Bund drops and Euro advances as ECB could turn less dovish

• US indices extended their gains as the bull market does not want to take a break and risk appetite lifted all major indices in unchartered territory.  Nasdaq Composite is up 4.47% YTD while DJIA advanced 3.46% YTD and S&P500 rose 3.51% YTD.  In Europe the Italian FTSEMIB is overperforming other continental gauges as it is up 6.64% YTD or 7.02% in US dollars. 68.3% of shares traded on AMEX, Nasdaq and NYSE closed above their 200 day moving averages.

• In the FX market EURUSD rose 0.7% to 1.2032 as the December monetary policy meeting account released yesterday suggested that the ECB could became less dovish.  The ECB could change its forward guidance but it will be interesting to evaluate the impact of the ECB deleveraging balance sheet on Eurozone countries.  The German Bund dropped as its yield soared. The derivative of the 10 -Year Bund dropped to 160.31.  USDJPY closed at 111.26, down 0.16% and GBPUSD rose to 1.3538, up 0.22%.

• Gold closed at 1,322.44.85 $/oz, up 0.42% while silver closed almost flat at 16.98 $/oz. Crude Oil closed off its intraday high 64.74$/barrel at 63.80 $/barrel, with a gain of 0.36%,

 

Chart of the day

Germany 10 Year Bund February (Daily Timeframe)

Bund left its bullish channel, made a pullback and made a bearish leg yesterday that could continue to 159.78, thus it may make a 100% retracement of the bullish wave started in September. Beneath this level it could test 156.97. In case of a rally the derivative it may rise to 162.

 

Economic Calendar

Friday January 12, 2017  CET Time			Forecast	Previous
08:45	EUR	French CPI (MoM) (Dec	0.3%	0.3%
08:45	EUR	French HICP (MoM) (Dec)	0.1%	0.1%
09:00	EUR	Spanish CPI (YoY) (Dec)	1.2%	1.7%
09:00	EUR	Spanish HICP (YoY) (Dec)	1.3%	1.3%
14:30	USD	Core CPI (MoM) (Dec)	0.2%	0.1%
14:30	USD	Core CPI (YoY) (Dec)	1.7%	1.7%
14:30	USD	Core Retail Sales (MoM) (Dec	0.4%	1.0%
14:30	USD	CPI (MoM) (Dec)	0.2%	0.4%
14:30	USD	Retail Sales (MoM) (Dec)	0.4%	0.8%
16:00	USD	Business Inventories (MoM) (Nov)	0.3%	-0.1%
17:30	EUR	German Buba President Weidmann Speaks
22:15	USD	FOMC Member Rosengren Speaks

 

During the Asian session had been released Chinese Trade Balance that showed a surplus better than the consensus in December. Both import and export soared as the Chinese economy is still growing but less export oriented than in the past as consumption rose. During the European session will be released the French and the Spanish CPI. The most relevant data will be released during the US session as at the same time  CPI and Retail Sales figures might have the power to consolidate or to shift current market sentiment on most asset classes. BUBA President Weidmann will hold a speech on the occasion of the "Freiheitspreis der Medien" award in Rottach-Egern while FOMC Rosengren will hold a speech will hold a speech when FX market liquidity usually decreases.

 

Technical Analysis

EURUSD (Daily timeframe)

EURUSD rebounded on its 21 day MA and it could test soon area 1.2090. Above this static resistance the pair could rise to 1.222 and then to 1.2450.  In case of a retracement beneath the medium term trendline the pair could test 1.1660 and then its November low at 1.1554.

EURGBP  (Daily timeframe)

The rate made a pullback on its supply line, and at the same level there is also the 200 day MA.  Above 0.8930 the rate could rise to 0.90. In case EURGBP will retrace below 0.88 the support in area 0.8754 could became weak and the rate it may trade below this level.

NZDUSD (Daily timeframe)

The pair made a breakout of the medium term supply line that links lower highs and it may rise above 0.74 and then test the September 2017 top at 0.7555. Beneath 0.72 NZDUSD could test 0.7090 and then  0.70.