Dollar Holds its Rebound

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Market Drivers January 18, 2018
AU Employment data mildly better
CNY GDP beats
Nikkei -0.44% Dax 0.33%
Oil $64/bbl
Gold $1328/oz.
Bitcoin $10800

Europe and Asia:
AUD AU Employment 34K vs. 9K
CNY GDP 6.8% vs. 6.7%

North America:
USD Weekly jobless claims 8:30
USD Housing Starts 8:30
USD Philly Fed 8:30

After yesterday’s massive breakouts in late NY afternoon, today Asian session trade was decidedly more subdued with the dollar continuing its recovery but other majors treading water all night long.

US yields continued to rise with 10 years popping above the 2.60% barrier while the 2 years hit their highest level since 2008. The surge in yields has helped the dollar recover with USDJPY trading firmly above the 111.00 all night long, but the pair ran into resistance at the 111.50 level and that will the next price point for dollar bulls to overcome if the pair is to establish a near-term bottom for now.

In overnight news, Australian employment data beat to the upside printing at 34K vs. 9K eyed as labor conditions Down Under continue to show robust growth. Aussie popped on the news but quickly retreated as the .8000 level is proving to be formidable resistance to bulls. Although the job picture in Australia shows steady improvement, wage growth remains subdued and RBA is likely to remain resolutely neutral especially with the currency trading near the .8000 level.
In China, the GDP numbers also beat forecast printing at 6.8% vs. 6.7% eyed. Overall the data showed that Chinese economy continues to perform well, generating 13 million jobs last year with urban unemployment now below 5%.

With no data in European trade and only 2nd tier housing and Philly Fed data in NY session, there are no funda catalysts for trade today. However, the markets will no doubt keep an eye on proceedings in Washington DC where the continuing resolution for US budget has not been passed as Friday’s deadline looms large. Any news of a last-minute compromise should prove positive for the dollar which has been weighed down by political risk concerns. A deal could see the pair gun for the 112.00 level while a new government shutdown – especially if it becomes a bitter standoff, could hurt investor sentiment and send USDJPY to a fresh test of 110.00

Boris Schlossberg
Managing Director

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