China’s Inflation Report
Inflation in countries experiencing rapid growth continues to be a developing economic story, in particular as some commodities continue to make new highs with apparently no end in sight. The January Producer Price Index in China rose above the 6.2% expectation to come in at 6.6% higher year over year (5.9% prior,) whereas the Consumer Price Index fell below the 5.4% increase expected at 4.9% (4.6% prior.) Both readings are high and continuing to grow and could eventually put the Chinese in a situation where they must curb growth and financing or deal with the consequences of out of control inflation. The USD had a muted reaction to the release.
RBA Meeting Minutes
The following are the RBA meeting minutes from January that after a momentary trade lower, has the AUD and risk pairs gaining a bid early in the Asian session, on the back of a more hawkish tone than the prior statement. The RBA had the following comments:
- Saw consumer caution easing price pressures.
- Retailers reported ‘highly value conscious’ customers.
- Underlying inflation in lower half of target at year-end.
- Saw more signs of ‘expected strong expansion’ in resources.
- Restrained spending, lower inflation offsets trade boost.
- Saw ‘slightly restrictive policy’ as still appropriate.
- Saw 1% point flood hit to GDP mostly recouped in June quarter.
- Medium term inflation outlook mostly unchanged.
- Spending restraint despite solid income growth.
- Signs of solid job growth, tighter labor market.
- ‘Stronger tone’ in condition of global economy.
- Weak retail spending led to ‘a little more disinflation.’
The Forex Day Ahead from FXDD
Today, I am pleased to introduce a new PDF report for our customers titled
“The Day Ahead from FXDD” (in PDF format). (CLICK ON THE LINK)
This report is a supplement to the newly created weekend report. The difference is this version is focused and intended for the next forex trading day. Use it as a handy reference. Print and save the reports with your trading blotter so you have a full history. I like to think of the report as reference guide so you can “Be Aware” and ”Be Prepared”
Included in the report is a:
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Graphical summary of the six most important economic releases over the next twenty-four hours,
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A snap shot of rates and intermarket rates from the current trading day (taken around 4 PM ET),
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A preview of other events on tap for the new trading day,
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A “Chart of the Day”, and
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A short written review of the current trading day.
There is also a section that outlines the upcoming FXDD Trading Educational Webinars which have become quite popular (Register for our next webinar and/or review an archived lesson by going to http://forex.fxdd.com/webinars ). All our welcome. They are free and are currently open to anyone.
This report is just another way for FXDD to provide quality and meaningful trading education and information to forex traders. If you would like to be included in the FXDD daily email distribution list, send me an email at greg@fxdd.com or if you just want to “weigh-in” with your comments (good and bad) on what you think, send me a note.
Kind regards,
Greg Michalowski
The FXDD Day Ahead Report and the FXDD End of Day Commentary
GBPUSD returns to resistance area in afternoon trade
The GBPUSD has moved back into a resistance band in between the 1.6023 to 1.6036 area. The level corresponds with an area of support and resistance over the last couple of weeks (see yellow area in the chart above). The price seems to be finding intraday sellers in the area as the up and down day continues.
Tomorrow the UK CPI data for the month of January will be released at 4:30 AM ET with the expectation for a rise to 4.0%. The Month on Month gain for is exected to be a modest 0.1%. However, although modest, CPI typically falls in January due to seasonal after-Christmas sales. This year, however, the rise in VAT and oil prices will likely keep the number positive. Inflation a full percentage point higher than the upper target bank of 3%, may be a worry to the market.
Howwever, what may be encouraging to the BOE and the market, is that over the next few months gains of 0.4%, 0.6% and 0.6% will fall out of the annual inflation calculation (in Feb, Mar and April repectively). As a result, the inflation concern may start to abate if 1% or more can be cut in short order. This is what the BOE is awaiting.
The risk is if the monthly numbers coming out higher than 0.2% during that time period. If this were to occur it will likely tilt the central bank toward tightening as inflation will then likely remain above 3% for the year and could see another spike to the upside when in May, June and July, a cumulative 0.1% falls out of the equation. 
Currently, the BOE is counting on a more normal inflation numbers. The verdict is out, but a 4% reading tomorrow would be alarming but would unlikely lead to action from the central bank.
The NY Midday Forex Commentary is available for viewing
USDJPY wanders toward trendline support at 83.21 area in quiet trading
The USDJPY is wandering lower in quiet NY trading. The trendline support comes in at the 83.21 level. A move below that line comes in at 82.93. The 100 hour MA comes in at the 82.87 (blue line in the chart above).
The pair has been moving higher of late. Last week, the price moved above they key 100 day MA (blue line in the chart below) and moved to trendline and 2011 high resistance against the 83.55 and 83.67 levels respectively (see daily chart). These levels will be the next key target levels to get through in order to keep the bullish trend moving. A move above will next target the 84.40-50 area.
Today Japan GDP came in better than expected. That combined with Japan exporters buying of JPY as they repatriated funds back to Japan, led to a decline in the USDJPY. The fall took the pair to support and the market reversed.
Fed’s Dudley on the Wires
Says:
- Predicts ‘substantial amount of slack in labor markets’
- New York Fed district economy paused in 4th quarter
- Sees signs of ‘pick-up’ in pace of U.S. economic growth
- U.S. housing industry ‘stuck at a very low level’
- New Jersey economy declined a bit through end of 2010
- Inflation, unemployment rates ‘unsatisfactory’
- Household deliquesces ‘begin to subside’
- Unemployment ‘remains stubbornly high’
- ‘Conditions are in place for stronger growth’
- Expects ‘continued stability in inflation expectations
- QE helping to spur U.S. economic growth
- U.S. economy ‘healthier’ but ‘not yet well’
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