|Tentative||JPY||Monetary Policy Statement|
|Tentative||JPY||BOJ Outlook Report|
|Tentative||JPY||BOJ Policy Rate||-0.10%||-0.10%|
|06:30||JPY||BOJ Press Conference|
|10:00||EUR||CPI Flash Estimate y/y||1.5%||1.5%|
|10:00||EUR||Core CPI Flash Estimate y/y||1.1%||1.1%|
|10:00||EUR||Prelim Flash GDP q/q||0.6%||0.5%|
|12:30||USD||Employment Cost Index q/q||0.5%||0.7%|
|14:00||USD||CB Consumer Confidence||119.8||121.1|
|19:30||CAD||BOC Gov Poloz Speaks|
Asian markets were mixed on Monday, with Chinese linked markets falling, while the rest of the region saw modest gains. After remaining quiet last week during the Communist National Party Congress, mainland China’s markets fell sharply Monday morning, as a selloff in the bond market had investors worried about deleveraging by the People’s Bank of China. Hong Kong and Singapore both followed the mainland lower. Meanwhile, technology shares across the region rallied in response to the solid earnings from Microsoft, Amazon, Alphabet and others late last week. South Korea’s Kospi ended higher on strength from Samsung, and the technology heavy Taiwanese market outperformed. A stronger Yen weighed on Japan’s Nikkei, so while technology shares performed well, exporters weighed on the index and at the close the Nikkei was basically unchanged.
European markets were higher on a broad basis, hitting a five month high, although there was some weakness on a country specific basis. The bulk of the broad based gains for the European Union came from Spain, where the IBEX 35 soared higher in response to Madrid ousting the current pro-independence lawmakers, and setting December 21 as the date for elections. Hundreds of thousands had taken to the streets in Catalonia on Sunday in support of the move, and the majority of those currently polled favor no secession for Catalonia. In London, the FTSE declined for the first time in three days as banks fell due to a weak earnings report from HSBC, and the home builders were weak after Barclay’s downgraded the sector. Investors are also becoming cautious ahead of this Thursday’s meeting of the Bank of England, as they fear the BoE will raise interest rates, but strike a dovish tone for the future.
U.S. markets declined Monday as investor sentiment was dented by news that the U.S. House of Representatives was considering dragging out the tax reform plan over four years, rather than implementing it fully immediately after passage. As this would dull the impact of the potential tax cuts it was viewed as a negative for equities. Both the Dow Industrials and S&P 500 suffered moderate losses, while the Nasdaq edged slightly lower as technology was one of the better performing sectors of the session. Investors are also preparing for the Federal Reserve monetary policy meeting results later this week, as well as President Trump’s choice for the next chair of the Federal Reserve.
The pair recently broke through what had been fairly solid resistance at the 113.00 level and rallied briefly above the 114.00 level. Monday saw the pair break down on news that the next Federal Reserve chairman may be a dovish candidate. The move lower saw the pair trade just a pip above the 113.00 level before bouncing slightly. Because we had resistance at the 113.00 level over several weeks it should now be a good support level, enabling trades off bounces as the pair is likely to retest that support in the coming days.
The pair responded to the bullish hammer candle from last Friday by rising on Monday as expected, but not enough to fully confirm adherence to the bullish candle. The pair ended the session just below the 0.7700 level that we would like to see breached to confirm the bullish reversal in response to the handle. That test will likely come on Tuesday, and traders should be ready to take positions based on their analysis around that key level.