Despite the easing of the Chinese inflation to 4.6% from 28 months high in November at 5.1% yearly, it could not sway the market from expecting further tightening actions from PBOC its Q4 GDP came up yearly by 9.8% and it was expected to be just 9.6% and also December retail sales of December rose by 19.1% while the markets were waiting for just 18.7% and December industrial productions came up by 13.5% and they were expected to be 13.3% which shows to the market that the economic growth in china is still strong which can open the door for further tightening in spite of the inflation up side risk easing worries in December lowering their demand for commodities which can effect negatively on both of Australia and New Zealand exports and GDP as well as they are the nearest markets to china which put pressure on the Aussi to reach .983 and the Kiwi to fall to .7525 from .7785 undermined by lower than expected December all industrial activities index release which came down by .1% while the markets were waiting for rising by .2% from declining by .2% in November and also import prices in December came down by 3.8% quarterly while they were expected to rise by .9% from .8% a quarter earlier thanks to the taken tightening actions in New Zealand.
The gold also as a mirror of inflation has come under pressure from the strong easing of CPI in China during December and also the better than expected weekly US inventories of the crude oil which rose by 2.6% from falling a week earlier by 2.2% while the markets were waiting for declining by 1.1% which weighed negatively on the oil prices and from other side, we have had new better than expected weekly initial jobless claim which came down to 404k and they were forecasted to be 425k from strong rising to 445k a weak earlier and also US existing homes sales of December which rose to 5.28m from 4.7m while the markets were waiting for 4.8 m monthly in December to be up monthly by 4.5% from 5.6% in November and also US leading indicator of December which was forecasted to be .7% from 1.1% in November and it could rose to 1% which suggest that the growth pace in US.
The gold has broken 1360$ supporting level and its next expected support is expected to be at 1329$ then 1315$ after it has been under pressure recently getting down below 1400$ by better growth outlook could contain the market sentiment bringing back the market confidence in the US economy and the risk appetite of the business spending in the greenback which had which is expected to be much credibly wanted this year having stronger yielding debt outlook.
The strong demand for the greenback could put pressure on the cable which was unable to gain further having strong footing on 1.60 psychological level after rising to 1.6058 on strong December inflation data retracing to 1.5835 as an intermediate support whereas I have mentioned in the recent reports that it has tried to form a new base at to continue ascending up and breaking down this level can expose it to fall further to 1.57 then 1.558 while the main supporting level is now at 1.534 where it was its recent bottom while the next resisting level can be at 1.6092 then its recent main top which has been formed in the beginning of last November at 1.6296 when the greenback was under pressure from the Fed's decision to add another 600b$ in another step of its QE policy for stimulating the economic growth in US.
God Willing, We wait today for UK retail sales of December to be down monthly by just .1% from rising by just .3% in November, after it had stronger than expected data recently as we have seen better than expected December UK jobless claimant change to -4.1k from -3.2k while the market was waiting for just -1.4k and strong inflation figures of December as UK CPI has reached 3.7% yearly while it was expected to be just 3.3% while the monthly figure has been 1% and it was expected to be just .7% after UK Jan Right move housing prices index has risen up by .3% after falling in December by 3% and RICS Housing prices balance had improved to -39 in December 2010 from -44 in November while it was expected to be just -42 to be in line with the recent MPC members meeting last week which has shown their worrying about inflation as UK CPI is still well above its 2% target and also above 3% in the recent months and it can accelerate further to 4% as we have seen UK CPI of December coming at 3.7% which can show that the UK economy is exposed to stagflation risks this year as it has become ruled out to have a new added funds to the BOE 200b Stg buying bonds plan, if there is a new tightening action from the MPC to come for fighting the inflation upside risks as Andrew Sentence the only MPC voting member who has called for hiking the interest rate by 25 basis points in their last meeting while the economy is not yet at the shape which does not need of its easing measures.
The cable rose to 1.6058 after the inflation data but it has retraced some of its recent gains to 1.594 and it is still expected to find intermediate support at 1.5835 where it has tried to form a new base for ascending up and breaking down this level can expose it to fall further to 1.57 then 1.558 while the main supporting level is now at 1.534 where it was its recent bottom while the next resisting level can be at 1.6092 then its recent main top which has been formed in the beginning of last November at 1.6296 when the greenback was under pressure from the Fed's decision to add another 600b$ in another step of its QE policy for stimulating the economic growth in US.
The single currency has eased back from above 1.35 versus the strong greenback after it has been still underpinned by the recent announced Russian consideration of buying Spanish debts which came after Japan had given a pledge for buying European bonds following China for restoring confidence in the European debt market.
The single currency could come over 1.35 for a while before easing back again to 1.345 versus the greenback as the market uncertainty about this week EU Financial ministers meeting in Brussels has been cleared out by their announcement about studying adding more funds to the EU and the IMF package for lending the EU debt ailing economies and ruling banking stress tests as in US for giving better transparent view to the markets about the current EU banking sector crediting position.
God willing, we wait now for the Germane IFO to continue rising in January after making new highs at 110.1 after reaching 109.9 in December, after the recent better than expected EU ZEW economic sentiment of January could reach 25.4 and the markets were waiting for 17.3 from 15.5 in December could help the single currency to get over 1.35 while the next supporting level is expected to be at 1.326 where it has dropped to this week and this level can be followed by 1.309 and then the recent bottom of the pair at 1.287 level.
Kind Regards
FX Market Strategist
Walid Salah El Din
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