Forex News and Events:
FX markets trade the PMI figures all over the globe today. The focus on manufacturing PMI readings will continue with Canadian and US figures in the afternoon. In the Euro-zone, the unemployment rate eased to 11.9% in February, the March final manufacturing PMIs have been flat-to-positive unlike weakness in China and Australia overnight. EUR trends higher in Europe this morning; we see no signs of dovish ECB bets on Thursday meeting. In Japan, USD/JPY and JPY crosses gain momentum on the upside despite soft Tankan readings. The sales take hike from 5% to 8% is effective from today.
Euro gains on PMI
Released in the morning, the manufacturing PMI final readings have been flat-to-positive across the Euro-zone, thus boosting EUR demand versus USD and GBP. Despite the softness in inflation figures (released yesterday, the Euro-zone CPI y/y estimate for March eased from 0.6% to 0.5%, CPI core y/y is expected back from 1.0% to 0.8%), EUR/USD shows no signs of dovish ECB pricing regarding Thursday meeting. March 25th CFTC data shows slight contraction in speculative long EUR positioning since March 19th post-Fed spike, however the interest in EUR remains acceptable. We see reluctance to take direction pre-ECB, traders remain sellers above the 21-dma (1.3828). On the downside, we see stops below 1.3725 (Monday’s post-CPI low), yet to be balanced by bids trailing above 1.3700.
EUR/GBP rallied above the 50-dma (0.82785) amid UK manufacturing showed slower expansion in March according to PMI release. Trend and momentum indicators remain solidly bearish, resistance should come into play pre-0.83021/93 (fibonacci 76.4% on Aug’13 – Feb’14 sell-off & 100-dma). Light stops are eyed above.
Japan sales tax rise from 5% to 8%
The rise in sales tax from 5% to 8% becomes effective in Japan today. The Tankan readings in 1Q were softer than expected, the large all industry CAPEX increased 0.1% (vs 0.0% expected & 4.6% last). Despite soft figures, a BoJ official stated that the large and small manufacturing outlook is better compared to levels recorded at the time of the previous sales tax hike in 1997. While the impact of this hike on inflation is widely doubted, the improvement in labor cash earning in February (to 0.0% from -0.2% in Jan) saw little attention.
USD/JPY cleared resistance above its daily Ichimoku could top (103.10) yesterday and remained well bid above this level in Tokyo. Bullish momentum gains traction, the next key target stands at 103.76 (March high), if broken will shift attention to year high levels of 105.00/44 zone. We see intensifying buying interest above 103.50.
Decent buybacks on Friday & Monday lifted EURJPY back into the bullish trend. MACD (12, 26) turns positive and will suggest the extension of gains for a daily close above 141.84. On the downside, solid support is eyed at the daily Ichimoku cloud top (140.96) given the lack of dovish ECB pricings before Thursday meeting.
AUD/JPY extends gains to the fresh 10-month high of 96.055, shortly breaking the Fibonacci 50.0% level of 95.922 on Apr-Aug 2013 drop. Trend and momentum indicators are comfortably bullish. The 30-day RSI enters the overbought zone (72%) today, signaling that a downside correction should be healthy at these levels. A significant breach of 95.922 will shift the focus to 98.166 (fibo 68.2% retracement).
Today's Key Issues (time in GMT):
2014-04-01T12:30:00 CAD Feb Industrial Product Price MoM, exp 0.80%, last 1.40%2014-04-01T12:30:00 CAD Feb Raw Materials Price Index MoM, exp 3.00%, last 2.60%
2014-04-01T13:30:00 CAD Mar RBC Canadian Manufacturing PMI, last 52.9
2014-04-01T13:45:00 USD Mar F Markit US Manufacturing PMI, exp 56, last 55.5
2014-04-01T14:00:00 USD Mar ISM Manufacturing, exp 54, last 53.2
2014-04-01T14:00:00 USD Mar ISM Prices Paid, exp 59.5, last 60
2014-04-01T14:00:00 USD Feb Construction Spending MoM, exp 0.10%, last 0.10%
2014-04-01T14:00:00 USD Apr IBD/TIPP Economic Optimism, exp 46, last 45.1
2014-04-01T16:00:00 EUR IT Mar New Car Registrations YoY, last 8.59%
2014-04-01T22:00:00 GBP Mar Halifax House Prices MoM, exp 0.60%, last 2.40%
2014-04-01T22:00:00 GBP Mar Halifax House Price 3Mths/Year, exp 9.40%, last 7.90%
The Risk Today:
EUR/USD is bouncing near the support at 1.3708. However, the declining trendline continues to favour a bearish bias. An hourly resistance for a short-term bounce can be found at 1.3847 (25/03/2014 high). Another resistance lies at 1.3876. In the medium-term, the break of the support at 1.3834 (11/03/2014 low, see also the rising channel) coupled with general overbought conditions favour a move lower towards the support at 1.3643. The recent high at 1.3967 is likely to act as a strong resistance.
GBP/USD continues to rise after the successful test of its rising channel. The hourly resistance at 1.6666 has been breached. Other resistances can be found at 1.6718 and 1.6786 (07/03/2014 high). The short-term momentum remains positive as long as the hourly support at 1.6598 (28/03/2014 low) holds. Another hourly support stands at 1.6555 (27/03/2014 low). In the longer term, a break to the downside out of the rising channel would negate the current bullish bias implied by the break of the resistance at 1.6668 (24/01/2014 high). A strong horizontal support stands at 1.6220 (17/12/2013 low). Our short strategy has been stopped.
USD/JPY continues to improve. Monitor the resistance area between 103.43 and 103.76. The short-term structure is positive as long as the hourly support at 102.75 (intraday low) holds. Another support can be found at 102.43 (27/03/2014 high). A long-term bullish bias is favoured as long as the key support area given by the 200 day moving average (around 100.66) and 99.57 (see also the rising trendline from the 93.79 low (13/06/2013)) holds. A major resistance stands at 110.66 (15/08/2008 high).
USD/CHF weakened yesterday, confirming a fading short-term bullish momentum. An hourly support is given by the rising trendline (around 0.8816). Another support stands at 0.8787. Resistances can be found at 0.8896 and 0.8930. From a longer term perspective, the structure present since 0.9972 (24/07/2012) is seen as a large corrective phase. The recent technical improvements suggest weakening selling pressures. A key resistance lies at 0.8930.
