Market Brief
Dollar bulls remained broadly sidelined during the first half of the week, waiting for the next batch of economic data from the world’s biggest economy. The dollar index rose 0.30% in Asia, reaching 94.25. However, the index has been trading with a negative bias for the last seven days as traders start to lose faith in further dollar appreciation. EUR/USD reversed yesterday’s gains and returned to around 1.1360. Overall, the pair remained between the strong resistance area at around 1.15 and the 1.1310 support (low from March 31st). The single currency will need a strong boost to break to the upside; the next resistance lies at 1.1714 (high from August 2015). The US retail sales, producer prices index are due for release this afternoon and are expected to show an improving picture of the US economy. However, in the event of disappointing readings, it could help EUR/USD to clean the 1.15 resistance area and pave the way towards 1.1714.
In China, exports expanded 11.5%y/y in March (in USD term), the most since June 2015. This rebound suggests that the economy is finally stabilising after the sharp decline in February (-25.4%y/y). However, given that the data is not seasonally adjusted and that the trend is rather negative than positive since 2015 we think it is a bit early to call it a stabilisation. On a month-over-month basis, exports surged 27.5% but contracted 20.8% in January and 28.9% in February. Imports contracted 7.6%y/y, beating estimates of -10.10%, while the trade balance came in at $29.86bn versus $34.95bn median forecast. Nevertheless, the market welcomed the news and pushed Asian equities higher. In mainland China, the Shenzhen and Shanghai Composite were up 1.71% and 1.86% respectively, while in Japan the Nikkei and the Topix index surged 2.84% and 2.55%. In Hong Kong, the Hang Sang rose 2.33%.
The overnight correction in crude oil prices dragged down commodity currencies. The Norwegian krone slipped 0.57% to 8.2150 against the USD, the Australian dollar fell 0.42% to $0.7654, while the Canadian dollar slid 0.35% to 1.2793 against the USD. The West Texas Intermediate is now testing a key resistance area at between $42 and $44. We expect a consolidation below the $50 level. US weekly crude inventories are due for release later today and are expected to have risen by 1 million barrels compared to a contraction of 4.9 million barrels in the previous week.
Today traders will be watching CPI from France and Spain; industrial production and a few speeches from ECB members from the euro zone; retail sales from South Africa; PPI, retail sales, crude inventories and Beige Book from the US; Bank of Canada rate decision (no change expected).
Currency Tech
EUR/USD
R 2: 1.1714
R 1: 1.1465
CURRENT: 1.1346
S 1: 1.1144
S 2: 1.1058
GBP/USD
R 2: 1.4591
R 1: 1.4459
CURRENT: 1.4221
S 1: 1.3836
S 2: 1.3657
USD/JPY
R 2: 112.68
R 1: 109.90
CURRENT: 108.85
S 1: 107.61
S 2: 105.23
USD/CHF
R 2: 0.9913
R 1: 0.9788
CURRENT: 0.9590
S 1: 0.9476
S 2: 0.9259