GERMAN DATA: December Trade Surplus Increases Amid Higher Exports
The German trade balance surprisingly increased in December to E20.7bln (seasonally-adjusted, vs E17.0bln cons; E19.7bln prior, revised from E19.2bln). That came as the growth in exports (+2.9% M/M vs -0.5% cons, +2.3% Nov revised from +2.1%) outstripped that of imports (+2.1% M/M vs +1.9% cons, -2.7% Nov revised from -3.3%).
On a longer-term view, the German trade surplus appears to be stalling however - the surplus fell back to 5.6% GDP on a 12-month rolling basis. For context, it has recovered since October 2022 when it saw a 2.0% low but remains well below its highs of almost 8%.
- Imports from the EU (+3.6% M/M), the US (+3.0%) and a "rest of world" collation (+0.5%) increased, while they decreased from China (-1.0%, third consecutive decline). On a 2024 vs 2023 comparison, imports from all these constituencies declined (all broadly around the 3% mark except China which was only slightly negative).
- The exports increase appears rather broad-based in December, with volumes to the Eurozone (+5.9% M/M), China (+1.4%) and "rest of world" collation (+0.2%) rising - only to the US, exports fell (-3.5%). On a broader view, exports to China remain on a longer-term downtrend in place since around mid-2022 (2024 vs 2023 total -7.3%, while exports to the US have been broadly stable since then (leaving aside some in-between volatility; 2024 vs 2023 total +2.4%).
- Looking ahead, there appears to be little sign of an imminent revival of external demand for German products: IFO export expectations fell in in January, at -7.3 points (vs -6.1 Dec) - "the positive momentum abroad has so far had no significant impact on domestic exporters", IFO concludes.
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GILTS: Light Bull Steepening, Supply & Global FI Cues Eyed
Gilt futures off opening highs, with core global FI markets seeing some light selling pressure in recent trade.
- Contract last +10 at 91.50.
- Bearish technicals intact, initial support at yesterday’s low (91.31), while initial resistance comes in at yesterday’s high (92.13)
- Yields 1-2bp lower across the curve, light bull steepening.
- 10s last 4.67%, focus on 4.70% next, yesterday’s high was 4.687%.
- 30s topped out at 5.25% yesterday, which represents the highest level seen since ’98.
- 10-Year gilt/Bunds ~2bp tighter on the day, last ~216bp.
- There isn’t anything of note on the UK data calendar today, which will leave focus on swelling global supply and U.S. data.
- On the supply front, the DMO will return to market today, looking to sell GBP4.25bln of the 4.375% Mar-30 gilt.
- This morning has already seen the DMO confirm a syndicated re-opening of the 4.375% 2040 gilt, planned for w/c January 20 "subject to demand and market conditions".
USDCAD TECHS: MA Studies Remain In A Bear-Mode Set-Up
- RES 4: $34.903 - High Oct 23 and the bull trigger
- RES 3: $33.125 - High Nov 1
- RES 2: $32.338 - High Dec 12 and a key resistance
- RES 1: $30.489 - 50-day EMA
- PRICE: $30.054 @ 08:08 GMT Jan 8
- SUP 1: $28.748 - Low Dec 19
- SUP 2: $28.446 - 76.4% retracement of the Aug 8 - Oct 23 bull cycle
- SUP 3: $27.686 - Low Sep 6
- SUP 4: $26.451 - Low Aug 8
A bear cycle in Silver that started Oct 23 remains in play - for now - and recent gains appear corrective. The metal has recently breached support at $29.642, the Nov 28 low. The break lower opens $28.446, a Fibonacci retracement. Note that moving average studies are in a bear-mode position highlighting a dominant downtrend. Key resistance has been defined at $32.338, the Dec 12 high. A break of this level would signal a reversal.
USDCAD TECHS: Bull Flag
- RES 4: 1.4676 2.0% 10-dma envelope
- RES 3: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4360 @ 08:04 GMT Jan 8
- SUP 1: 1.4326/4280 20-day EMA / Low Jan 6
- SUP 2: 1.4232 Low Dec 17
- SUP 3: 1.4163 50-day EMA
- SUP 4: 1.4011 Low Dec 5
USDCAD traded lower Monday. The trend set-up remains bullish and the move down is considered corrective. The latest pause in the uptrend appears to be a flag formation - a bullish continuation signal. Note too that MA studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4508 next, a Fibonacci projection level. 1.4326, the 20-day EMA, has been pierced. A clear break of the EMA would open 1.4163, the 50-day EMA.
