Antipodeans cheer risk-on rally in equities, German Ifo eyed

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 25, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Mumbai) - A better risk tone prevailed at the beginning of the week in Asia, with oil prices and equities extending last week’s rally and hence, boosting risk-appetite across the board. While the greenback failed to benefit from risk-on market profile and weakened against its major competitors.

    Key headlines in Asia

    BoJ Kuroda provides no hints at further QQE

    Australia: Business confidence remains resilient - NAB

    Yen bullish bets at 4-year high before BOJ

    Dominating themes in Asia – centered on JPY, AUD and NZD

    Despite, higher demand for riskier assets this session, sentiment was quiet mixed as markets remain wary over uncertain times ahead. The US dollar remained broadly lower, and was heavily sold-off against higher-yielding currencies such as the AUD, NZD and GBP.

    While the dollar-yen pair halted its bullish run and remains offered near 118.70 region as the yen strengthened after Kuroda’s comments at Davos poured cold water or further BOJ easing bets this week. Kuroda noted on Jan. 22 in Davos that “at this stage, we don’t think the current market situation has been affecting corporate behaviour unduly. “While impressive Japanese trade balance data also underpinned the JPY. Japan's trade balance was in surplus by ¥140.2 billion in December after recording a deficit of ¥379.72 billion in November.

    Contrarily, the Antipodeans flew through the roof as markets rejoiced the recent rebound in oil prices and believed that oil prices may have finally found a bottom. The kiwi extends further on the 0.65 handle, having bounced-off hourly 200-SMA support and now trades +0.40%. While the AUD/USD pair tracks its OZ sister higher and trades near 0.7020 levels, up 0.24% on the day. The Aussie ignored the weak NAB business confidence data and rallied in sync with the Australian stocks.

    On the equities space, the Australian stocks lead the advance in the Asian stocks, with Australia’s S&P/ASX index rallying 1.60% to just shy of 5k mark towards the closing hours. While the Nikkei index rises 0.80% to 17,089 versus +1.30% previous. The Chinese equities also follow suit and extend the rally, with the Shanghai Composite up +1%%, while Shenzhen’s CSI300 index trades +0.84%.

    Heading into Europe and North America

    A quiet start to a big week ahead, with the only German Ifo Surveys to keep the traders busy in the European session ahead. While second liner events in the UK’s CBI industrial orders and German Buba report will be also reported.

    The closely watched Ifo Business Climate Index in Germany is expected to tick down to 108.5 in January, from the 108.7 booked last month. The Current Assessment sub-index is seen at 112.7 from the 112.8 booked a month ago. The Ifo Expectations Index - indicating firms' projections for the next six months - is expected to edge down to 104.3 from the 104.7 registered in December.

    Besides, ECB board member Sabine Lautenschläger will participate in a hearing at the Committee on Economic and Monetary Affairs (ECON) at the European Parliament.
    While the North American session remains absolutely data-empty, while ECB President Mario Draghi speech in Germany will take centrestage.

    EUR/USD Technicals

    Valeria Bednarik, Chief Analyst at FXStreet noted, “In the daily chart, the price has broken below its 20 SMA by the end of the week, and extended below it, while the technical indicators have turned south, but still within neutral territory, while so far, the pair has hold above the weekly low and 50% retracement of the latest bullish run at 1.0780, the level to break to confirm further declines. In the 4 hours chart, the technical indicators have lost bearish potential near oversold territory, whilst the moving averages remain all together, but above the current price. Should the decline accelerate this Monday, the decline may later extend down to the 1.0710 region, the 61.8% retracement of the same rally and the lowest in over a month. Support levels: 1.0780 1.0745 1.0710 Resistance levels: 1.0845 1.0890 1.0925.”
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