Daily market outlook, January 13, 2020

Main market themes

• Markets are trading higher at the start of the new week with the Asian market up this morning. This comes ahead of the expected signing of a ‘phase one’ trade deal between the US and China, but also reflects some relief that events surrounding Iran have failed to escalate
• Market retreated from record highs on Friday on weak job data. The Dow Jones briefly breached 29,000 for the first time but pulled back to lose 0.5% DOD at 28,823.77 whereas the S&P500 and NASDAQ slipped by 0.3%.
• December NFP job gain came in at 145k, below analyst estimate of 160k and was accompanied by a 14k net downward revision to previous two months’ numbers.
• Demand for safe haven assets returned pushing down US bond yields by 1-5bps and leading gold to recover 0.65% to $1,562.34/troy ounce. Crude oils slid around 0.6-0.9% where Brent crude closed the week at $64.98/barrel. Major currencies were little changed against the dollar and were kept around recent ranges; AUD was the winner on Friday following upbeat retail sales data.
• Secretary Steven Mnuchin announced that the US is imposing sanctions on Iran after the latter carried out an attack on US forces in Iraq. On the trade front, the WSJ reported that the US and China have agreed to restart the semi-annual talks aimed at resolving economic disputes. The decision will be announced officially during the 15 Jan signing of the phase one trade deal at the White House.
• The investment community took a big step against the USD seen in the latest round of CFTC data release. Non-commercial and leveraged accounts cut down their implied long USD bias aggressively, while the asset managers also deepened their implied short USD bets.
• The US has a busy week ahead again. December CPI is on Tuesday, whilst December PPI is on Wednesday. December import prices on Thursday will also give further insight on the inflation backdrop. Retail sales data for December will be rolled out on Thursday, and the preliminary January Michigan consumer sentiment index data due on Friday.
• In the Eurozone, November industrial production is out on Wednesday. On the same day, November trade balance data will be released. On Friday, the European Central bank (ECB) will update the current account surplus, and the Eurostat should confirm the final HICP inflation reading at 1.3% at both core and headline level.
• For the UK, the week kicks off with the delayed November GDP update on Monday. On Wednesday, CPI inflation for December will be due, whilst Friday sees retail sales for December. Meanwhile, the Bank of England (BoE)’s Credit Conditions Survey on Thursday may prove to be a more important ingredient to the looming MPC meeting at the end of the month.
• The economic docket remains thin for both Japan and Australia. That said, Chinese data releases this week start with its December trade data (Tuesday). More importantly, China will release its 4Q19 numbers on Friday. According to the Bloomberg survey, Chinese GDP growth is expected to be at 6% y/y in 4Q (unchanged from 3Q), bringing full year growth to 6.1% in 2019 (easing from 6.6% in 2018). Other notable data includes China’s December retail sales, industrial production, unemployment rate, and fixed asset investments

Today’s Options Expiries for 10AM New York Cut (notable size in bold)

• EURUSD: 1.1095 (EUR528mn); 1.1100 (EUR993mn); 1.1120 (EUR854mn); 1.1130 (EUR740mn)
• GBPUSD: 1.3100 (GBP877mn); 1.3170 (GBP587mn); 1.3200 (GBP713mn)
• USDJPY: 109.45 (USD400mn); 110.55 (USD430mn); 111.00 (USD361mn)
• AUDUSD:  0.6850 (AUD613mn)

EURUSD (Intraday bias: Bearish below 1.1150 Bullish above)

From a technical and trading perspective, trapped between pivotal 1.11 and 1.1150, as 1.1150 caps corrections sellers will target a sustained breach of 1.11 en-route to a symmetry swing objective sited at 1.1040. If we can get a close above 1.1150 that would suggest a base at symmetry swing support and open a retest of cycle highs at 1.1239

GBPUSD (Intraday bias: Bearish below 1.3060 target 1.2930)

From a technical and trading perspective, another failure below 1.3150 opened anticipated test of bids below 1.3000, as 1.3060 caps corrections to the upside look for a test of bids and stops below 1.2950. Only a close above 1.31 would suggest a delay to downside objectives

USDJPY (intraday bias: Bullish above 108.65 targeting 110.50)

From a technical and trading perspective, the breach of 109.50 provides a window for upside extension to challenge the 110.50 equidistant swing objective.Only a failure back below 109 would suggest another upside false break and return to well trodden range

AUDUSD (Intraday bias:Bullish above .6940 Bearish below .6870 below)

From a technical and trading perspective, anticipated test of .6840 plays out as does profit taking here as we test symmetry swing support. There is a window for prices to base here and develop a platform for a correction to retest .6940 from below, a closing breach of this level will encourage bullish sentiment

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