Market Brief
The USD remained broadly in demand across the board as Dallas Fed’s Fisher said the emphasis on wages is dangerous, while the inflation should bounce with stabilizing energy prices. Therefore it would be better, according to him, to proceed with an early and gradual normalization, rather than a late and steeper action. The US 10-year yields hover around 2.20%, theUS Dollar Index index reaches 98.196. The S&P 500 added $8 in New York following Friday’s dip to $2,037.27. The recovery is seen limited at February highs ($2,120) before next week’s FOMC meeting (Mar 18th) as hawkish Fed expectations mount.
USD/JPY pulls out December top, advances to fresh 7-year high (122.03) in Tokyo on sustained US yields and broad USD appetite. With strengthening positive momentum, we see room for further upside. Next resistance stands at 124.14 (2007 high). Large vanilla bids should give support above 120.50/121.00 for today expiry. EUR/JPY and AUDJPY perform mixed as EUR and AUD weakness counter the JPY debasing. EUR/JPY consolidated between 131.37/87 as AUD/JPY tests 21-dma (93.047) on the downside. A break below should send the MACD in the red territories and signal short term bearish consolidation for the pair.
EUR/USD extends weakness to 1.0785. Sentiment remains strongly negative with fundamental shorts building stronger. The market focus is already set to parity. As resistance thickens pre-1.10 psychological level, the deep oversold conditions (RSI at 20%) suggest that a correction would be healthy before further weakness. EUR/CHF volatilities are again very low suggesting that the SNB is perhaps intervening to keep the level at about 1.0680/07 (21-dma). The euroswiss futures advance to 110.77 on expectations that the SNB may go more negative on rates.
The Antipodeans were the biggest losers verse USD overnight. According to NAB, the business confidence fell to lowest in February since July 2013 while business conditions remained subdued. AUD/USD legged down to 0.7632 (also impacted by Fonterra issue), the MACD (12, 26) stepped in the red zone. Break below 0.7626 (Feb 3rd low) should increase selling pressures before Thursday’s labor data. Option barriers are placed at 0.7700/50 area. The NZD-complex was squeezed as police said to investigate a threat of contamination on Fonterra's baby milk formula. While tests showed no evidence of contamination, the recovery to NZD sell-off has been limited. NZD/USD fell to 0.7277. Stronger push to 0.72 is eyed.
USD/CAD advances to 1.2648 as WTI stepped back below $50. Friday’s jobs data may reveal further deterioration in jobs market and revive speculations for additional 25 bp cut on April 15th meeting. Break above 1.2698 (MACD pivot & Feb 11th high) should call for fresh 6-year highs (> 1.2800).
Else, USD/BRL extended gains to fresh highs (3.1321), overnight interbank deposit futures spiked to 13.90 as traders price in higher borrowing costs in Brazil. The BCB is now expected to proceed with further policy tightening, while protests mount against a sweet combination of probe scandals, Rousseff and Congress inability to agree on budget, economic slowdown and fastening inflation. At this point, Rousseff is comfortably far from getting market’s support behind her. The BRL sell-off continues with next key resistance set at 3.2420 (May 2004 high).
Today, traders watch Swiss February Unemployment Rate, French January Industrial and Manufacturing Production m/m & y/y, Spanish January Retail Sales m/m & y/y, Norway January CPI m/m & y/y, Italian January Industrial Production m/m & y/y, US February NFIB Small Business Optimism, US January Wholesale Inventories and Wholesale Trade Sales m/m, US January JOLTS Job Openings.
| Today's Calendar | Estimates | Previous | Country / GMT |
|---|---|---|---|
| SZ Feb Unemployment Rate | 3.50% | 3.50% | CHF / 06:45 |
| SZ Feb Unemployment Rate SA | 3.20% | 3.10% | CHF / 06:45 |
| FR Jan Industrial Production MoM | -0.30% | 1.50% | EUR / 07:45 |
| FR Jan Industrial Production YoY | 0.40% | -0.10% | EUR / 07:45 |
| FR Jan Manufacturing Production MoM | 0.10% | 1.20% | EUR / 07:45 |
| FR Jan Manufacturing Production YoY | -0.10% | 0.30% | EUR / 07:45 |
| SP Jan Retail Sales YoY | - | 5.40% | EUR / 08:00 |
| SP Jan Retail Sales SA YoY | - | 6.50% | EUR / 08:00 |
| NO Feb CPI MoM | 0.60% | -0.10% | NOK / 09:00 |
| NO Feb CPI YoY | 2.10% | 2.00% | NOK / 09:00 |
| NO Feb CPI Underlying MoM | 0.70% | -0.10% | NOK / 09:00 |
| NO Feb CPI Underlying YoY | 2.50% | 2.40% | NOK / 09:00 |
| NO Feb PPI including Oil MoM | - | -4.50% | NOK / 09:00 |
| NO Feb PPI including Oil YoY | - | -12.40% | NOK / 09:00 |
| IT Jan Industrial Production MoM | 0.20% | 0.40% | EUR / 09:00 |
| IT Jan Industrial Production WDA YoY | 0.10% | 0.10% | EUR / 09:00 |
| IT Jan Industrial Production NSA YoY | - | 0.10% | EUR / 09:00 |
| US Feb NFIB Small Business Optimism | 98.9 | 97.9 | USD / 13:00 |
| US Jan Wholesale Inventories MoM | -0.10% | 0.10% | USD / 14:00 |
| US Jan Wholesale Trade Sales MoM | -0.50% | -0.40% | USD / 14:00 |
| US Jan JOLTS Job Openings | 5050 | 5028 | USD / 14:00 |
Currency Tech
EUR/USD
R 2: 1.1000
R 1: 1.0907
CURRENT: 1.0798
S 1: 1.0765
S 2: 1.0536
GBP/USD
R 2: 1.5459
R 1: 1.5270
CURRENT: 1.5079
S 1: 1.5027
S 2: 1.4952
USD/JPY
R 2: 124.14
R 1: 122.50
CURRENT: 121.74
S 1: 120.61
S 2: 119.38
USD/CHF
R 2: 1.0240
R 1: 0.9944
CURRENT: 0.9911
S 1: 0.9825
S 2: 0.9722