Market Brief
Asian stock markets are trading higher after China’s central bank loosen monetary policy for the third time since November 2014. On Sunday, the PBoC cut the benchmark one-year lending rate by 25bps to 5.1% and the one-year deposit rate by 25bps to 2.25%. Shanghai's stock market gained 2.91% and erased partially losses from last week. Hong Kong’s Hang Seng up by 0.82% to 27,804 while Nikkei 225 is up 1.25%. China also released April’s CPI figures at 1.5%y/y verse 1.6% expected, 1.4% prior read and PPI at -4.6%y/y verse -4.5% consensus.
USD/JPY failed at breaking the 120.18 resistance (Fib 50% on March sell-off) and will certainly make further attempts today. One can find a strong support at 118.50 (April’s multi lows) and a resistance around 120.61/82 (Fib 61.8% and high from April 13th).
In Australia, equities are treading water after NAB business condition fell to 4 in April (6 prior read). Meanwhile business confidence remained stable at 3. Since Thursday, AUD/USD is trading range-bound between 0.7869-0.7968. The Aussie sits on the 0.7869/84 support area and could find support lower at 0.7805 (Fib 50% on April rally). However, the pair is getting closer to the bottom of its uptrend channel, a break of this support would pave the way for further Aussie depreciation toward 0.77, then 0.7550. NZD/USD suffered heavy sell-off in the early Asian session, retreating -1.43% to 0.7392 after rumours that RBNZ will continue to cut interest rates. Next meeting is on June 10.
In Europe, equity futures are mixed with Euro Stoxx 50 flat, DAX down -0.06% and SMI up 0.17%. In UK, equities consolidated after the sharp appreciation following Conservatives’ victory. GBP/USD printed a 10-week high at 1.5523 and tested the strong resistance standing at 1.5552/69 (high from February 26th and Fib 38.2% on July-April sell-off). EUR continues its freefall against the GBP. After a small pause on Friday, EUR/GBP was on bid in the early Asian session. Next support stands around 0.7193 (Fib 61.8% on March-April rally). Today’s BoE meeting will be a non-event with unchanged policy.
EUR/USD is grinding lower toward the next support standing at 1.1043/59 (previous high from March 18, now support and Fib 38.2% on April rally). The USD should find some buying interests below the latter. Friday’s US labour report reassured markets as NFPs came in below expectation at 223k verse 228k (prior read revised down to 85k). It seems that traders were broadly expecting much worse and are satisfied with the numbers. However, average hourly earnings contracted by 2.2%y/y in April (or 0.1%m/m) while analysts were looking for 2.3%y/y (or 0.2%m/m). Wages growth remained our primary focus as an increase will help inflation to increase and then allow the Fed to finally start hiking rates. We still expect a rate hike in September.
Markets’ focus will switch from the UK General Election toward Greece as euro area finance ministers are meeting today in Brussels, to discuss the unlock of the final €7.2bn left to help the cash-strapped government. Finally, Greece €750mn payment to the IMF is due tomorrow.
Currency Tech
EUR/USD
R 2: 1.1529
R 1: 1.1450
CURRENT: 1.1169
S 1: 1.1111
S 2: 1.1000
GBP/USD
R 2: 1.5826
R 1: 1.5552
CURRENT: 1.5414
S 1: 1.5156
S 2: 1.5051
USD/JPY
R 2: 122.03
R 1: 120.10
CURRENT: 119.98
S 1: 118.91
S 2: 117.94
USD/CHF
R 2: 1.0240
R 1: 0.9571
CURRENT: 0.9325
S 1: 0.8936
S 2: 0.8823