One Financial Weekly Market Report

Andrei Wogen | One Financial | finance.wogen@gmail.com | Week: 01-11 through 01-17

TABLE

OF CONTENTS

Overview of Last Week!

Australian Dollar!

Japanese Yen!

UK Pound Sterling!

Euro (Euro Zone)!

Canadian Dollar!

US Dollar!

New Zealand Dollar!

China Yuan (on shore)!

O V E RV I E W

OF

LAST WEEK

Last week, the markets were dominated mostly by speculation about what the ECB will do combined
with the FOMC and what they had to say. Speculation continues to rise about what the ECB will do at
their meeting in just a couple weeks time with the consensus being that they will introduce QE. However
there are also rumors and speculation that they will hold off on QE as Greece goes to the polls just three
days after the ECB meeting. As for the FOMC, nothing huge came from the minutes released of their last
meeting (in December) though they did sound a bit more dovish than the previous meeting as they
voiced more concerns about the weakness in global growth. They also appear to be looking through the
recent slide in oil prices in terms of inflation. Other news that dominated the markets was Greece elections which will occur later this month. At the time of print of this report, Syriza (the anti-Euro party in
Greece) has about a two-and-a-half point lead ahead of the incumbent party. So still a close call in terms
of who will win the elections there when Greece votes at the end of this month.

AUSTRALIAN DOLLAR
The overall tone of Australia continue to be negative.
Growth and inflation both continue to remain weak and is
getting weaker in Australia while other parts, such as employment and consumer and business sentiment continue to
remain weak. Last week some brighter data came to light
though in the form of better than expected building permits
data while imports and exports were positive. Though the
Trade Balance widened further into negative territory. The
manufacturing sector and consumer spending weakened,
per the data seen last week. Retail sales and manufacturing
performance data both came in weaker than expected and
previous.

Overall Tone of Australia: Negative 3

Overall Tone of AUD/USD: Negative 3
Overall Relationship: Aligned
Overall Tone of Australia: Negative 3
Overall Tone of AUD/JPY: Negative 1
Overall Relationship: Aligned
AUD/USD 4 Hour - 0.82200 level black line
As for this week, employment data and new loans data from Australia will be the two highlights in terms of data for
the Aussie Dollar. I am personally not expecting a good number overall for the employment numbers. The employment sector has been getting weaker as the months go on especially as the mining sector continues to weaken. On
another note, overall I expect this year the RBA will finally make a change in their policy and rhetoric and cut rates
rather than raise them. With a continued strong Aussie Dollar along with domestic and international weakness, particularly with China getting weaker, I expect these things in particular will drive the RBA to ease policy further.
As for the charts, the AUD/USD (above) I expect will continue lower overall but the line-in-the-sand that will tell
me the overall tone of the Aussie Dollar versus the US Dollar has changed will a strong cross above the 0.82200
level (blue line).

JAPANESE YEN
The overall tone of Japan as an economy continues to be very negative. Overall growth continues to be very weak as
seen by the most recent quarters GDP numbers which showed the country going into recession. Inflation also remains weak and continues to fall after a big jump in the first quarter of last year due to a hike in the sales tax. As for
the consumer, they continues to be weak both in consumption (retail sales data continues to be weak) and sentiment.
Business conditions also remain weak especially in the manufacturing sector as exports continue to remain weak
while the services sector has stabilized some after weakening quite a bit last year. Last weeks services data showed
some more improvement too with the internals showing some improvement as employment gained as did expectations while new orders weakened some more. Overall though the overall conditions, both politically and economically especially, in Japan remain weak and fragile.

Overall Tone of Japan: Negative 4

Overall Tone of USD/JPY: Positive 4
Overall Relationship (between Japan and the Yen): Aligned

This week, key data will include machinery orders, Trade

Balance data, Machine Tool orders and Tertiary Industry
Index
data. The Tertiary Index data could see some improvement
from last months data as the services sector continues to
show
some improvement right now. Focus also continues to be on
how the newly formed government will move forward with
reforms after Abes party got a new vote of confidence from
voters based on last months snap election results.
As for the charts, the USD/JPY continues to stay elevated
but
has moved lower this past week. The 115.00 level is the key
level to watch in terms of where a divergence between Japan
and the Yen could begin.
USD/JPY 4 Hour - 115.00 level black line

UK POUND STERLING
The United Kingdoms tone continues to be neutral to
more negative as current data and economic developments
show a weakening economy. Both the manufacturing and
services industries have suffered recently along with sentiment
of the business community. Industrial production numbers last
week
Showed more weakness in this sector. Sentiment of the consumer
has
also deteriorated in recent months though retail sales have
picked up a bit recently. As for the housing market, this
continues to be strong as prices continue to rise overall though
this has given more wealth to the consumer which has given
yet another problem...rising levels of debt. House price data
rose last week, overall though, growth continues to weaken overall
and is expected to do so At least for the time being. Also, inflation
has and continues to move lower thereby pushing out expectations
of a rate hike coming from the BoE as the Bank left rates alone at
their meeting last week.

