HotForex Forex News

18:45 Brazil: Central Bank showing that there is light at the end of the tunnel - Wells Fargo

According to analysts from Wells Fargo, the Brazilian economy is getting help from the Central Bank, that continues to reduced the key interest rate (Selic)

Key Quotes: 

“This week’s 75 basis points reduction in the Selic benchmark interest rate and the overall 200 basis point decline in the past five months confirms that the Brazilian central bank has become an ally of the current Brazilian president as he tries to revive a moribund economy.”

“The central bank will probably continue with its campaign of lowering interest rates in the near term. An additional consideration for the central bank will be currency dynamics and how those dynamics are influenced by its interest rate actions. For now, our sense is that the central bank is not particularly worried that its interest rate easing will lead to excessive currency weakness, though it continues to monitor trends closely.”

“After two years of going through the worst recessionary period in Brazilian recorded history, the central bank is showing that there is light at the end of the tunnel. We still believe that the recovery will take time and will not be very strong, but weak growth is always better than what has happened during the past two years.”

“The country is not out of the woods yet as it still has to fix its fiscal accounts and the road ahead is not devoid of social and political problems. However, if the economy starts to rebound the political environment and the fiscal situation will probably start to improve, which is no small feat for such a battered economy.”

What could help the Brazilian economy considerably would be a stronger global economy, which is not a sure thing today even though we have seen some improvement at the global stage.”


18:36 Latin America Outlook: North-south divergence - BBVA

Analysts from BBVA Research expect economic growth to accelerate in Shout America, leaving behind 4 year of deceleration, but they see Mexico slowing down. 

Key Quotes: 

“The global economy still points to higher growth, but also more uncertainty and significant risks in the long run.”

“South America will grow 1% in 2017 and leave 4 years of deceleration behind. Mexico is on the receiving end of uncertainty about US economic policies.”

“Growth falls to 1% in 2017Markets recover in South America since January, supported by commodity prices. But asset prices still under pressure in Mexico"

“Interest rates will fall further in South America in 2017. But Mexico will continue to tighten monetary policy given rising inflation.”

“Main asset prices and exchange rates registered losses after US elections, especially in Mexico. After initial shock, markets recovered since end of 2016. Asset prices in South America managed to recover levels seen before US elections. Mexican asset prices recovered since January 20, but still remain below levels seen at the beginning of November.”

Latam


18:35 AUD/USD bearish below 0.77; RBA s Lowe talked down Australian dollar

Currently, AUD/USD is trading at 0.7685, up -0.38% or 38-pips on the day, having posted a daily high at 0.7719 and low at 0.7664.

Today's US docket had limited news to support a dollar rebound. Nevertheless, the Michigan Consumer Sentiment Index clocked a slightly positive result at 96.3 against 96 consensus and 95.7 previous. Hence, the Australian dollar lost ground against the greenback as the pair broke below the 0.77 level to trade as low as 0.7660 or (50)-pips from the daily highs.

On the other hand, yesterday's comments from RBA's Lowe were enough to somewhat slow down the Aussie upside pressure. Australia's concerning household debt-to-income at 180% seems to be an issue the central banker would like to tame avoiding further easing which could be translated as no hikes in the short or medium-term. However, there is evidence to expect a change in this rhetoric if the Australian economy suddenly signals a lower rate growth.

AUD/USD keeps the bullish bias – UOB

Historical data available for traders and investors indicates during the last 8-weeks that AUD/USD pair, a commodity-linked currency, had the best trading day at +1.18% (Jan.17) or 89-pips, and the worst at -0.81% (Jan.18) or (61)-pips. Furthermore, the US 10yr treasury yields have traded from 2.38% to 2.32%, down -1.72% on the day at 2.33% or -0.0408.

