USD teeters, not yet toppled

The G-10 rundown

USD – some broad US dollar measures have broken down through pivotal levels, though not the USD index, and a look at EURUSD reminds us that that this key pair has not torn free of the range- would like to see it clear of 1.1500 and rising to suggest a USD bear market is firing on all cylinders, to mix a metaphor.

EUR – the euro is sharply weaker in the G10 small crosses though this looks like a mirror image of equity market developments – not sure there is any other angle driving that development. Not enthused about the euro as a top performer in any scenario for now and for a turn back lower in risk appetite again, interested in whether EURJPY pivot around 125.00-50 holds. Just out before posting: German Industrial production dropped 1.9% month on month in November, taking the year-on-year figure to -4.7%, the worst since 2009. This is terrible news.

JPY – JPY crosses gyrating in sympathy with risk appetite for now after last week’s flash crash. Would expect the G10 small JPY crosses, especially AUDJPY, to trade with the most beta to risk appetite as they have for the last couple of weeks.  See this op-ed piece from William Pesek on the BoJ’s ugly dilemma for more.

GBP – Therese May is supposedly looking at options for curtailing the risks of a no deal after a vote on her likely ill-fated deal next Tuesday, perhaps providing sterling support at the margin. Even with a rejection of May’s deal, surely the EU and UK will hammer out some sort of deadline extension with status quo conditions. Sterling traders’ safest option is to sit on their hands.

CHF – EURCHF is on a slow jagged path lower as the big 1.1200 level approaches – wouldn’t  a sustainable move below that level require fresh hot existential risks or ugly turns in Brexit?

AUD – expecting the Aussie to trade with high beta to risk appetite. The November building approvals data tonight likely to show another steep decline and remind us that Australia’s housing bubble unwind has the added risk of having created too much new construction as at one point, more cranes were said to be active in Australia than in all of the US.

CAD - looks like CAD bears getting caught offside ahead of the Bank of Canada tomorrow, which will deliver no rate hike and likely remains very cautious on the outlook.

NZD – the kiwi is neutral here –likely to trade weaker than AUD if risk appetite extends aggressively higher and/or on positive China or US/China trade developments, but stronger than AUD if the latter weakens on the opposite set of developments.

SEK – EURSEK wants to look lower, but really the SEK performance has disappointed, given the scale of the rebound in risk appetite – may be due to the distraction of a hard charging NOK and NOKSEK flows.

NOK – EURNOK interacting with the pivotal 9.75-80 area – needs to fully take this out to suggest  a full reversal of the upside risk. 

Upcoming Economic Calendar Highlights (all times GMT)

1000 – Eurozone Dec. Confidence Surveys
1330 – Canada Nov. International Merchandise Trade
2130 – Australia Dec. AiG Performance of Services Index
0030 – Australia Nov. Building Approvals