The dollar was a poor performer overnight after the ECB minutes kicked off 2018 with a hawkish tilt, reminding markets that it is not just the Fed that we need to monitor, albeit moving on from the BoJ's JGB tapering concerns that were perhaps overblown. Despite that, the USD/JPY bulls could not maintain traction on the bid and the downside taps were open when the long-dated auction later in the NY shift weighed on US 10yrs. US 10yr treasury yields initially rose from 2.53% to 2.57% on the back of the ECB minutes and a sell-off on Bunds and Chinese officials denying the Bloomberg story, but they later completely retraced on the long-dated auction.
For the day ahead, markets look to US CPI and to a lesser extent, retails sales.
US CPI and retail sales previews
CPI preview: expect a strong rebound? - Nomura
- "We expect a strong rebound of 0.3% (0.271%) m-o-m in core CPI in December (Consensus: 0.2%) following a disappointing reading of 0.117% in the previous month," - Nomura
Retail sales preview: what to expect? - Nomura
- "We expect a robust 0.6% m-o-m increase in nominal core (“control”) retail sales in December (Consensus: 0.4%). Against the backdrop of low unemployment and elevated consumer confidence, consumer spending in December was likely strong," - Nomura
Valeria Bednarik, chief analyst at FXStreet explained that the pair maintains its bearish tone according to technical readings in the 4 hours chart:
"It holds well below its 100 and 200 SMAs, with the shortest gaining traction downward above the larger, and with technical indicators resuming their declines near oversold readings. "An immediate support comes at 111.83, November low, with a break below this last, opening doors for an extension toward the 110.00 figure."
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