Market Brief
It has been all but a calm Sunday in Brazil. Following the street protests by over a million citizens, the government promised to present a package of anti-corruption within days. We are long gamma in BRL as higher volatilities will not be easy to dissipate before a satisfactory solution is offered to citizens in Brazil. The 1-month USD/BRL implied volatility advances to 21.9%, the 1-month risk reversals have spiked to 336 points.
The WTI crude started the week downbeat, sold-off from $45 to $43.57 as Chinese Premier Li said it will not be easy to achieve 7% growth in 2015. Buying interest is presumed above $40 as nuclear talks with Iran start today in Lausanne, Switzerland. Should the Iran sanctions start waning, it will only happen gradually.
Failure in oil recovery is certainly not good news for the loonie, that hit fresh 6-year high amid Friday’s job report. The Canadian labor market has been through a soft month in February, with unemployment rate up to 6.8% (from 6.7% exp. 6.6% last) and participation rate little changed (from 65.7% to 65.8%). Canada lost 1’000 jobs (vs. -5K exp. & 35.4K last), with however 34’000 full-time jobs added verse 34’900 part-time jobs off. USD/CAD advanced to fresh 6-year high of 1.2824. Trend and momentum indicators remain comfortably positive on the combination of lower oil and hawkish Fed expectations before March 17/18th FOMC meeting. Option markets are supportive of an extension toward 1.30.
EUR/USD hit fresh low of 1.0458 in Asian open. The sentiment in EUR remains comfortably negative as Greek uncertainties persist. Large put expiries at 1.0500/75 should anchor the market down. There is opportunity to sell the rallies before the FOMC meeting, corrective upside moves under constant pressure. EUR/GBP trades water between 0.70950/0.71357. With fading GBP-appetite, a close above 0.7190 (MACD pivot) should push the pair in short-term bullish consolidation zone to meet offers at 0.72486/0.72600 (Fib 23.6% on Dec’14-Mar’15 sell-off & 21-dma).
JPY crosses were mixed in Tokyo, Nikkei 225 stocks did little (-0.04%). USD/JPY remained ranged between 121.16/48 with decent support from the option market between 120.00/121.50 area. EUR/JPY consolidates below 128.53 (Fib 61.8% on 2012/2014 rally), the sentiment in AUD/JPY turns flat (MACD at the zeroline).
Russian Central Bank eased the key rate from 15% to 14% as expected on Friday. The rate cut had little negative impact on RUB given the still-very-high rates and restrained RUB trading outside Russia.
The economic calendar today: Swiss February Producer and Import Prices m/m & y/y, Swiss January Retail Sales y/y, Canadian January International Securities Transactions, US March Empire Manufacturing, US February Industrial Production and Capacity Utilization, US February Manufacturing (SIC) Production, US March NAHB Housing Market index, US January Net Long-term TIC Flows and Total Net TIC Flows.
Currency Tech
EUR/USD
R 2: 1.0893
R 1: 1.0684
CURRENT: 1.0535
S 1: 1.0458
S 2: 1.0400
GBP/USD
R 2: 1.5137
R 1: 1.5027
CURRENT: 1.4774
S 1: 1.4700
S 2: 1.4547
USD/JPY
R 2: 124.14
R 1: 122.03
CURRENT: 121.24
S 1: 120.61
S 2: 119.38
USD/CHF
R 2: 1.0240
R 1: 1.0190
CURRENT: 1.0037
S 1: 0.9970
S 2: 0.9825