Market Brief
Australian economy added 14.2K jobs in April (vs. 8.8K exp. and 18.1K last), the unemployment rate remained unchanged at 5.8% for the stable participation rate of 64.7%. Better-than-expected jobs data sent AUD/USD up to three-week highs. The short-term trend turns positive; MACD (12, 26) will step in the bullish zone for a daily close above 0.9418. The next key resistance stands at 0.9499/0.9500 (Fib 76.4% on Nov’13 – Jan’14 pullback and psychological level). AUD/NZD and AUD/JPY broke their 21-dma on the upside (1.0812 and 95.285 respectively).
USD/JPY and EUR/JPY remained sluggish in Tokyo. USD/JPY advanced to 101.96, yet exporter offers and option barriers continue limiting the upside pre-102.00. Bids remain solid at 101.00/50 as importers see dip-buying opportunities (at levels slightly higher than year low of 100.76). Trend and momentum indicators are marginally bearish. Key supports are placed at 101.07 (200-dma), then 100.76 (2014 low). EUR/JPY remained bid at the daily Ichimoku cloud top (141.51) in Tokyo. Techs are flat before ECB decision and Draghi’s speech later today. Event risk should be considered.
EUR/USD traded in the tight range of 1.3906/1.3919 in Asia. The focus is on Frankfurt today. The ECB is expected to keep its main refi rate unchanged at 0.25%, deposit and marginal lending corridor unchanged at 0.00% - 0.75%. The ECB President Draghi’s monthly press conference should trigger some volatility. Expectations are two-sided. We remind that the ECB President Draghi had stated on April 12th that stronger EUR will trigger looser monetary policy, mentioning the possibility of QE. On the other hand, low interest rates could have financial stability implications. Should Draghi talk down the deflation risk, a relief rally could push EUR towards fresh year highs. Option barriers at 1.3985 expire today, option bids take over above 1.4000. EUR/GBP consolidates weakness at 0.82012/0.82120 range waiting for fresh direction post-BoE and ECB decisions. Decent option related offers are waiting to be activated between 0.81300/750.
The BoE is also expected to keep the bank rate stable at the historical low of 0.50% and the asset purchases target unchanged at GBP 375bn. We do not expect significant price action after BoE decision, GBP-crosses should continue trading on technicals. Trend and momentum indicators remain steadily bullish on GBP/USD, while the overbought conditions (RSI at 71%) trigger profit taking on upside attempts. The key resistances stand at 1.7000 psychological level then 1.7043 (five year high). Option bids to expire pre-weekend trail above 1.6850 to 1.7070.
The BoE and the ECB announce policy today at 11:00 GMT and 11:45 GMT respectively. The ECB President Draghi speaks at 12:30 GMT. The economic calendar consists of German and Norwegian March Industrial Production m/m & y/y, Spanish March Industrial Output m/m & y/y, Swiss April CPI m/m & y/y, Swedish April Average House Prices and Budget Balance, Canadian April Housing Starts and March New House Price Index, US May 3rd Initial Jobless Claims and April 26th Continuing Claims.
Currency Tech
EUR/USD
R 2: 1.4000
R 1: 1.3967
CURRENT: 1.3924
S 1: 1.3885
S 2: 1.3775
GBP/USD
R 2: 1.7043
R 1: 1.6996
CURRENT: 1.6964
S 1: 1.6900
S 2: 1.6825
USD/JPY
R 2: 102.70
R 1: 102.00
CURRENT: 101.77
S 1: 101.07
S 2: 100.76
USD/CHF
R 2: 0.8862
R 1: 0.8780
CURRENT: 0.8753
S 1: 0.8720
S 2: 0.8699