Draghi Comments and Ukriane Assault
FX price action was limited in the Asian session as news flow was light. Regional equity markets were lower with the exception of the Nikkei. The Nikkei was up 0.23% (giving back most of its earlier gains), while the Hang Seng and Shanghai composite were down -0.12% and -0.20% respectively. Yet, considering the strong message anti-Brussels parties sent the EU, we are unexpectedly seeing European peripheral bond markets rally and general strength within stocks. The trend of FX G10 was a weaker USD but only marginally.
The EUR/USD rose to 1.3669 early in the session despite dovish sound comments from Draghi but slowly depreciated down to 1.3658.
The USD/JPY bounced around a 10pip range but fell sharply heading into European trading. EM Asia currencies are generally softer with the exception of the Korean won. European futures are pointing to a mixed open, illustrating the lack of conviction specifically concerning the ECBs next move.
Yesterday, the ECBs Draghi stated that he was "particularly watchful" for any downward price spiral in the euro zone. However, he then stated that the central banks were not expecting that inflation would be low for an extended period of time. These comments have further increased expectations for easing steps at the next ECB policy meeting and we would watch for EUR depreciation near term.
On the geopolitical front, the Ukraine's newly elected president ordered airs strikes and a paratrooper assault against pro-Russian rebels at Donetsk airport. Ukraine President Poroshenko rejected any negotiations with "terrorists" and moving forward with the most aggressive firepower seen in the crisis so far. While details are somewhat hazy we have yet to hear a response from Russia but suspect markets will retract to a deeper risk–off stance when Putin does respond.
Data watch
On the docket today we will see Swiss Q1 GDP, euro area consumer confidence and US durable Goods orders. Given the strong showing by most Swiss indicators, markets expect a solid read at 0.6%. In Europe, confidence should soften as Italy decreases slightly to 104.4 and France dips below 85. And finally in the US, negative effects of the harsh winter should be felt as orders fall -0.7%, led by a drop in airline orders. In addition, the FHFA and Case-Shiller house price indices are expected to show marginal increases of 0.5% and 0.7%, respectively. Which should help lower fears of a stalled housing recovery in the US.
Supprt And Resistance:
EUR/USD
R 2: 1.3775
R 1: 1.3695
CURRENT: 1.3656
S 1: 1.3630
S 2: 1.3608
GBP/USD
R 2: 1.6898
R 1: 1.6870
CURRENT: 1.6877
S 1: 1.6836
S 2: 1.6816
USD/JPY
R 2: 102.20
R 1: 101.20
CURRENT: 101.87
S 1: 101.81
S 2: 101.64
USD/CHF
R 2: 0.8967
R 1: 0.8952
CURRENT: 0.8943
S 1: 0.8936
S 2: 0.8922