Intraday Market Thoughts

Dollar Storms Back, China CPI

by Adam Button
Dec 9, 2014 23:48

The US dollar made a dramatic round-trip in New York trading in a wild day of trading. Yen shorts were squeezed across the board; AUD and USD were the laggards on the day. Up next, China releases CPI  and Australian releases housing finance data.

We warned about overbought yen crosses at the start of the week and that proved prescient as those positions were squeezed hard on Tuesday. USD/JPY fell as low as 117.95 – more than 250 pips on the day – before the bleeding stopped.

It was a quick turnaround later in the day as the pair rallied all the way back to 119.82 in a dramatic day of trading. The S&P 500 fell by as much as 26 points but rebounded to close nearly flat.

Days like this are part of trading and a reminder to manage risk and be prepared for opportunities. The key driver was China, where securities regulators announced tighter repo lending rules and after Monday's soft trade data.

In addition, Greece appears to be headed for an election in early Feb and there are signs of a global economic slowdown despite a pickup in the US.

On spot very few people were talking about Tuesday was oil and that's because prices stabilized around $63.50 despite the turmoil elsewhere. That suggests the forced selling may be done, at least for now. API supply numbers were bearish late on Tuesday, however, so official data on Wednesday could spark fresh selling.

Ideally, a bearish headline or two will hit oil in the days ahead and prices won't fall. That could be a sign, at least in the short-term, that a bottom is in. The main focus in Asia-Pacific trading will be Chinese stocks after the Shanghai Composite fell 5.4% on Tuesday. Inflation numbers are in focus with November CPI expected up 1.6% y/y but the risks are definitely on the downside due to falling commodity prices.

Otherwise, Japanese PPI data is due at 2350 GMT and Australian home loans are due at 0030 GMT.

Act Exp Prev GMT
Consumer Prce Index (NOV) (y/y)
1.6% 1.6% Dec 10 1:30
Consumer Prce Index (NOV) (m/m)
0% 0% Dec 10 1:30
Home Loans (OCT)
0.0% -0.7% Dec 10 0:30

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