The market took last night’s Federal Open Market Committee (FOMC) minutes as dovish, though I found the magnitude of the reaction in fixed income a bit surprising – perhaps more of a sign that investors are looking to buy bonds than anything in the minutes. The June 2015 Fed Funds future did rally a couple of ticks yesterday as traders pushed back the odds on the timing of the Fed’s first hike. The most notably dovish excerpts were the commentary suggesting that the FOMC felt that not all of the weaker US data in recent months was weather related and that several participants found the FOMC’s forecasted rate trajectory too steep. Still, the minutes underlined the consensus that the Fed will continue to unwind purchases at the rate of USD 10 billion per meeting.
The Australian employment report was a good one, though not as good as the 0.3 percent drop in the unemployment rate would suggest, as a 0.2 percent decline in the participation rate was a significant contributor to that reading. As well, the overall 18,000 payrolls growth looks better than the internals, which showed a -20,000 fall in full time employment.
Chart: AUDNZD
The Australian employment report helped AUDNZD find local support overnight and the pair looks ready for an assault on higher 1.0900-plus resistance after its recent double bottom.
The UK’s best housing survey, the RICS House Price Balance, showed a strong surge in March – a bit of a surprise to see this trend change so quickly after it appeared it was forming a top and was on the decline, as the survey tends to trend strongly. The Bank of England's Mark Carney and company will need to start sharpening the macro-prudential saw if this index heads much higher, as we are already close to historic extremes.
The Chinese Trade Balance data for Mar. showed drops in both exports and especially imports. The timing of this outlier is a bit odd – usually we should expect the outlier readings in January and February around the Chinese New Year holiday. It still looks like a holiday-related figure, however, as the Jan/Feb numbers this year were hardly changed from previous months. We’ll mark it down as “odd” and make a mental note to pay extra attention to the April data. After all, we did see the authorities’ crackdown on the USDCNY carry trade (which heavily affected trade activity) over the last two months.
Looking ahead
Technically speaking, I’m wondering if the commodity dollars’ strength is getting long in the tooth as the Asian session saw momentum fading after yesterday’s reaction to the FOMC meeting. NZDUSD may be forming a broadening top-like formation after poking toward the 0.8750 area overnight, and USDCAD punched through 1.0915 support yesterday and down close to a major Fibonacci retracement (see below). AUDUSD may just fall short of the 0.95000 level if it reverses all of last night’s post-employment report gains, which would mean that it falls short of the ideal 0.9510 upside down head and shoulders formation. The line in the sand for this rally is 0.9500 plus slippage in my mind – but l would like to see a quality technical reversal to encourage that bias.
The week AUDUSD topped out above 0.9700 last October, the US futures COT report showed speculative interest was still short AUDUSD to the tune of -23k contracts . The COT report for this week (released this Friday, showing positioning as of this Tuesday) will likely show speculators have gotten net long AUDUSD for the first time since last May. In other words, positioning is no longer working against the bears’ favour.
Chart: USDCAD
The selling pressure abated yesterday close to the 38.2% retracement of the big move from the 200-day moving average, back when it was below 1.0250. This may prove an area of interest for long-term bulls looking for fresh entry points. They certainly need for support to come in soon, as the secular uptrend needs for support to come in soon for upside arguments to remain intact.
EURUSD slugged its way to 1.3872 overnight, but again, I question its ability to maintain much directional momentum here.
The JPY crosses remain heavy after trying to stage a rally on the risk-on response to the FOMC minutes. I’m watching the 140.00 level in EURJPY with interest and the 100.75 area in USDJPY.
Watch out for the Swedish CPI release today as EURSEK is pushing up against the key 9.00 level. The Norwegian CPI is up just a bit later.
The Bank of England meets today, but no policy moves are expected.
Economic Data Highlights
The UK’s best housing survey, the RICS House Price Balance, showed a strong surge in March – a bit of a surprise to see this trend change so quickly after it appeared it was forming a top and was on the decline, as the survey tends to trend strongly. The Bank of England's Mark Carney and company will need to start sharpening the macro-prudential saw if this index heads much higher, as we are already close to historic extremes.