Technical levels to consider

In terms of technical levels, upside barriers are aligned at 0.7740 (high Feb.23), then at 0.7777 (high Nov.8) and above that at 0.7834 (high April.21). While supports are aligned at 0.7617 (low Feb.14), later at 0.7512 (100-DMA) and below that at 0.7459 (50-DMA). On the other hand, Stochastic Oscillator (5,3,3) seems to shift direction to head south. Therefore, there is evidence to expect further Aussie losses in the near term.

audusd

On the long term view, if 0.7834 (high April 2016) is in fact, a relevant top, then the upside is limited at 0.7809 (short-term 38.2% Fib). Furthermore, RBA's Lowe removed from the table any further 'easing' via rate cuts, however, the interest rate advantage that favors the Aussie should decrease organically as the Federal Reserve continues increasing rates with '3-hikes' in the next 16 months.

To the downside, supports are aligned at 0.7433 (short-term 23.6% Fib), later at  0.7182 (reverse long-term 61.8% Fib) and below that back to 0.6826 (low Jan.2016).

audusd

Trump speech to Congress next Tuesday should move markets


18:28 USD/JPY finds support at 112.00 and trims losses

USD/JPY moved off daily lows and trimmed losses amid a rally of the US dollar across the board. The yen still remains among the top performers of the day. 

The pair bottomed at 112.04, the lowest level in two weeks. From the lows it bounced quickly to the upside. The recovery of the US dollar lost strength below 112.50. 

Currently, the pair trades at 112.30/35, 55 pips below the level it closed last week. 

Technical levels

Despite it moved off lows, USD/JPY still holds a bearish bias. Below 112.00, attention would turn to 111.60, where February lows area located. Below that level, the next target could be seen near the 111.00 zone. 

On the upside, if the US dollar rises above 112.50/55 (American session high / 20-hour moving average) it could remove the negative short-term momentum. Above the next resistance level might be seen at 112.95 (daily high) and 113.30.

USD/JPY
 


18:03 U.S. President Trump: We are going to massively lower taxes on middle-class

During a speech at Conservative Political Action Conference (CPAC) 2017, U.S. President Donald Trump said that he'll "massively" lower taxes on middle-class.

More headlines (via Reuters):

  • We will make tax code simpler and fair
  • We will be substantially upgrading our military
  • Putting in massive budget request for US military
  • It's going to be one of the most massive military buildups in US history
  • We believe in peace through strength and that's what we will have
  • I've directed military to create plan to totally obliterate ISIS
  • We are doing one-on-one trade deals
  • We don't need 75% of our regulation
  • We are going to protect our environment and our workers
  • We are going to massively reduce taxes
  • We're going to make our taxes much more simple and fair

17:57 Brazil Primary Budget Surplus up to 36.7B in January from previous -70.737B


17:56 Brazil Unemployment Rate rose from previous 12%to 12.6% in January


17:56 Brazil Nominal Budget Balance rose from previous -105.237Bto 0.299B in January


17:54 EUR/USD volatile around 1.0580 on upbeat US results

EUR/USD has deflated from daily highs above  the critical 1.0600 handle following US data today, currently attempting some consolidation in the 1.0580 region.

EUR/USD off highs on upbeat U-Mic

Spot came under renewed selling pressure after US Consumer Sentiment tracked by the Reuters/Michigan index surprised to the upside for the current month, advancing to 96.3 (vs. 96.0 exp.) from January’s 95.7.

Further data from the US docket saw New Home Sales expanding at a monthly 3.7% in January, or 555K units, missing prior surveys.

In the meantime, the pair is so far heading towards its third consecutive week with losses, coming down without stopping since YTD tops in the 1.0830 region seen in late January.

EUR/USD levels to watch

At the moment the pair is up 0.06% at 1.0587 facing the initial hurdle at 1.0618 (high Feb.24) followed by 1.0658 (20-day sma) and finally 1.0682 (high Feb.16). On the flip side, a breach of 1.0492 (low Feb.22) would target 1.0452 (low Jan.11) en route to 1.0339 (2017 low Jan.3).


17:46 EUR/USD returns to the neutral bias Scotiabank

FX Strategists at Scotiabank noted the outlook on the pair has shifted to neutral in the near term.

Key Quotes

“Opinion polls suggest centrist candidate Macron has derived some additional support from his election pact with leftist Bayrou but concerns around the French presidential election outcome are likely to remain elevated through the vote itself, considering how poorly opinion polls have tracked underlying voter sentiment elsewhere recently”.

