Financial market research and analysis

The EURUSD consolidated in the tight range of 1.0406/1.0435 after having tanked to 1.0366 Frankfurt yesterday. The growing gap between the US and EU yields is supportive of a further euro depreciation. Traders remain seller on tops. Offers are touted at 1.0485 / 1.0500 (minor 23.6% retracement on Dec 8th to Dec 15th sell-off / optionality) and 1.0560 (major 38.2% retrace). Due today, the November inflation in the Eurozone is expected to have accelerated at the stable pace of 0.6% year-on-year. The core inflation is expected at 0.8%y/y. Soft figures could further weigh on the single currency, while a solid read could encourage a minor correction after losing five big figures against the US dollar in one week.

The USDJPY extended gains to 118.65, boosting the Japanese stocks in Tokyo. Nikkei (+0.75%) and Topix (+0.49%) rallied to year’s highest levels as Japanese exporters continued surfing on the cheaper yen. The 1.20 handle is right around the corner against the US dollar, while there are no major reasons to stop the Nikkei from rising to 20’000.

Chinese stocks closed the week deeply in the red. Weaker Yuan and concerns regarding the US-China relationship under Donald Trump’s rule have taken their toll on Chinese stocks. China also revised its growth forecast to 6.5% earlier this week.

This year, the Shanghai’s Composite has been totally left outside the global stock rally. Both stock and bond Investors remain increasingly sceptical regarding Chinese markets. Chinese sovereigns recorded their biggest weekly decline in seven years. Australia’s mining and energy stocks wrote-off 1.27% despite firmer oil and commodity prices.

The pound was better bid in Asia.Overnight session pulled the GBPUSD slightly higher to 1.2436. The Bank of England maintained the status quo at Thursday’s MPC meeting. The bank said that the recent recovery in the pound could contain inflationary pressures. Trend and momentum indicators remain comfortably negative for a further depreciation to 1.2295 (Fibonacci’s 50% level on Oct 7th flash crash to Dec 6th recovery).

US and European futures gained, as stock traders rapidly recovered from the Fed hangover. The DAX and CAC futures gained past one percent in Asia. Appetite in FTSE stocks remained limited (+0.06%), with limited appetite above 7000 pence.

The FTSE 100 stocks are expected flat at 7000 at the open, the DAX is called 16 points higher at 11382.