Market Roundup
- Euro drops to six-week low of $1.1157.
- Dollar Index touches new 11year high at 95.516.
- USD/JPY rise stalled at 120.27 on comments from JP govt adviser. 119.56 low.
- RBA leaves rates unchanged at 2.25 pct, AUD rallied to 0.7845 before easing.
- JP PM advisor Honda: Any USD rises against JPY from current levels not sustainable.
- China Head FXRregulator: Yuan remains strong against basket of currencies.
- China Vice FinMin: Domestic deflationary pressure in China not as great as in Europe.
- Fitch: Failure by Greece to reach durable agreement with EZ would lead to downgrade.
- Swedish C/B Skingsley: Room to lower rates further.
- Riksbank Ingves: Weaker krona should definitely make a difference.
- Swiss Q4 GDP 0.6% q/q, 1.9% y/y vs previous 0.7%/1.9% revised. 0.3%/1.7% expected.
- UK Feb Markit/CIPS Construction PMI 60.1 vs previous 59.1. 59.0 expected.
- EZ Jan Producer prices -0.9% m/m, -3.4% y/y vs previous -1.0%/-2.6% revised. -0.7%/-3.0% expected.
Economic Data Ahead
- (0830 ET/1330 GMT) Statistics Canada releases gross domestic product data for the fourth quarter. Canada's economy is expected to have expanded by 2 pct in the quarter, a rate lower than the 2.8 percent expansion reported for the third quarter. The growth in December was likely increased to 0.2 pct against a drop of 0.2 pct and the annual growth in Dec was seen at 2.5 pct vs previous 1.9 pct.The government agency also releases figures for producer prices, which are expected to have fallen 0.7 pct in January. The raw materials price index for Jan is seen at -6.3 pct vs previous -7.6 pct.
- (0855 ET/1355 GMT) U.S. Redbook mm, previous 0.8 pct; yy previous 2.8 pct.
- (0900 ET/1400 GMT) Mexico's National Statistics Institute will release gross fixed investment data for December. The measure of spending on machinery, equipment and new construction rose 0.3 percent in November.
- (0945 E/1445 GMT) ISM-New York Index for Feb, previous 671.1.
- (1330 ET/1830 GMT) The U.S. auto industry will report February sales. Analysts expect the industry to maintain its strong sales pace despite the snow and cold weather in large parts of the United States. Analysts estimate an annual sales rate of 16.6 million-16.7 million vehicles in February, matching that in January. If the industry meets the estimates, February would be the 12th straight month of an annual sales rate above 16 million. Investors will be looking for comments on any price hikes and discounts.
- Domestic car sales for Feb, market expectation 5.50 mln, previous 5.47 mln.
- Domestic truck sales for Feb, market expectation 8.00 mln, previous 8.07 mln.
- All Truck Sales for Feb, previous 9.11 mln.
Events Ahead
- (1645 GMT) FedTrade operation 30-year Fannie Mae / Freddie Mac (max $1.125 bln).
- (1930 GMT) Senate Banking Committee holds hearing on reforming/auditing the Federal Reserve.
- (19:30 GMT) Treasury Sec'y testifies before Senate subcommittee on FY'16 funding request/budget justification.
- (01:15 GMT) Fed Chair Yellen speaks on "Bank Regulation and Supervision"
FX Beat
EUR/USD was flat at $1.1192, crawling up from a six-week low of $1.1160 struck overnight. The pair has seen in tight range, +15 points in Asia, but trended lower and side lined by local focus on RBA and modest EZ data schedule. The overall price actions from 1.6039 long term top was referred as a corrective pattern. The dip from 1.3993 is the third leg of such pattern and should target 100% projection of 1.6039 to 1.2329 from 1.3993 at 1.0283 next. On the upside, break of 1.2042 support turned resistance is required to indicate medium term reversal. Otherwise, outlook will stay bearish. Option expiries for NY cut at 1.1180 (679M), 1.1200 (420M), 1.1290 (250M), 1.1350 (350M)
USD/JPY rose against its major rivals in late Asian deals after the Japanese PM's adviser commented that the present exchange levels are "upper limit of comfort zone." Etsuro Honda, an economic adviser to Abe, said that the BoJ should avoid extra stimulus measures for some time as economy "could overheat over the latter half of this year." He also said the exchange rate is likely to rise further from its current levels around 120, which may be the upper limit of its comfort zone. Moving away from an early near 3-week low of 120.25 versus the dollar, the yen climbed to a 4-day high of 119.56. At previous close, the pair was trading at 120.11, if it extends rise, 118.00 is possibly seen as its next resistance level. Against the euro, it edged higher to 133.87 in early deals, and is likely to find resistance around the 132.5 area. Option expiries for NY cut at 118.50 (580M), 119.00 (350M), 119.75 (250M), 121.00 (432M).
AUD/USD rose on Tuesday, after the Reserve Bank of Australia unexpectedly kept monetary policy unchanged and also positive economic reports lent the support. I hit 0.7842 during late Asian session and then consolidated at 0.7827, advancing 0.79 pct. It was likely to find support at 0.7778, the low of February 23 and resistance at 0.7912, the high of February 26. RBA signalled that it may consider rate cuts in the near future, commenting on the decision, RBA Governor Glenn Stevens said that "further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target." The Aussie was higher against the euro, with EUR/AUD declining 0.59 pct to 1.4317. Option expiries for NY cut at 0.7750 (383M), 0.7800 (393M), 0.7900 (439M)
NZD/USD was higher as demand for the greenback frozen after Monday's upbeat U.S. economic reports fuelled expectations for a near term rate hike. The pair hit 0.7285 during late Asian session and subsequently consolidated at 0.7545, gaining 0.44 pct. It was likely to find support at 0.7472, the low of February 25 and resistance at 0.7617, the high of February 25. The kiwi edged lower against the Australian dollar, with AUD/NZD rising 0.35 pct to 1.0375. The failure above and close break below 55 DMA Monday keeps the short in play, the marginal new low was seen at 0.7501 in Asia but consolidated intraday. Traders continue to target 0.7315.
GBP/USD entered into positive territory after the UK construction PMI was slightly better than expected, it was unchanged against the dollar at $1.5368 but rose over 0.1 percent to 72.70 pence per euro, within sight of a seven-year low of 72.35 struck on Monday. "Sentiment for the pound is positive this year," said Jake Trask, a corporate dealer with broker and currency payment company UKForex in London. "However, the uncertainty over the result of the General Election is causing a headwind for the construction sector, leading to some building companies delaying spending decisions." Specs are erring to sell short on a weaker technical bias and sellers gathering around 1.5400. The pair was likely to find support at 1.5328, the low of February 23 and resistance at 1.5460, the high of February 27.
USD/CAD opened up 0.2 pct, as consolidation extended and saw tight range in early Asia. The unchanged RBA is a blow for doves advocating BoC rate cut Wednesday, 1.2491 = early Europe USD/CAD low as continent digested RBA. Traders are looking to get long at 1.2405 for expectation of an extension through 1.2600, the support has formed between 1.2353/1.2388; Feb 3/26 lows. Daily close below 1.2286 - 23.6% of the 1.0620 to 1.2800 up-leg - will defer.