The Chinese Trade Balance data for Mar. showed drops in both exports and especially imports. The timing of this outlier is a bit odd – usually we should expect the outlier readings in January and February around the Chinese New Year holiday. It still looks like a holiday-related figure, however, as the Jan/Feb numbers this year were hardly changed from previous months. We’ll mark it down as “odd” and make a mental note to pay extra attention to the April data. After all, we did see the authorities’ crackdown on the USDCNY carry trade (which heavily affected trade activity) over the last two months.
Looking ahead
Technically speaking, I’m wondering if the commodity dollars’ strength is getting long in the tooth as the Asian session saw momentum fading after yesterday’s reaction to the FOMC meeting. NZDUSD may be forming a broadening top-like formation after poking toward the 0.8750 area overnight, and USDCAD punched through 1.0915 support yesterday and down close to a major Fibonacci retracement (see below). AUDUSD may just fall short of the 0.95000 level if it reverses all of last night’s post-employment report gains, which would mean that it falls short of the ideal 0.9510 upside down head and shoulders formation. The line in the sand for this rally is 0.9500 plus slippage in my mind – but l would like to see a quality technical reversal to encourage that bias.
The week AUDUSD topped out above 0.9700 last October, the US futures COT report showed speculative interest was still short AUDUSD to the tune of -23k contracts . The COT report for this week (released this Friday, showing positioning as of this Tuesday) will likely show speculators have gotten net long AUDUSD for the first time since last May. In other words, positioning is no longer working against the bears’ favour.
Chart: USDCAD
The selling pressure abated yesterday close to the 38.2% retracement of the big move from the 200-day moving average, back when it was below 1.0250. This may prove an area of interest for long-term bulls looking for fresh entry points. They certainly need for support to come in soon, as the secular uptrend needs for support to come in soon for upside arguments to remain intact.
EURUSD slugged its way to 1.3872 overnight, but again, I question its ability to maintain much directional momentum here.
The JPY crosses remain heavy after trying to stage a rally on the risk-on response to the FOMC minutes. I’m watching the 140.00 level in EURJPY with interest and the 100.75 area in USDJPY.
Watch out for the Swedish CPI release today as EURSEK is pushing up against the key 9.00 level. The Norwegian CPI is up just a bit later.
The Bank of England meets today, but no policy moves are expected.
Economic Data Highlights
- New Zealand Mar. BusinessNZ Manufacturing PMI out at 58.4 vs. 56.5 in Feb.
- UK Mar. RICS House Price Balance out at 57% vs. 43% expected and 47% in Feb.
- Japan Feb. Machine Orders out at -8.8% MoM and +10.8% YoY vs. -2.6%/+17.5% expected, respectively and vs. +23.6% YoY in Jan.
- Australia Mar. Employment Change out at +18.1k vs. +2.5k expected and +48.2k in Feb.
- Australia Mar. Unemployment Rate fell to 5.8% vs. 6.1% expected and 6.1% in Feb.
- China Mar. Trade Balance out at +$7.7B vs. +$1.8B expected and -$23B in Feb.
- France Mar. CPI (0645)
- Sweden Mar. CPI (0730)
- Sweden Mar. Average House Prices (0730)
- Norway Mar. CPI/PPI (0800)
- Euro Zone ECB publishes monthly report (0800)
- UK Bank of England announcement (1100)
- Canada Feb. New Housing Price Index (1230)
- US Weekly Initial Jobless Claims (1230)
- Euro Zone ECB’s Praet to Speak (1300)
- US Weekly Bloomberg Consumer Comfort Survey (1345)
- Euro Zone ECB’s Constancio to Speak (1800)
- New Zealand Mar. REINZ House Price Index (2100)
- Japan Bank of Japan March 10-11 meeting minutes (2350)
- Japan Mar. Domestic CGPI (2350)
- China Mar. PPI/CPI (0130)