meeting becomes greater, in light of the volatility in the Crude Oil Market and the expectations attached to initiatives the market expects from producers, so that the supply demand imbalance can be addressed.
Another key event the market shall focus on in the coming week includes the testimony of Fed Chief Janet Yellen to the House Financial Service Committee at Capitol Hill. The markets shall be keen to pick insights into the future of US interest rate policy, after conflicting signals from different central banks around the world.

Technicals

EURUSD

EURUSD was strongly bullish last week as it surged 2.95 percent over the previous week .Last week , Euro posted its largest weekly gain since March,2015 against the US Dollar despite losing some ground on Friday after the release of the US labor market report.
EURUSD crossed above SMA50 on the weekly chart last week with a major spike through the average. On the daily chart the price crossed both 50 day and 200 day moving averages and Stochastic also turned up higher. The immediate resistance of EURUSD is at 1.1250 - the breakout of which would spur the current bullish momentum further. It has formed interim support at the 1.1120 level. The major support of EURUSD is at the 1.1050 level - breakdown of which would invalidate the current bullish scenario. The weekly bias is bullish. A sustained move above 1.1200 would open up the way towards the next significant resistance level at 1.1430.

Trade Suggestion:
Buy Digital Call Options above 1.1250. Buy Digital Put Options on a break below 1.1040 and/or above 1.1370.

GBPUSD

GBPUSD gained 1.80 percent against the Dollar last week despite trimming gains over the last two days of the week. Last week, it created a high at 1.4667 boosted by a strong rally but retreated from there after the release of ‘MPC Official Bank Rate Votes’ details on Thursday, as no MPC member voted to increase the interest rate. On Friday, it fell further on the back of the US employment report.
On the Daily chart, price still remains below SMA50 and SMA200. Stochastic started to turn up higher after having strong rallied towards the upside last week. GBPUSD completed 50 percent retracement of the selloff from 11th December 2015 to 21st January 2016 last week at the 1.4667 level. Currently SMA50 at 1.4700 is working as immediate resistance. Major support is at 1.4350 breakdown of which might resume the previous selloff. It formed interim support at the 1.4450 level. A sustained move above 1.4650 might spur further advance towards the 1.4800 level.

Trade Suggestion
Buy Digital Calls above 1.4675. Buy Digital Puts on a break below 1.4580 and/or above 1.4770.

USDJPY

USDJPY posted the greatest weekly drop since October, 2008 as USD plunged 3.45 percent against the Japanese Yen last week. It happened just a week after the Yen weakening on adoption of negative interest rate by BOJ.
USDJPY has been strongly bearish after hitting and being rejected by the strong resistance zone at 121.67 on 29th January,2016 .It ended last week at the 116.81 level after making an abortive attempt to go higher. The weekly bias in USDJPY is strongly bearish. The next major support level is at 115.94 level which might be evacuated easily if current bearish momentum sustains. A sustained move below the 116.00 level might open the way towards 110.00.

Trade Suggestion
Buy USDJPY Digital Put Options below 115.65. Buy USDJPY Digital Call Options above 116.80 and/or at/below 113.50.

Gold

Gold recorded its highest weekly gain since July, 2013 last week. It climbed by 5.15 percent last week as investors are rushing towards gold as a safe haven, seeking refuge from from plunging global stocks in current fragile economic condition, as well as volatile currency markets.
On the Daily chart, price has crossed above 50 day and 200 day moving averages and stochastic has also turned higher. Price crossed above the SMA50 on weekly chart with a strong up-move last week. Gold ended higher at the 1173.06 level breaching the 1169.00 level. The next significant level is the high of 16th October, 2015 at 1191.42. If the current bullish momentum sustains, it is expected that Gold may trade above the 1200.00 level soon.

Trade Suggestion
Buy Digital Call Options above 1170.00. Buy Digital Put Options on a break of 1158.00 and at/above 1186.00.

Crude Oil

Crude Oil dropped 8.06 percent last week propelled by the overwhelming supply of Oil and a lack of initiatives to cut production significantly.
Crude Oil was rejected by the resistance at 34.80 last week and resumed falling lower in a choppy market. The break of interim support at 29.40 would pave the way towards the 13 year low at the 25.80 level. The weekly bias remains strongly bearish as the price was rejected from 50 day moving average on the Daily chart.
Trade Suggestion
Buy Digital Put Options on a break below 29.00. Buy Digital Call Options if the market sustains above 30.60 or at/below the 26.80 level.

 

[Option_Banque]

USDJPY Extends Its Gains, Supported By Divergent Policy Outlook

After some statements from Fed officials last week, the US dollar is surging strongly against the basket of major currencies. The dollar index DXY increased to 96.339, the two-week high level and is expected to climb further.

Today, the US will be releasing some important indexes such as core personal consumption expenditure, personal income and goods trade balance. The market is waiting for positive readings from these economic data and the green currency seems to continue strengthening.

On Tuesday, Fed Chair Janet Yellen will talk about the economic outlook and monetary policy. Fed’s upcoming policy has been the most concerned problem until now. The dollar strengthened ahead of these announcements.
In front of Japan’s consumption weak and emerging economy slowdowns, economists anticipated that Prime Minister Abe will postpone the sales tax rise to 10 percent from 8 percent this year.

Fig. USDJPY Technical chart H4

After reaching the support of 110.650 on March 17, USDJPY is on a gradual uptrend. The pair is currently traded at 113.529 and expected to climb more as the two SMA lines moves under the price movement. The Stochastics chart shows that the pair is diving in overbought zone, the pair is expected to test the resistance of 113.765 before pulling back.

Trade suggestion

Buy Digital Put Option at 112.074, Buy Digital Call Option at 114.525.