“Meanwhile, negative nominal, short-term yields near 1% for core EZ bonds represent a significant fundamental negative for the EUR from our perspective. We remain bearish EURUSD”.

EURUSD looks a little steadier on the chart after the mid-week bounce from the 1.05 area. Daily gains through Thursday appear to have “confirmed” a low in place and the market is testing the 55-day MA in the low 1.06 area at writing where good selling interest emerged earlier in European trade. We see resistance at 1.0605/10 on the session”.

 

 


17:45 Mexico Current Account, $ (QoQ) climbed from previous $-7.571M to $-3.363M in 4Q


17:20 US Dollar leaps to 101.00 post-US data

The greenback, in terms of the US Dollar Index, has jumped back to the positive ground above 101.00 the figure in the wake of upbeat US data.

US Dollar bid after data

USD has rapidly reverted the drop to the area of 100.70 after US Consumer Sentiment gauge by the Reuters/Michigan index surpassed the preliminary reading for the month of February, up to 96.3 vs. 96.0 forecasted and 95.7 previous.

On the not-so-bright-side, New Home Sales rose below estimates to 555K units during last month, lower than consensus at 570K units and coming up from December’s 535K units.

The index regained both the positive territory and the 101.00 handle soon after the releases, eroding the initial negative sentiment and still on its way to clinch its third consecutive week with gains.

US Dollar relevant levels

The index is gaining 0.02% at 100.97 facing the next resistance at 101.34 (55-day sma) followed by 101.75 (high Feb.15) and finally 101.95 (23.6% Fibo of the November-January up move). On the other hand, a break below 100.66 (low Feb.24) would open the door to 100.55 (20-day sma) and then 100.40 (low Feb.16).


17:11 US stocks keep the red during opening hour

Major US equity indices snapped their record-setting run and witnessed a weaker opening on Friday, with the Dow Jones Industrial Average (DJIA) ending 10-days of winning streak.

During opening hour of trading, DJIA was down around 40-points to 20,770, while the broader S&P 500 Index lost nearly 6-points to 2,358. Meanwhile, tech-heavy Nasdaq Composite Index retreated 16-point to 5,820.

A slide in oil prices, with WTI crude oil flirting with $54.00/barrel mark, was also seen weighing on investors’ appetite for riskier-assets – like equities.

In absence of any specific details over the Trump administration’s fiscal policies, market participants look forward to Trump's highly anticipated address to Congress on Feb. 28 for reason to keep pushing shares higher.

Meanwhile, possibilities of some profit-taking, on the last trading day of the week, could also be one of the factor for a mildly bearish trading sentiment.
 

 


17:01 United States Michigan Consumer Sentiment Index came in at 96.3, above expectations (96) in February


17:01 United States New Home Sales (MoM) came in at 0.555M, below expectations (0.57M) in January


17:01 United States New Home Sales Change (MoM) below expectations (6.3%) in January: Actual (3.7%)


16:49 EUR/CZK goodbye to the peg? Danske Bank

Analyst at Danske Bank Aila Mih sees there is scope for the floor on EUR/CZK to be removed at some point this year.

Key Quotes

“We still expect a EUR/CZK floor removal in mid-2017, when inflation sustainably reaches the CNB’s target, as FX reserves also create no great concerns for now”.

“However, with the recent inflation developments, there is a risk of an exit as early as Q2 17. We expect a further move down in EUR/CZK forwards over coming months as the exit draws nearer”.

“The CZK is fundamentally undervalued from a REER point of view; however, the CNB’s readiness to intervene after the exit if needed to smooth out FX swings and covering of short positions should limit significant CZK strengthening after the exit”.

“Hence, we project the cross will settle in the 25.5-26.0 range following the exit and our forecast for EUR/CZK is 27.0 in 1M and 3M, 26.0 in 6M and 25.5 in 12M”.


16:42 GBP/USD muted near 1.2560, targeting critical support near 100 DMA

Currently, GBP/USD is trading at 1.2514, down -0.31% or (39)-pips on the day, having posted a daily high at 1.2569 and low at 1.2497.

