Commodity currencies have been bid today during the Asia-Pacific session, while the G3 currencies plied narrow ranges in quiet trading conditions. The AUD was showing a 0.4% gain and the NZD was up by 0.7% as staff on London desks took to their seats There didn't appear to be any specific news catalyst or other development, though remarks from Beijing policymakers yesterday that promised "proactive" and "flexible" policy have been going down well, as have the U.S. Fed's promises for gradual data-dependent tightening (which explains why the USD is on course for its biggest monthly loss since April). This has helped base metal prices find a footing, even if oil prices remain fragile in the face of unrelenting supply. NZD-USD logged one-week high at 0.6826, stalling just shy of the two-month peak at 0.6834 seen on Dec-15. AUD-USD, meanwhile, rallied to a five-day peak of 0.7226. As for the G3 currencies, EUR-USD has been mired in a narrow range in the low 1.09s, and USD-JPY in the low 121.00s.
[EUR, USD]
EUR-USD has settled around 1.09, higher after clocking a two-week low at 1.0802 late last week. The Fed's promise for gradual data-dependent tightening has put the dollar on course for its biggest monthly loss since April. EUR-USD is likely to remain without direction until the new year Resistance is marked at 1.1044 and 1.1060, which are the present situations of the 200- and 100-day moving averages, both of which have near horizontal profiles, reflecting the broadly sideways price action the pair has seen since making major-trend lows at 1.0462 back in March. The Dec-7 low at 1.0796 is a key level on the downside.
[USD, JPY]
USD-JPY is making time in the low 121.00s, settling after the high volatility of last Friday after the BoJ announced it would buy more ETFs and extend the duration of the bonds it buys in its QQE program. USD-JPY had spiked to a 123.56 peak on this news before reversing sharply lower as markets realized that the new policies are small. The central bank detailed that it will buy an extra Y300 bln a year in equities, and that it will start accepting foreign-currency bonds and housing loans as collateral, which is aimed at addressing concerns that the BoJ is running out of assets to buy as it will make it easier for banks to sell JGBs. USD-JPY looks likely to trade without much direction into the new year.
[GBP, USD]
The pound continues to trade with a weakening bias against both the dollar and euro. BoE MPC member Weale, who is a relatively hawkish member on the Committee, said over the weekend that there was a "slight less immediate" need to tighten policy. This follows the minutes to the early December MPC policy meeting, which noted recent moderation in wage growth, which has been a metric that the central bank has been playing close attention to. With the BoE's version of rate lift-off still some six months down the track, and data dependent, we anticipate Cable will grind lower. Initial focus is on last week's low at 1.4865. Resistance is now marked at 1.5000 and 1.5029-30.
[USD, CHF]
EUR-CHF is trading steadier after last week making daily closing lows below 1.0800 for the first time since mid-November. The cross logged a one-month low of 1.0756 on Friday, though has since recouped above 1.0800. We expect EIR-CHF to remain comfortably above the sub-1.0500 levels that prevailed earlier in the year before the SNB cut the deposit rate to -0.75%.
[USD, CAD]
USD-CAD is trading softer today after clocking to a new major-trend peak of 1.4001 on Friday. The combo of higher U.S. yields and low oil prices have been underpinning the pair, which is up by over 4% over the last two weeks (measured with spot at 1.3920). Support is marked by a former high at 1.3781, while 1.4000-01 now marks resistance.