GBP/USD 4 Hour - 1.5500 level black line

Overall Tone of the United Kingdom: Negative 2

Overall Tone of GBP/USD: Negative 3
Overall Relationship (between UK and the Pound): Aligned

This week, inflation data will be the main, and really only, important data from the UK. As already mentioned, inflation has been moving lower in recent months and I expect it to move even lower especially due to energy. Also
though, continued competition among UK retailers will likely continue to keep prices of goods down as well for
quite some time. This continued subduing of prices I expect will also keep the BoE on hold from raising rates this
year. This is quite a turn around from my own expectations for a rate hike from the BoE, and the expectations of the
market (which also have lowered their expectations) from just a few months ago. But with growth and inflation being as weak as they are right now and with the fact that these things will likely continue to weaken going further, the
arguments in favor of a rate hike are diminishing. Besides the inflation data this week, there is really nothing else to
look forward to of great importance.
As for the charts, the GBP/USD continues to move lower with the 1.55000 being the line-in-the-sand being the level
I am watching for divergence to begin between the UKs tone and the overall sentiment seen in the GBP/USD.

EURO (EURO ZONE)

The overall tone of the Euro Zone continues to be very
negative. Growth is very weak and inflation continues to
move lower. Inflation data in fact last week showed yet
more weakness in prices across the Euro Zone. Yearover-year CPI data in fact moved into negative territory
though Core y/y actually rose a bit. Still not good overall
though. PPI prices also moved lower again. Italy CPI also
moved lower. Due to all of this weakness therefore, the
ECB continues to be expected to implement more easing
to their policy, i.e., QE. As for the different parts of the
Euro Zone nations, the consumer continues to remain
mixed with German retail sales coming in better than
expected last week while business conditions and
sentiment continue to be weak. German Industrial numbers
Came in lower than expected and previous.Services numbers
last week from the Euro Zone moved lower.

Overall Tone of the Euro Zone: Negative 4

Overall Tone of EUR/USD: Negative 4
Overall Relationship (between EZ and the Euro): Aligned
EUR/USD 4 Hour - 1.2000 level black line
This week, key data will again be inflation data as the final data of inflation, released last week, will be released on
Friday. The final reading of German inflation data will also be released as will Italy and Frances. Besides that, the

markets will continue to be fully focused on what the ECB will do at their meeting next week. Expectations are that
they will introduce QE, as already mentioned, but I am not so sure yet. I know.I am going against literally everybody, including the market with that unsureness but with political discord occurring in Greece again (elections are
just a few days after the ECB meeting) and due to the complex nature of QE causing longer-than-usual planning
needing to be done to do it properly, I am thinking there is still risk that the ECB will not do QE until their next
meeting. Just so they can see what happens in Greece and be sure they are planned well enough to implement QE
properly. If that is the case too, that the ECB does NOT announce QE at their meeting, I expect a pretty good bounce
in the Euro though an unsustainable bounce that will soon after turn south again.
As for the charts, the EUR/USD does continue to move lower inline with the overall tone and conditions of the Euro
Zone; both very negative. The 1.2000 level is the level I am watching for a divergence between the sentiment of the
participants and the tone of the Euro Zone. If this level breaks and holds then I will see that as a change in the overall sentiment of the participants.

CANADIAN DOLLAR
Canada as a whole continues to be weak overall both in
terms of growth and now (maybe) in terms of inflation.
As for growth, recent numbers show a slowdown from
the previous month and on an overall basis. As for the
economy as a whole, the manufacturing sector continues
to be somewhat weaker while business confidence is
steady...not falling but not really rising either. As for the
Consumer, spending remains mixed, looking at recent
retail sales data numbers while sentiment has weakened
a bit over the past few months. The biggest downside risk
to the Canadian economy though continues to be low oil
prices. The other downside risk, depending on which side
of the argument you are on, is the housing market which
continues to see gains in house prices and construction.
This strong housing market continues to be a concern of
the BoC which continues to maintain a neutral bias
overall. The employment sector is a positive part of the
Canadian Economy. Last weeks employment data was mixed
But showed a tad bit of improvements overall.

Overall Tone of Canada: Negative 2

Overall Tone of USD/CAD: Negative 3
Overall Relationship (between Canada and CAD): Aligned

USD/CAD 4 Hour - 1.15500 level black line

This week, there is no data from Canada.at all. So movement in the CAD will be mostly determined by oil prices
and whatever the USD in particular will do.
Looking at the charts, the USD/CAD continues to move higher inline with the overall tone of the Canadian economy. The level to watch for a change in the overall sentiment of the participants will be the 1.15500 level in the
USD/CAD current pair.