The British pound vs. American dollar had been trading above water as the ongoing political uncertainty in the US linked to Trump's Agenda seems to favor risk-on trades. Furthermore, there is evidence to be 'cautiously optimistic' no matter how friendly negotiations between the EU and PM May could develop as different businesses in the UK are facing immediate pressure, for example as Ben Chapman at Independent reported when quoting Ufi Ibrahim, chief executive of the British Hospitality Associations, “People don’t want to pack up their lives and move to the UK if they could end up having to go back again very soon. It’s not only waiters and bartenders who are put off. Even top chefs are turning down jobs in London."

On the data front, the UK economic docket had BBA Mortage Approvals that clocked 'a better than expected' figure at 44.657K against 41.9k consensus and 43.581K previous. Later, the US dollar would face New Home Sales (MoM) and Michigan Consumer Sentiment Index if both figures print better than expected results the greenback could experience extra strength at least during the NA trading session.

GBP/USD bullish above 1.2610/15 – UOB

Historical data available for traders and investors indicates during the last 8-weeks that GBP/USD pair, also known as the Cable, had the best trading day at +3.01% (Jan.17) or 373-pips, and the worst at -1.19% (Jan.18) or 146-pips. Furthermore, the US 10yr treasury yields have traded from 2.38% to 2.33%, down -1.50% on the day at 2.33% or -0.0355.

Technical levels to consider

In terms of technical levels, upside barriers are aligned at 1.2581 (high Feb.9), then at 1.2705 (high Feb.2) and above that at 1.2777 (high Dec.6). While supports are aligned at 1.2345 (low Feb.7), later at 1.2260 (low Jan.20) and finally below that at 1.2010 (Jan.17). On the other hand, Stochastic Oscillator (5,3,3) seems to change course to head north. Therefore, there is evidence to expect further British Pound gains in the near term.

gbpusd

On the long term view, if 1.1985 (low Jan.16) is in fact, a short-term bottom, the upside runs all the way towards 1.3210 (short-term 23.6% Fib). However, without removing the 'hard' dark cloud from all Brexit negotiations, the sterling faces a gargantuan resistance level against 1.3978 (short-term 38.2% Fib) and 1.4153 (long-term 23.6% Fib).

gbpusd

GBP/USD Forecast: consolidating at highs


16:37 EUR/USD takes a sharp U-turn, reverses daily gains ahead of US data

The EUR/USD pair witnessed a sharp retracement from multi-day tops beyond 1.0600 handle and has now reversed all of its daily gains, dropping closer to session low near 1.0575-70 band. 

A modest greenback recovery, with the key US Dollar Index reversing daily losses to move back closer to 101.00 handle, prompted some profit-taking move following the pair's strong rally of over 100-pips in the past three trading session.

The pair’s sharp reversal during early NA trading session also seems to suggest that investors remain skeptic of any meaningful near-term recovery amid mounting fears over political instability in the region, reaffirmed by plummeting global bond yields.

Next on tap would be the release of new home sales and Revised UoM Consumer Sentiment, which would be looked upon for some follow through US Dollar traction and might drag the pair further during NY trading session.

Technical levels to watch

A follow through weakness below 1.0570 level seems to drag the pair further towards 1.0530 horizontal support ahead of 1.0500 psychological mark. On the flip side, momentum back above 1.0600 handle should accelerate the up-move towards 1.0630-35 intermediate resistance, en-route 1.0675-80 strong barrier.

 


16:29 Gold at 3-month highs above $1,260

The continuation of the selling mood around the greenback is fuelling the upside in Gold to fresh 3-month tops beyond $1,260 per ounce troy, where sits the key 200-day sma.

Gold boosted by USD weakness

Prices for the precious metal has extended its weekly upside today, clinching the $1,260 region for the first time since early November 2016.

Bullion met extra buying interest today in response to the renewed offered bias around the buck, which is dragging the US Dollar Index to weekly lows in the 100.80 region.

