Overall, the market has barely moved ahead of the ECB's press conference. The major currency pairs traded in the same tight ranges as in the last few days, unable to pull any significant moves. However, after today's economic calendar, the currency pairs may start to trend again.
The Euro (Eur/Usd) has extended, in the overnight market, the range developed during the U.S. trading hours. The pair has had two weak attempts to break higher, above the neutral pivot point (1.3195), but were easily rejected. The euro, as the whole market, will pick up activity during the ECB's press conference.
Inflation fell in December to 1.6% from one-year earlier, in-line with the Flash CPI forecast. The strong declines in the energy market helped the CPI reach the 2% target much earlier than forecast. German CPI in December rose by 0.3%, in-line with market expectations. This is the first time in the last five months that CPI has shown a positive read. Year-over-year inflation in Germany reached 1.1%, dragged lower by the huge declines seen in the energy market.
The Pound (Gbp/Usd) had a 100-pip range during the overnight market, moving side by side with the neutral pivot point (1.4590). The pound may just follow the euro very closely in the next two days, as there are no important releases coming from the U.K. economy the rest of this week.
The Aussie (Aud/Usd) moved in a wide channel overnight. The pair tested the 0.6580 support, an area where the pair bottomed in the last two days of trading. On the upside, the 50-day moving average, acts as a resistance level. In addition, the pair moved in correlation with the commodity markets in the last few days.
The unemployment rate in Australia increased by 0.1 percent to 4.5 percent in December, which is exactly what economists had forecasted. This is a fairly steady reading as male unemployment increased by 0.3 percentage points to 4.4 percent while female unemployment decreased by 0.3 percent to 4.5 percent. Employment in Australia decreased by a mere 1.2 thousand in December. This is much less than the 21 thousand that economists had forecasted
The Cad (Usd/Cad) traded in a relatively small channel near the Asian opening price in the overnight sessions. The pair gained 700 pips in the last 4 days, from which 250 were gained yesterday, pushing the cad to trade at one month high.
The Swissy (Usd/Chf) moved within the same range for the fourth consecutive day. In the last few days, the swissy managed to break, briefly, above the 1.1200 resistance area but it was too much for the pair to handle. On the downside, the 1.1100 support level holds the pair from moving any lower.
The Yen (Usd/Yen) traded mostly directionless during the overnight market. The pair moved between the neutral pivot point (89.15) and the 88.90 support area, but it was unable to break in either direction. Over this period, the U.S. futures numbers were trading below the breakeven line.
Machinery orders for Japan fell by 16.2 percent in November, which is almost twice the forecasted decrease. This is the steepest drop ever recorded; indicating the overall outlook for the country's industrial sector is grim. Machine orders from manufacturers fell an astounding 33.2 percent. Domestic corporate goods prices came in better than the expected 0.8 percent, with a reading of 1.1 percent for the month of December. However, this figure is lower than Novembers 2.8 percent reading
European Markets Are Down A Seventh Consecutive Day
Current Futures: Dow -80.00, S&P -10.80, NASDAQ -26.50
European Trade: Despite surging higher in the first minutes of trading, and expecting a rate cut from the ECB, European stocks are now heading lower. This is the seventh consecutive day of declines seen in Europe. Also tonight, Asian stocks tumbled almost 5%, after a report in Japan showed that machine orders fell the most on record. U.S. futures are also pointing to a negative start on Wall Street.
It now looks like investors are again focusing upon the real economy. However, this time things appear a little different. The major central banks are near the limit of monetary policy, while the stock market has probably valued in every stimulus plan the Government might come with. Still, the latest reports point to a marketable deterioration on the world's outlook.
In the last 2 days, Mr. Bernanke had to rename quantitative easing into credit easing, saying that the Fed would focus on its assets side, rather than on the liability side, the same as the BoJ did. However, the asset side is equal with the liability side on the Fed's balance sheets, so instead of the Chairman presenting something new, we are playing a semantic game. Also coming from the Fed, the latest report of the Beige Book confirms that things in the financial sector may get worse going forward.
Tonight, the Nikkei fell 415.15 points (4.92%) to 8,023.31. The Australian S&P/Asx lost 157.50 points (4.27%) to 3,529.50. The U.K. Ftse tumbled 70.33 points (1.68%) to 4,110.31, while the German Dax loss 72.89 points (1.65%) to 4,349.46.
Crude oil is trading near the $36 area again, after oil supply reached a 16-month high. Crude oil for February delivery fell $0.80 to $36.40.
Gold moved very little in the Asian session. Bullion for immediate delivery rose $0.60 to $809.40.
Previous Asian trade: Following the very weak retail sales report, equity markets around the world are surrounded by red. The U.S. markets posted tonight the biggest decline from the last period, while the Asian stocks fell to the lowest value seen in the last 5 weeks.
There were two key reports tonight that might have made the bulls change camps. The U.S. retail report showed that sales fell for six consecutive months in December, making it the worst Holiday season in the last four decades. Retail sales were forecasted to fall by 1.2%, instead of the printed 2.7%.
Also tonight, a report showed that machine orders plunged in Japan by 16.2% in November, the most on record. A huge decline in machine orders is detrimental to a country where the whole economy is based on technology exports. The report shows that the Japanese corporate environment cuts back on its spending, which also does not help the economy.