FTSE -60 points at 7271
DAX -62 points at 12155
CAC -26 points at 5065
Euro Stoxx -17 points at 3455
The Federal Reserve (Fed) minutes revealed the FOMC members’ will to start shrinking the $4.47 trillion worth of balance sheet ‘later this year’. This has been an important piece of additional information that has been brought on the table for the first time since the Fed stopped tapering its asset purchases.
Fed’s Dudley warned that the balance sheet shrinkage would act as a ‘substitute for short-term rate hikes’, warning that the Fed may need to decide whether ‘to take a little pause in terms of raising short-term rates’.
In the dirt of details regarding the timing and the size of the balance sheet operation, the Fed doves were rapidly pushed out of the market. The probability of a June interest rate hike increased to 63.2%; the 10-year yields held the ground above 2.30%.
The U.S. dollar shortly gained against the G10 currencies, yet the lack of clarity on the Fed’s policy turn prevented the U.S. dollar from taking a fresh bullish direction.
On the data front, the U.S. ADP report beat analyst estimates, as the U.S. economy added 263’000 new private sector jobs in March, versus 185’000 anticipated by analysts.
The consensus for the nonfarm payrolls (NFP), due on Friday, is 180’000 versus 235’000 released a month earlier. The 12-month moving average stands at 185’000. Given the weak expectations, there is room for a positive surprise in March payrolls data.
The Aussie (-0.37%) has been the biggest loser against the greenback, as the Fed minutes failed to revive the carry appetite in the AUD/USD and the slower than expected expansion in China’s services sector weighed on the appetite heading into the meeting between Chinese President Xi and the U.S. President Donald Trump today. Downside risks prevail given that news in China - Australia’s biggest trade partner, have a significant impact on the value of the Australian dollar.
The AUD/USD broke below its 200-day moving average (0.7552) and is preparing to test the 100-day moving average at 0.7530. Below this level, the March low of 0.7490 should be a natural downside target for the AUD-bears. Mixed option expiries trail above 0.7550 for today.
Gold continues seeing a decent resistance at $1260, its 200-day moving average. A further slide in the U.S. yields, due to an eventual pullback in Fed interest rate expectations, could pave the way for a further recovery toward $1280 mark.
The USD/JPY remained under pressure as sellers stepped in pre-110.75 in Tokyo. Nikkei (-1.66%) and Topix (-1.68%) traded lower. Decent put options trail below 110.75 to 110.00 at today’s expiry, warning that the 110.00 is at risk despite a better bid USD.
In Europe, the European Central Bank (ECB) meeting minutes and the ECB President Mario Draghi’s speech in Frankfurt will be in traders’ focus. French election worries are pushed back as the most recent polls suggest that the anti-European candidate Marine Le Pen may not make her way to the Elysée.
The EUR/USD continues seeing support above its 100-day moving average, 1.0620. The pair is stuck within the 1.0620-1.0700 range. A breakout in either direction could gain momentum. On the upside, we watch 1.0748 and 1.0808 (major 38.2% and minor 23.6% retracement on March rise). On the downside, the move could extend toward 1.0500/1.0495 (March low).
Cable remained capped by 1.2500 offers. Trend and momentum indicators remain marginally positive, keeping the possibility of a renewed rise toward the 200-day moving average, 1.2565. The short-term support to the recent positive trend is eyed at 1.2420/1.2506 (major 38.2% retracement on March rise / 100-day moving average).
The FTSE rolling index extended losses to 7251p in Asia. The FTSE 100 is called lower at the open due to the strong pound and solid topside in oil and commodity markets.
The WTI bounced lower from $52.00 after the EIA reported that the U.S. inventories increased by 1.6 million barrels last week, versus a contraction of 100’000 barrels expected. The bias remains positive with dip-buyers eyed at $50.00.
Quick glance at technicals on LCG Trader:
CAC 40 intraday: key resistance at 5133
EUR/GBP: key resistance at 0.8575
Gold spot intraday: downside prevails
Crude oil (WTI) intraday: under pressure