In addition, expectations of a rate hike by the Federal Reserve at the March meeting have diminished somewhat following the FOMC minutes on Wednesday and the speech by US Treasury Secretary S.Mnuchin on Thursday, all giving extra wings to the upside in the yellow metal.

Gold key levels

As of writing Gold is gaining 0.66% at $1,259.00 facing the next up barrier at $1,287.50 (high Nov.10 2016) followed by $1,307.00 (high Nov.2 2016) and then $1,318.60 (high Nov.9 2016). On the downside, a break below $1,248.50 (low Feb.24) would expose $1,236.10 (low Feb.23) and finally $1,228.10 (low Feb.21).


16:02 Mexico Retail Sales (MoM) dipped from previous 1%to -1.4% in December


16:01 Mexico Retail Sales (YoY): 9% (December) vs previous 11.2%


15:47 USD/CHF flirting with 100-DMA support ahead of US data

The USD/CHF pair extended Wednesday's reversal move from 1.0140 level and traded with bearish bias for the second consecutive session.

Persistent greenback weakness has been the key factor that drove the pair back towards 100-day SMA support near the 1.0030 region. Thursday's comments from the US Treasury Secretary Steve Mnuchin failed to provide any details over Trump's proposed tax reforms and diminished prospects of a rate-hike move at the Fed's upcoming meeting in March. 

Fading optimism led by Trump's promised pro-economic policies and uncertainty over the timing of next Fed rate-hike action continued to weigh on the greenback, with the key US Dollar Index now placed at daily lows near 100.70 region.

Meanwhile, the prevalent risk-off mood, as depicted by a sell-off in equity markets, is lending support to the Swiss Franc’s safe-haven appeal and collaborating to the pair’s offered tone. 

With today’s downfall, the pair has now reversed all of its gains recorded during the early part of the week and hence, a follow through selling pressure below weekly lows support near 1.0010 level would turn the pair vulnerable to extend the ongoing reversal move further in the near-term. 

Next on tap would be the US economic docket, featuring the release of new home sales data and Revised UoM Consumer Sentiment index, due in a short while from now.

Technical levels to watch

Follow through weakness below 1.0030 level (100-day SMA) could get extended towards 1.0010 level below which the pair is likely to continue sliding towards 0.9970-60 horizontal support. On the flip side, 1.0060 area might act as immediate resistance, which if cleared could lift the pair back towards 1.0100 handle ahead of multi-week tops resistance near 1.0140 area.

 


15:41 USD/CAD tests lows near 1.3060 on CPI

The Canadian Dollar is extending its gains vs. its neighbour on Friday, dragging USD/CAD to fresh daily lows in the 1.3060 region.

USD/CAD weaker post-CPI

CAD met extra upside pressure after January’s inflation figures tracked by the CPI rose more than expected 2.1% on an annualized basis and 0.9% inter-month. Additionally, Core consumer prices measured by the Bank of Canada rose 1.7% over the last twelve months and 0.5% MoM.

Spot has briefly dropped to the 1.3060 area in the wake of the release, where it is now holding against the backdrop of a broad-based selling atmosphere around the buck.

In the US data space, Consumer Sentiment for the month of February is due along with New Home Sales.

USD/CAD significant levels

As of writing the pair is losing 0.29% at 1.3066 facing the next support at 1.3057 (low Feb.17) and then 1.3007 (low Feb.16). On the other hand, a breakout of 1.3118 (high Feb.24) would aim for 1.3148 (200-day sma) and finally 1.3211 (high Feb.22).


15:31 Canadian CPI rose 2.1% YoY

Statistics Canada informed on Friday that consumer prices rose at an annualized 2.1% in January and 0.9% on a monthly basis vs. forecasts for a 1.6% and 0.3% gains, respectively.

BoC’s Core CPI rose 1.7% over the last twelve months and 0.5% inter-month.