US DOLLAR
The United States economys tone continues to be
positive overall. Both growth and inflation have been
strong but inflation anyway has weakened some in the
past few months,along with the rest of the world. This
lower inflation has been driven lower mostly by energy
but prices of other goods have also moved lower. As for
growth, this continues to look good as third quarter
GDP numbers rose above the 4% handle, above
expectations. However, recent data suggests that fourth
quarter and likely first quarter (of 2015) growth will
likely be lower and show weakness. Recent
manufacturing data as well as services data have shown
weakness in the overall US economy though. This, in
my opinion, is due to a couple of things: (1) a high USD
and (2) global weakness, with the second reason being
the biggest reason with the most effect. As for the
consumer, their sentiment remains elevated and spending
remains strong with recent spending and retail sales data
showing strength. As for the housing, this has weakened
some in the last few months as bets on rate rises continue
to rise and consumers have taken on more debt, yet again.
So a mixed picture is occurring right now in the US but
DXY 4 Hour - keeps climbing higher.
the markets are still expecting the Fed will raise rates
soon, sometime this year, helping to keep the US rising and the US markets in general fairly well bid. Last week
though meeting minutes showed a more cautious Fed especially in terms of growth in the rest of the world and what
its effect could have or is having on the overall US economy. The other key part of the US economy, the jobs sector,
continues to improve overall as last weeks NFP numbers showed a better than expected increase in the number of
newly employed while the previous number was revised higher. However wage growth remains subdued which will
be an increasing concern of the Fed and therefore the markets. As a side note, I am expecting the Fed will stay on
hold through this year on a combination of subdued wages, low global growth and weaker domestic growth.

Overall Tone of the United States: Positive 3

Overall Tone of the Dollar Index (DXY): Positive 3
Overall Relationship (between the US and USD): Aligned

This week the two big data releases will be Retail sales on Wednesday and Inflation data on Friday. Both will be
interesting to see the results of in terms of how the lower oil prices have affected both. Expectations are that consumer spending and the consumer as a whole has been given a lift from the low price in oil while inflation has likely
moved lower due to, once again, the lower oil prices. So it will be interesting to see if both are true and in my opinion, I am more bearish on the positive effects that lower oil has potentially had on the US consumer than I am on
how oil has affected inflation. Other data to watch will be Export and Import price data which will come a couple of
days ahead of the CPI data and could be seen as a pre-cursor for the CPI data later on in the week. Also monthly
Philly Fed numbers will be released as well as Industrial production and capacity utilization numbers which I expect
will continue to show more weakness in the US manufacturing sector.

NEW ZEALAND DOLLAR

New Zealand as a whole continues to have an overall
positive tone to it. Growth remains strong while, as
continues to be same story, inflation continues to
weaken especially because of commodity prices with
dairy prices in particular weakening the most. Prices of
commodities continued to fall shown in data last week
with milk prices falling the most. As for the growth
story, though overall growth of New Zealand continues
to be strong, such areas as the manufacturing sector
have weakened some as has business sentiment. Trade
data has also shown some weakness in the past few
months too with the trade surplus turning into a trade
deficit while both imports and exports have also
weakened. As for the consumer, both sentiment and
spending continues to remain strong overall. The labor
market also continues to show strength as the rate of
unemployed continues to fall and newly employed
continues to rise. Then, for the housing market is still
Strong with rising prices and continued increased
construction. Overall then, the conditions of New
Zealand is positive though is weakening some though
The RBNZ has pulled back on their hawkish rhetoric
and is expected to hold off on rates until at least the end
of this year.

NZD/USD 4 Hour - 0.80500 level black line

Overall Tone of the New Zealand: Positive 2

Overall Tone of the NZD/USD: Negative 2
Overall Relationship (between New Zealand and NZD/USD): Diverged

This week House price data and Food price data will be released. House prices continue to rise and I dont expect a
huge divination from this overall uptrend while Food prices I expect wont rebound much and even at all given the
continued fall in prices around the world and in New Zealand.
As for the charts, the NZD/USD continues to move lower overall and against the overall positive tone of New Zealand. The level I am watching for the NZD/USD to start moving inline with the overall conditions of the country is
the 0.80500 level. A sustained close above this level will be a good indication that sentiment towards the NZD/USD
has improved.

CHINA YUAN (ON

SHORE

China as a whole continues to weaken as the government continues to implement reforms to begin the task of liberalization the Yuan and interest rate markets as well as opening up their financial markets and their overall economy.
Due to these reforms, growth overall continues to be weak and remain continues to weaken further. The manufactur-

ing sector in particular continues to weaken as a whole as has the non-manufacturing sector. Services though have
improved some over the past couple of months with more evidence of this bounce back being seen in Services PMI
data released last week. As for the consumer, spending and retail sales continue to strengthen while sentiment has
weakened over the past few months. Trade has also weakened as imports and exports have weakened in the past few
months though there has also been some discussion lately on just how accurate those numbers really are. Looking at
inflation, this also continues to move lower. Last week, CPI data for December came in as expected but continues to
remain low while PPI came in at negative territory, falling further from last month.

Overall Tone of Chine: Negative 3

This week, trade balance and new loan data will be the two highlights in terms of data from China this week. Besides that, markets will continue to keep their ears and eyes open for any more news from the government in terms
of new reforms.
As for the charts, the Yuan continues to stay weak versus the US Dollar as the PBoC continues to weaken the currency. Overall sentiment towards China remains mixed as their equity markets continue to move higher overall
while other forms of investment have been getting weaker as of late due to reforms and law changes.