Market Brief
Here we go again. Since the beginning of 2016, financial markets have had a tough time choosing sides between bulls and bears, and as you can see the market is in risk-off mode this week. Commodity prices fell sharply in Tokyo, with the West Texas Intermediate dropping 1.57% and the Brent crude retreating 0.87%, as the supply glut does not appear to be going anywhere anytime soon. Therefore nothing could keep the global stock market from pairing losses. Yesterday, Wall Street ended the session wearing red, with the S&P 500 losing 1.25%, the NASDAQ falling 1.47% and the Dow Jones sliding 1.14%, on worsening risk environment.
As usual in a period of falling crude oil prices, commodity currencies are the first to lose ground. The Australian and New Zealand dollar were amongst the biggest losers overnight as the Aussie fell 0.11%, while the Kiwi dropped 0.24% against the US dollar. However, over the medium-term the two currencies are moving sideways within a narrow range. NZD/USD has been trading range bound between 0.6550-0.6750 for most of the month of February; therefore, in the absence of major news or/and significant improvement in risk sentiment, the pair should continue to move sideways around those levels. Similarly, AUD/USD failed for the second in a month to break the 0.7250 resistance to the upside and is currently heading toward the 0.71 support.
After falling roughly 3% since mid-February, EUR/USD stabilised around 1.10 over the last three days. In this time of high uncertainty, traders prefer to remain sidelined, while trying to guess whether the Fed or ECB will move first. Stanley Fischer, Federal Reserve Vice Chairman, suggested yesterday that the committee is clueless about a potential rate hike at the next FOMC meeting on March 16th as he said “If the recent financial market developments lead to a sustained tightening of financial conditions, they could signal a slowing in the global economy that could affect growth and inflation in the United States”. Given the recent weak data from the euro zone, we believe the bias remains on the downside in EUR/USD, with the 1.09 as next target.
In the equity market, Asian regional indices were mostly pairing losses with the Nikkei down 0.85% and the Topix lower by -0.51%. In mainland China, stocks were mixed with the Shanghai Composite up 0.88%, while the Shenzhen Composite was down -0.04%. Offshore, Hong Kong’s Hang Seng was down 1.26%. In Australia shares slid 2.10%, while in New Zealand the NZX surged 0.89%.
Today traders will be watching the unemployment rate from Norway; industrial production from Italy; MBA mortgage application, Markit service and composite PMIs and new home sales from the US. A few Fed members will also give a speech today with Lacker speaking in Baltimore and Kaplan speaking in Dallas.
Currency Tech
EUR/USD
R 2: 1.1376
R 1: 1.1193
CURRENT: 1.1003
S 1: 1.0893
S 2: 1.0711
GBP/USD
R 2: 1.4591
R 1: 1.4409
CURRENT: 1.3981
S 1: 1.3845
S 2: 1.3657
USD/JPY
R 2: 117.53
R 1: 114.91
CURRENT: 112.05
S 1: 110.99
S 2: 105.23
USD/CHF
R 2: 1.0257
R 1: 1.0074
CURRENT: 0.9944
S 1: 0.9847
S 2: 0.9660