Market Brief
Safe haven assets were broadly in demand on Friday, while stocks and riskier assets struggled to find buyers ahead of today’s much awaited NFP report. Data from China surprised slightly to the upside, suggesting that the PBoC’s stimulus has finally started to show some results. The official manufacturing PMI passed the 50 mark that separates growth from contraction, printing at 50.2 in March from 49 in February (also beating median forecast of 49.4). Similarly, the non-manufacturing PMI rose to 53.8 from 52.7 in the previous month. However, this good news should be viewed cautiously due to the strong seasonality effect of the Chinese New Year holiday in early February. Finally, the private Caixin manufacturing PMI printed at 49.7, beating consensus of 48.3 and the previous month’s reading of 48. The People’s Bank of China set the dollar/yuan fixing lower for the fourth straight day, down to 6.4585, the lowest level since mid-December last year.
The Japanese yen remained broadly in demand in Tokyo as investors fled riskier assets. USD/JPY fell 0.30% to 112.20, after testing the 112 threshold. The one-week 25-delta risk reversal in USD/JPY continued to improve, reaching -0.70, which indicates that market participants are seeking less downside protection. It also shows that the market does not anticipate further yen appreciation. On the upside, the closest resistance lies at 113.80 (high from March 29th), while on the downside a support can be found at around 112 (psychological level and previous low).
USD/CHF almost completely reversed gains from yesterday and consolidated at around 0.96. From a technical standpoint, the bias is on the downside as the pair broke its 40-week moving average, as well as the bottom line of its uptrend channel - which it has held since August last year. Concerning fundamentals, the delay of the Federal Reserve’s next rate, and the high level of uncertainty in global financial markets should continue to weigh on the greenback. EUR/USD treaded water throughout the entire Asian session, moving between 1.1367 and 1.1390.
In the equity market, Asian regional markets were trading in negative territory across the board. Japanese shares took the biggest hit with the Nikkei and Topix indices down 3.55% and 3.40% respectively. In Hong Kong, the Hang Seng slipped 1.02%, while in Singapore the STI was off 0.71%. In mainland China, equity returns were mixed with the Shanghai Composite moving back and forth between positive and negative territory, while the slump in tech shares dragged the Shenzhen Composite lower by 0.55%. In Europe, equity futures are no exception as all the indices are blinking red across the screen, pointing to a lower open. US futures are also trading lower.
Today traders will be watching manufacturing PMI from Norway; Markit manufacturing PMI from Turkey, Italy, France, the UK, Germany, Brazil, the euro zone and the US; retail sales and manufacturing PMI from Switzerland; industrial production from Brazil; NFP report, unemployment rate, ISM manufacturing and Michigan sentiment index from the US.
Currency Tech
EUR/USD
R 2: 1.1714
R 1: 1.1495
CURRENT: 1.1386
S 1: 1.1144
S 2: 1.1058
GBP/USD
R 2: 1.4668
R 1: 1.4591
CURRENT: 1.4350
S 1: 1.4195
S 2: 1.4033
USD/JPY
R 2: 117.53
R 1: 114.91
CURRENT: 112.18
S 1: 110.67
S 2: 107.61
USD/CHF
R 2: 0.9913
R 1: 0.9788
CURRENT: 0.9603
S 1: 0.9476
S 2: 0.9259