Market Brief
Financial markets are subdued, with slight USD buying, as event risk looms in the near term. The FOMC Chair Yellens congressional testimony, Greece’s submission of final reform list to creditors today and China back from an extended Lunar New Year holiday tomorrow has FX traders in wait-and-see mode. However, equity markets remain bullish. Following the US strong close, the Nikkei rose 0.74%, Australia 200 climbed 0.32% while the Hang Seng sell-off -0.42%. Supported by a solid Nikkei 225 recovery and optimism of a EU/Greek bailout extension, USD/JPY (JPY broadweakness) was a one directional bullish trade to 119.35 from 118.80. EUR/JPY rallied from 134.65 to 135.20 in consideration. EUR/USD bounced around between 1.1330 and 1.1340 for most of the Asians session with most participants sidelined before Yellens testimony. AUD/USD was hit by light trading and tripped stops below 0.7780 sending the pair down to 0.7765. AUD/USD is focused on key support at 0.7740 which break could trigger an extension of bearish momentum to 0.7630. US rates were slightly softer falling to 2.0714%.
Commodity markets remain volatile, being led by oil. Oil dropped 3.0% in the morning session on headlines of a Libyan oil pipeline coming back online, then recovered only to collapse again to $48.70. OPEC President Diezani Alison-Madueke stated that if the price “slips any further, it is highly likely that I will have to call an extraordinary meeting of OPEC in the next six weeks or so.”
German Q4 GDP growth to be unchanged from the flash estimates at 0.7% q/q. Euro area final HICP inflation is also unchanged at -0.6% y/y in January, after falling from -0.2% y/y in December. Greece missed Mondays deadline for the reform proposal list which is a condition for extending the country's bailout program but government officials indicate the economic reforms plan will be delivered today. Productive developments between the Greek government and the Eurogroup will likely generate bullish relief rally, yet structurally we remain negative on the pair. Any recovery towards 1.1450 potentially due to Eurozone peripheral bonds to reacting positively to an agreement would be seen as an opportunity to reload shorts.
BoE Governor Carney will testify on the central bank’s February 2015 Inflation Report. GBP/USD focus stays on 1.5492, break above which would see bullishness extend to 1.5620. EUR/GBP’s bearish extension below channel support at .7365 indicates a broader move to .7255.
Yesterday U.S. home resales dropped suddenly in January declining 4.9% m/m, to an annualized pace of 4.82mn, below consensus 4.95mn, amid a shortage of properties on the market, a obstruction that could slow outlooks for an quickening in housing activity this year. Markets await Fed Chair Yellen’s semi-annual testimony to Congress today and Wednesday. Trader will be hoping for some clarity around inflation and labor markets to derives a view on timing. We could also get some comment regarding the recent USD strength, that would easily generate market volatility.
| Today's Calendar | Estimates | Previous | Country / GMT |
|---|---|---|---|
| GE 4Q Private Consumption QoQ | - | 0.70% | EUR / 07:00 |
| GE 4Q Government Spending QoQ | - | 0.60% | EUR / 07:00 |
| GE 4Q Capital Investment QoQ | - | -0.90% | EUR / 07:00 |
| GE 4Q Construction Investment QoQ | - | -0.30% | EUR / 07:00 |
| GE 4Q Domestic Demand QoQ | - | -0.20% | EUR / 07:00 |
| GE 4Q Exports QoQ | - | 1.90% | EUR / 07:00 |
| GE 4Q Imports QoQ | - | 1.70% | EUR / 07:00 |
| GE 4Q F GDP SA QoQ | - | - | EUR / 07:00 |
| GE 4Q F GDP WDA YoY | - | - | EUR / 07:00 |
| GE 4Q F GDP NSA YoY | - | - | EUR / 07:00 |
| FR Feb Business Confidence | - | 94 | EUR / 07:45 |
| FR Feb Manufacturing Confidence | - | 99 | EUR / 07:45 |
| FR Feb Production Outlook Indicator | - | -11 | EUR / 07:45 |
| FR Feb Own-Company Production Outlook | - | 13 | EUR / 07:45 |
| EC Jan CPI MoM | - | -0.10% | EUR / 10:00 |
| EC Jan F CPI YoY | - | -0.60% | EUR / 10:00 |
| EC Jan F CPI Core YoY | - | 0.60% | EUR / 10:00 |
| US Dec S&P/CS 20 City MoM SA | - | 0.74% | USD / 14:00 |
| US Dec S&P/CS Composite-20 YoY | - | 4.31% | USD / 14:00 |
| US Dec S&P/CaseShiller 20-City Index NSA | - | 172.94 | USD / 14:00 |
| US Dec S&P/Case-Shiller US HPI MoM | - | 0.76% | USD / 14:00 |
| US Dec S&P/Case-Shiller US HPI YoY | - | 4.69% | USD / 14:00 |
| US Dec S&P/Case-Shiller US HPI NSA | - | 167 | USD / 14:00 |
| US Feb P Markit US Composite PMI | - | 54.4 | USD / 14:45 |
| US Feb P Markit US Services PMI | - | 54.2 | USD / 14:45 |
| US Feb Consumer Confidence Index | - | 102.9 | USD / 15:00 |
| US Feb Richmond Fed Manufact. Index | - | 6 | USD / 15:00 |
Currency Tech
EUR/USD
R 2: 1.1534
R 1: 1.1443
CURRENT: 1.1330
S 1: 1.1262
S 2: 1.1098
GBP/USD
R 2: 1.5620
R 1: 1.5486
CURRENT: 1.5393
S 1: 1.5317
S 2: 1.5197
USD/JPY
R 2: 121.85
R 1: 120.83
CURRENT: 118.64
S 1: 118.18
S 2: 116.66
USD/CHF
R 2: 0.9831
R 1: 0.9554
CURRENT: 0.9521
S 1: 0.9385
S 2: 0.9284