Euro zone CPI on the soft side

Forex News and Events

Brazil economy stuck in the mud (by Arnaud Masset)

According to the BCB’s latest weekly economist survey - the median forecast were pretty stable over the past few weeks - the Brazilian economy is expected to have contracted by 3.71% in 2015. However, the GDP expected growth for 2016 continues to be systematically revised lower weeks after weeks, as the country is paralysed by the impeachment process and the government’s failure to pass much needed austerity measures.

The bottom in the Brazilian economy has been consistently revised lower throughout 2015 as the political chaos reached unexpected proportion, peaking with the start of the impeachment process and the resignation of Joachim Levy. We believe the situation will continue to give cause for concern over the first half of 2016 as sufficient time is required to sort things out. USD/BRL closed above the 4.00 mark in Sao Paulo yesterday in spite of an unexpected collapse of imports in December. Imports printed at $10.5bn versus $11.2bn expected and $12.6bn in November while exports came in also slightly below expectations, printing at $17.3bn versus $16.8bn median forecast. All in all, the trade surplus reached $6.24bn verse $6bn consensus, up from $1.2bn in November. The pressure on the real should remain high as long as the uncertainty exacerbated by the political crisis persists.

Eurozone CPI disappoints (by Yann Quelenn)

Draghi has announced that he will do “whatever it takes” for the Eurozone to pull up inflation towards the target. In 2016, the ECB forecast that average inflation will be 1% and 1.6% for 2017. At the last meeting on December 3, it was decided to slash the deposit rate by 10 basis points to -0.3% in an attempt to weaken the single currency to boost overall economic growth through exports. In addition, the central bank has declared that lingering low commodity prices will continue supporting household disposable income and drive private consumption. However, we think that the ECB is too optimistic as the December core CPI, released at 0.9% y/y below expectations this morning (which excludes energy prices) remains well below the inflation target. Should oil prices increase, we remain very suspicious of the validity of this theory validates our analysis that a further increase of the QE stimulus will happen this year. On the medium-term, we remain bearish on the single currency.

EUR/JPY - Breaking Support At 129.67.


Today's Key Issues	Country/GMT
Dec Manufacturing PMI, last 47,6, rev 47,5	NOK/08:00
Dec Unemployment MoM Net ('000s), exp -50, last -27,1	EUR/08:00
Dec Unemployment Change (000's), exp -8k, last -13k	EUR/08:55
Dec Unemployment Claims Rate SA, exp 6,30%, last 6,30%	EUR/08:55
Dec CPI Brandenburg MoM, last 0,00%	EUR/09:00
Dec CPI Brandenburg YoY, last -0,10%	EUR/09:00
Dec Markit/CIPS UK Construction PMI, exp 56, last 55,3	GBP/09:30
Dec CPI Estimate YoY, exp 0,30%, last 0,20%	EUR/10:00
Dec A CPI Core YoY, exp 1,00%, last 0,90%	EUR/10:00
Dec P CPI NIC incl. tobacco MoM, exp 0,10%, last -0,40%	EUR/10:00
Dec P CPI NIC incl. tobacco YoY, exp 0,20%, last 0,10%	EUR/10:00
Dec P CPI EU Harmonized MoM, exp 0,20%, last -0,50%, rev -0,40%	EUR/10:00
Dec P CPI EU Harmonized YoY, exp 0,40%, last 0,20%	EUR/10:00
Canadian Banks' Chief Economists Give 2016 Economic Outlook	CAD/12:30
Nov Industrial Product Price MoM, exp 0,10%, last -0,50%	CAD/13:30
Nov Raw Materials Price Index MoM, exp -2,50%, last 0,40%	CAD/13:30
Dec ISM New York, last 60,7	USD/14:45
Dec Foreign Reserves, last 483,9	DKK/15:00
Dec Change in Currency Reserves, last -7.7b	DKK/15:00
Dec Foreign Reserves, last $368.46b	KRW/21:00
Dec AiG Perf of Services Index, last 48,2	AUD/22:30

The Risk Today

Yann Quelenn

EUR/USD is trading sideways around 1.1000. Hourly support at 1.0796 (07/12/2015 low) has been broken as expected. Stronger support lies at 1.0524 (03/12/2015 low). Hourly resistance may be found at 1.1096 (28/10/2015 low). Expected to further decline. In the longer term, the technical structure favours a bearish bias as long as resistance holds. Key resistance is located region at 1.1453 (range high) and 1.1640 (11/11/2005 low) is likely to cap any price appreciation. The current technical deteriorations favours a gradual decline towards the support at 1.0504 (21/03/2003 low).

GBP/USD is heading lower. Hourly support at 1.4694 (04/01/2015 low) has been broken. Hourly resistance is given at 1.5242 (13/12/2015 high). Stronger resistance can be found at 1.5336 (19/11/2015 high). Expected to further decline. The long-term technical pattern is negative and favours a further decline towards the key support at 1.5089 , as long as prices remain below the resistance at 1.5340/64 (04/11/2015 low see also the 200 day moving average). However, the general oversold conditions and the recent pick-up in buying interest pave the way for a rebound.

USD/JPY selling pressure continues. Short-term technical structure suggests a stronger downside momentum. Hourly support can be found at 118.07 (15/10/2015 low). Hourly resistance lies at 123.76(18/11/2015 high). Expected to further decline towards hourly support at 118.07. A long-term bullish bias is favored as long as the strong support at 115.57 (16/12/2014 low) holds. A gradual rise towards the major resistance at 135.15 (01/02/2002 high) is favored. A key support can be found at 116.18 (24/08/2015 low).

USD/CHF's uptrend momentum is still lively. Support is located at 0.9876 (14/12/2015 low). Hourly resistance can be found at 1.0034 (04/12/2015 high). The short-term technical structure shows an upside move. Expected to further increase. In the long-term, the pair has broken resistance at 0.9448 and key resistance at 0.9957 suggesting further uptrend. Key support can be found 0.8986 (30/01/2015 low). As long as these levels hold, a long term bullish bias is favoured.

Resistance and Support:


EURUSD	GBPUSD	USDCHF	USDJPY
1.1561	1.5659	1.1138	135.15
1.1387	1.5529	1.0676	125.86
1.1095	1.5336	1.0328	123.76
1.077	1.4793	1.007	118.98
1.0524	1.4679	0.9786	118.07
1.0458	1.4566	0.9476	116.18
1	1.4231	0.9259	115.57

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