OVERNIGHT DATA AND HEADLINES
• Crude prices slid and equity markets around the world set new highs as investors took on greater risk in a relief rally after the United States and Iran moved to defuse escalating tensions in the Middle East. Gold prices retreated further from a near seven-year peak, while the safe-haven JPY fell to more than a one-week low against the USD.
• U.S. President Donald Trump said his administration will start negotiating the Phase 2 U.S.-China trade agreement soon but that he might wait to complete any agreement until after November's U.S. presidential election. "We'll start negotiating right away Phase Two. It'll take a little time," Trump told reporters at the White House. "I think I might want to wait to finish it till after the election because by doing that I think we can actually make a little bit better deal, maybe a lot better deal."
• US jobless claims fell to 214,000 Jan 4 week (consensus 220,000) from 223,000 prior week.
• U.S. stocks hit record highs as Middle East tensions eased, optimism about a U.S.-China trade deal firmed and several brokerages boosted price targets on high-profile companies. Dow Jones up 0.71% at 28,950, S&P 500 up 0.60% at 3,272 and the Nasdaq up 0.77% at 9,199.
• The U.S. DXY index was 0.2% higher on the day at 97.45 (from 97.20).
• The Swiss franc remained slightly elevated, which slipped 0.2% to 0.9721.
• EUR continued to plumb new lows, breaking below 1.1100 at 1.1092.
• GBP fell another leg further, from 1.3124 down towards 1.3011. Bounced back up to 1.3063.
• USDJPY fell to two-week lows - last up 0.37% at 109.57 (highest since Dec. 27).
• China's yuan rose to a five-month high of 6.9175 in the offshore market, boosted by a steady inflation readout.
• AUD fell from 0.6875 highs back towards 0.6850 support level, unable to make any further gains overnight.
• NZD made fresh new lows, selling off towards 0.6600 (0.6598 low).
• AUDNZD bounced from 1.0325 lows up towards 1.0385 on the aggressive NZD selling.
• AUDEUR remained in a 15 point range between 0.6165 / 0.6180.
• The selloff in Treasury bonds accelerated on a strong weekly jobless report & strong demand at a $16 billion auction of 30-year bonds.
• The 10-year Treasury yield has swung nearly 20 basis points this week on the headlines, last trading down 1.4 basis points at 1.860%.
• The 30-year bond yield was down 2.3 basis points at 2.337%. The two-year yield last down 0.7 basis point at 1.576%.
• Government borrowing costs across the euro zone rose to one-week highs - benchmark German Bund yield rose to a one-week high of -0.22%, up 4 basis points on the day.
• Gold fell, having surged past the key $1,600 level for the first time in seven years in the last session. Spot gold fell 0.6% to $1,546.33 per ounce (earlier slipped to $1,539.78 an ounce).
• China's iron ore futures retreated from its more than five-month high close in the previous session, as supply concerns eased. Weighing on prices further were shipments to China from Australia's Port Hedland terminal - world's biggest iron ore port, which rose more than 12% in December from a month earlier. Prices for spot cargoes of iron ore with 62% iron content for delivery to China rose to $96.2 per tonne.
• Copper prices scaled one-week highs, supported by easing tensions in the Middle East, China confirming it would sign a preliminary trade deal with the United States next week and expectations of stronger Chinese demand. Benchmark LME copper touched a session high of $6,213.50 before closing at a steady $6,180 a tonne.
• Oil prices retreated further after sharp losses in the previous session, Brent crude futures settled down 5 cents at $65.37 a barrel. WTI crude fell 7 cents to $59.56 after sliding nearly 5% the previous day.
ECONOMIC DATA TODAY
• Australian Economic data today - November retail sales (last 0.0%, market f/cast 0.4%). "BlackFriday" boost to volumes - but on heavy discounting.
• China - Dec new loans & Dec M2 money supply
• UK - Nov trade balance £bn (last –5.2). A weak UK economy to weigh on import demand.
• US - Dec non–farm payrolls (last 266k, market f/cast 164k). Continue to expect employment growth to slow
• US - Dec unemployment rate (last 3.5%, market f/cast 3.5%).
• US - Dec average hourly earnings 0.2% (Wages growth is expected to hold around 3.0%yr in 2020)
AUD pared minor gains overnight as it struggled to find direction during the offshore session falling back towards 0.6850 support.
Yesterday, ABS data revealed that Australia's trade surplus widened to 5,8 billion AUD from 4.5 billion AUD in October but came in below the market expectation of 5.9 billion AUD.
Much of the sharp improvement in the trade position had been due to resources exports but the weak AUD also helped services exports, while soft domestic growth has kept a lid on imports.
In the meantime, the inflation data from China stayed unchanged at 4.5% on a yearly basis in December and missed analysts' estimate of 4.7%.
With the USD extending its rebound overnight currencies continue to struggle with EUR & GBP leading the charge lower.
Today we have Australian retail sales release for the month of November – market looking for a jump towards 0.4% from 0.00% in the month of October.
Tonight markets focus will be on the U.S. non-farm payrolls report, with forecasts of 164,000 new jobs in December, from 266,000 the previous month. Unemployment rate to remain at 3.50%.
Focus is expected to shift back to the global economy next week, with expectations the U.S. and China will sign a trade deal next week providing underlying support for risk assets. China's Vice Premier Liu He, head of the country's negotiation team in the Sino-U.S. trade talks will visit Washington on Jan. 13-15, Gao Feng. Markets believe the deal will clear one of the world economy's biggest uncertainties and help boost global growth this year, although some think that view is too optimistic.
For today, watching retail sales release for any major deviation from forecast. It’s all quiet then until the Non farm payrolls data overnight. A good number likely to see AUD selling interest down towards 0.6800 levels.
AUD magnetic 55-DMA (0.6867) gives way to bears - AUD drifts lower & nears 0.6850 but little bounce seen.
AUD hovers above the 50% Fibonacci level (0.6849) of 0.6670-0.7032, Dec 19 low late in the day.
Daily, monthly RSIs falling & not oversold; implies downside momentum intact.
Dec 10 low, daily cloud and trendline sit @ 0.6800-0.6825 which will provide next level of support / selling interest.
US Dec. jobs data looms (tonight) - an upbeat result likely to drive AUD lower near 0.6800.