MNI China Daily Summary: Wednesday, December 11

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CORRECTED-MNI BRIEF: Brazil Inflation Rises To 4.87% In Nov

MNI: US NOV CPI 0.3%, CORE 0.3%; CPI Y/Y 2.7%, CORE Y/Y 3.3%

MNI: US NOV SUPERCORE CPI (CORE SERVICES EX-HOUSING) 0.342%

MNI: US NOV CPI UNROUNDED M/M 0.313%, CORE 0.308%

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Equities Rally Weighs Modestly On Greenback, USD Index Remains +0.85% on Week

FOREX
  • A significant shift higher for US yields this week sees the USD index set to close 0.85% in the green. A mid-week dip in equity sentiment briefly prompted the DXY to extends the week’s advance to 1.2%, although the more stable backdrop has prompted a moderate paring of gains over the past two sessions. With yield differentials the key focus, the greenback’s advance has been most notable against the Japanese Yen, with USDJPY up a further 2.3% this week.
  • This week’s USDJPY gains resulted in a break of 146.41, the Jan 11 high, confirming a resumption of the bull cycle. The move higher opens 149.16 next, a Fibonacci retracement. On the downside, a key short-term support has been defined at 144.36, the Jan 12 low. Clearance of this level is required to signal a top. Initial support moves up to 147.08, the Jan 17 low.
  • Ahead of the ECB next week, it is worth noting that EURUSD maintains a short-term weaker tone. The week’s move lower has resulted in the break of a trendline drawn from the Nov 1 low, signalling scope for a continuation of the corrective cycle. Note that key support at 1.0877, the Jan 5 low, has been pierced. A clear breach would further reinforce bearish conditions and open 1.0793, a Fibonacci retracement. Resistance is at 1.0998, Jan 5 high. A break would signal a reversal.
  • After a subdued couple of sessions for G10 FX overall, markets will be paying attention to the Bank of Japan decision and New Zealand CPI on Tuesday. Focus then quickly turns to European flash PMIs and the BOC on Wednesday. The action continues on Thursday with the European central bank decision and press conference, as well as the advanced reading of Q4 US GDP, which will include an estimate of Dec core PCE.
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