Vang SJC

Yesterday, the EUR/USD down in a tedious session because US markets closed for a holiday. Ending the session, the pair closed at $1.08889, down 0.28% compared with the opening price $1.09199.

Fundamental analysis

Fundamental analysis

Data from the National Bureau of Statistics showed that industrial output in China rose 5.9% in December from a year earlier, slowing from 6.2% growth in November. Industrial production, a rough proxy for economic growth, slightly undershot the median 6.0% growth forecast. The softer-than-expected output data points to continued weakness in factory activity at the end of a year in which China marked its slowest economic growth in 25 years. Month-on-month, industrial output increased 0.41% in December from November. For the full year of 2015, industrial output grew 6.1%, slower than an increase of 8.3% in 2014.

Fixed-asset investment in non-rural areas of China climbed 10.0% last year, compared with an increase of 10.2% for the first 11 months of the year. The rise in the closely watched indicator of construction activity was below economists’ median forecast for a 10.2% gain.

Retail sales grew 11.1% in December from a year earlier, slowing a bit from a 11.2% increase in November, also missing economists’ median forecast of a 11.2% rise for December. Retail sales rose 10.7% in 2015, compared with growth of 12.0% in 2014.

Downward pressure on industry threatens to spread to consumption and services. The market expects that policy makers would issue further monetary easing although it would spur more weakness in the yuan and additional capital outflow. The economy need a transitions from a reliance on manufacturing and investment to services and consumption. This may complicate the fragile balance between carrying out reforms and maintaining growth.

According to the median of economist estimates, the world’s second-largest economy will slow to 6.5% this year and 6.3% next year.

Last year, the authorities had to accelerate monetary easing with six interest-rate cuts since late 2014 and increased fiscal spending. This year, attention is likely to turn more to a new focus on supply-side reforms such as slashing excess industrial capacity and labor in state enterprises, cutting taxes and boosting productivity.

Asian equities fluctuated at a three-year low as investors weighed weaker-than-estimated Chinese economic data against prospects for increased stimulus.

Oil traded around $29 a barrel in New York as Iran issued an order to boost production in an already oversupplied market. Iran’s oil ministry gave directions to increase output by 500,000 barrels a day after international sanctions were lifted. In its monthly market report, OPEC forecast a steeper drop in supplies from rival producers as prices slump. Therefore, oil price has been supported in today session and up 1690 points compared to the open price.

Today in the Eurozone, center of attraction will be ZEW Economic Sentiment Survey in January. It’s a leading indicator of economic health – investors and analysts are highly informed by virtue of their job, and changes in their sentiment can be an early signal of future economic activity.

Recent updates provide some encouragement based on numbers through last year’s close. The ZEW expectations index has rebounded recently while the current situation data has been stable. German economy is in a healthy condition with conspicuous clues include the country’s 1.5% GDP increase last year, price stability with 0.3% inflation; record employment; and a fiscal surplus. But today’s January figures are expected to weaken amid the negative effect from stock market instability all over the world.

The debate about Europe’s inflation trend will be front and centre again today, thanks to the release of revised numbers on prices for December. In the previously released flash estimate headline inflation remained subdued, rising a tepid 0.2% vs. the year-earlier level in last year’s final month. That’s an improvement over the mild deflationary dip last September, but it’s still too low to inspire confidence that the danger has passed.

A firmer profile emerges with the core numbers – inflation increased 0.9% after excluding the volatile food and energy components. That’s roughly in line with the recent trend, and a clue for thinking the weak readings on headline inflation are primarily a function of the bear market in commodities.

ZEW Economic Sentiment of Eurozone is expected to reach 27.9, the lowest level from December 2014 which show the fear of deflation due to the slide in oil price.

The main event for US economic data is housing – residential construction figures for December are due out tomorrow. Meantime, today’s update on sentiment in the home building industry via the Housing Market Index will offer a timely clue on what’s coming.

The past two monthly HMI reports reveal some weakness, but in the context of mild dips in November and December after reaching a 10-year high in October. “For the past seven months, builder confidence levels [via HMI] have averaged in the low 60s, which is in line with a gradual, consistent recovery,” the chief economist at the National Association of Home Builders said last month.

Today’s HMI release for January is expected to reach 61, the same level to December’s.

Technical Analysis

Technical Analysis

Currently, at 14:52 GMT+7, the pair is trading at $1.08680, down 0.2% from the opening price of $ 1.08891.

Deriving from chart H4, the pair has slid from the beginning of the week and closed in red in 8 out of 9 candles. ADX indicator (The Average Directional Index (ADX) measures trend strength without regard to trend direction while the other two indicators, Plus Directional Indicator (+DI) and Minus Directional Indicator (-DI), complement ADX by defining trend direction) is 24 which shows that the pair has confirm the downtrend. The ADX line has been above both +DI line and -DI line, and the -DI (the white line) is above the +DI (the yellow line), indicating a clear direction that prices are moving down.

jan 19 h4 tech

Regarding chart H1, the pair had been in sideway in yesterday session before continued the downtrend in recent hours. The RSI is approaching 30 level, an indication that the asset may be getting oversold and therefore likely to become undervalued. Once hitting under this level, the price may bounce back.

Fibonnaci retractment showing the pair is currently trading under 38.2 level at $1.08786 and moving toward the 50.0 level at $1.08464. However as we can see, the 38.2 level has acted a strong support in yesterday session and the first half of Asian session. Therefore, the pair is likely to bounce back to this level and even go up further.

jan 19 h1 tech

MUAEA Signal Trend tool which showed selling signals from yesterday, is currently earning 262 points and continuing to signal selling today.

Sentiment Analysis

Sentiment Analysis

According to chart H1, price was moving sideways in early trades today. The first two candles with long shadow and short body indicates that price was about to reverse. The bullish side tried to rein in the next candle but could not make it last. The pair was up 217 points before the bear overwhelmed when price plunged in the next five consecutive candles.

jan 19 h1 sentiment

RISKS

Risk

In the monthly report in global oil demand and supply released by the International Energy Agency (IEA) today, the warm winter weather around the world and the rise in Iran’s oil export will cut down the global oil demand growth to a one-year low of 1 million barrels per day in the fourth quarter of 2015, down from a near five-year high of 2.1 million barrels/day in the third quarter. With the world economy slowing, the IEA said it had cut its forecast for 2016 OPEC crude oil demand by 300,000 barrels/day to 31.7 million barrels/day, as proven the weak demand. The low oil price hurt the inflation expectation, which weighed on the Fed rate hike. Just one of the two key missions has been achieved, while inflation finds it hard to get through the target 2%, thus cast shadow on the dollar, and then push the currency pair up.

The data of the housing market index published later, if the figures remains flat, the prospects of raising interest rates will be dented. However, this supports for the upward trend of the pair.

Linh Nhan