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Top Stories

• Japanese data disapoints
• Italian auction better than expected
• Nikkei lower at -0.20% Europe flat
• Oil above $100/bbl
• Gold at $1586/oz.

Overnight Eco

• JPY Jobless Rate (NOV) 4.5% vs. 4.5%
• JPY Tokyo CPI YoY (DEC) -0.4% vs. -0.6%
• JPY Natl CPI YoY (NOV) -0.2% vs.-0.2%
• JPY Retail Trade MoM SA (NOV) 2.5% vs . 0.5%
• JPY Large Retailers' Sales (NOV) -2.5% vs. -1.6%
• JPY Industrial Production (MoM) (NOV P) -4.0% vs. -2.0%
• CHF KOF Swiss Leading Indicator (DEC) n/a

Event Risk on Tap

• USD MBA Mortgage Applications (DEC 23)

Price Action

• USD/JPY hits a new 7 day low at 77.70
• AUD/USD mildly higher at 1.0175
• GBP/USD flat 1.5660
• EUR/USD very quiet ahead of auctions at 1.3070

Much better than expected results from Italian T-bill auctions failed to move the currency markets as risk FX remained moribund for most of Asian and early European trade in extremely quiet holiday trade. Although UK markets re-opened after a two day rest liquidity remained paper thin and currencies moved in very narrow ranges for most of the night.

The results from the Italian auctions were markedly better however, suggesting that financing pressures in Eurozone’s third largest economy were starting to ease. Italy was able to auction off 9 Billion euro of 6 month T-bills at 3.251% versus a whopping 6.504% yield just a month ago. The 2 year zero coupon bonds also saw better than expected demand with Italy selling 1.73 Billion versus 1.58 Billion planned.

The EUR/USD however hardly budged on the news rising to just 5 points in post release reaction. Nevertheless, the pair has remained at the upper end of its range throughout morning European trade as it held above the 1.3070 level and given the positive results of the Italian auction it may try to make another run to 1.3100 to take out the stops during North American trade.

Elsewhere yen hit a 7 day high today with USD/JPY drifting to 77.70 after US Treasury department took issue with Japanese intervention noting that the market was operating normally and reacting to risk concerns in other regions of the world. Japanese authorities however, brushed off any US criticism and reaffirmed their intent to support USD/JPY through intervention. 

Today’s weak Japanese economic data no doubt only confirms the policymakers fears that the strengthening yen is creating a major drag on growth, Japan’s Industrial Output declined by -2.6% versus -0.8% eyed while Retail Sales shrunk by -2.3% versus 0.1% forecast. USD/JPY remains hostage to US economic data which will need to improve markedly if the pair is to get any traction in the foreseeable future. 

Today, the North American calendar is virtually empty and trading could remain lackluster for the rest of the day as investors show little appetite for new positions. Overall however, the news continues favor risk assets as both the economic data in North America and the credit markets in Europe show slow but steady improvement and when investors return the markets should revive from their slumber.    

FX Upcoming

Currency	GMT	EST	Release	Expected	Prior
USD	12:00	7:00	MBA Mortgage Applications (DEC 23)

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.