15:31 Canada Bank of Canada Consumer Price Index Core (MoM) came in at 0.5%, above forecasts (-0.1%) in January


15:31 Canada Consumer Price Index (YoY) registered at 2.1% above expectations (1.6%) in January


15:31 Canada Bank of Canada Consumer Price Index Core (YoY) climbed from previous 1.6% to 1.7% in January


15:31 Canada Consumer Price Index - Core (MoM) rose from previous 0.2%to 0.3% in January


15:31 Canada Consumer Price Index (MoM) above forecasts (0.3%) in January: Actual (0.9%)


15:12 UAE and Iraq fully committed to OPEC oil output cut deal - Reuters

Reuters reported comments from UAE and Iraq that both the countries are fully committed to OPEC oil output cut agreement.

Key headlines:

   •   UAE fully committed to OPEC output cuts, acting to ensure complete compliance over the deal's 6 month duration
   •   Iraq respects its commitment to OPEC deal
   •   Iraq's oil export allocations in March are low due mainly to OPEC cuts

Meanwhile, WTI crude oil extended bearish slide through early NA session and is now placed at fresh session low near $54.00/barrel mark.


15:06 AUD/USD keeps the bullish bias UOB

FX Strategists at UOB Group noted the Aussie Dollar’s outlook stays bullish for the time being.

Key Quotes

AUD touched a high of 0.7741 yesterday, exceeding the target indicated at 0.7735. The positive undertone has improved considerably and from here, as long 0.7665 is not taken out (minor support at 0.7695), the current AUD strength could extend further to 0.7750. The major resistance at 0.7775/80 (last November high) is likely out of reach, at least for today”.

“We indicated yesterday that the current bullish phase in AUD would shift to neutral unless NY closing is above 0.7710. AUD rallied to a high of 0.7741 before closing at 0.7715. The outlook is still bullish but while upward momentum has improved, it is lacking in ‘impulsiveness’. All in, the bullish phase that started about 3 weeks ago is still in place but those who are long should look to take half profit at 0.7775/80. Stop-loss is adjusted higher to 0.7660 from 0.7640”.

 

 


15:05 World Trade: Positive end to 2016 cannot prevent the worst score for since 2009

Raoul Leering, Head of International Trade Research at ING, suggests that after a strong bounce back in November 2016, December again showed positive growth for world trade.

Key Quotes

"Nevertheless 2016 is the worst year for trade since the trade collapse in 2009 with growth of only 1.2%. Although the outlook for the short term has improved somewhat due to positive signs on the economy, no strong revival is to be expected."

"According to CPB Netherlands Bureau for Policy Analysis world trade in volumes was 0.5% higher in December 2016 compared to November. The November figure was revised downward to 2.6% (initially + 2.8%)."

"Behind the positive world figure is increasing demand for imports in all regions except the Eurozone that showed a whopping MoM decline of 2.4%. The weak development of Eurozone imports is one of the reasons why advanced economies did not contribute to the 0.6% growth of world import demand during the last quarter of 2016."

"In the US, on the other hand, it seems that businesses and consumers are importing extra in anticipation of more expensive times because of the risk of tariffs being imposed by President Trump. Despite the US import growth of 2% QoQ, advanced economies’ imports declined in the last quarter of 2016 by 0.4%."

"It is import demand from emerging markets that have fired up the engine of world trade in 4Q. Especially emerging Asia showed a recovery with quarterly import growth of 3.1%. Despite the yearend recovery, 2016 has been a very bad year for world trade with a growth rate of only 1.2%, the worst score since the great trade collapse in 2009."

"There are some hopeful signs that the Eurozone economy is gaining momentum and sentiment in the US has improved as well. But the growth of business investments, one of the main drivers of import growth, has yet to show evidence of a strong recovery. Another reason not to expect world trade growth to outpace worldwide GDP growth is that there are no signs that structural drivers have turned the corner. Chinese industry is still shifting towards domestic suppliers to substitute imported intermediates and the rise of protectionism is more likely to accelerate than slow down. The uncertainty around possible import tariffs by the US, also leads to a ‘wait and see’ attitude of companies with regard to offshoring, another driver of trade."

"For 2017, we expect another year in which world trade growth will fail to keep up with the growth of world GDP."


15:02 EUR/USD spikes through 1.0600 handle but lacking follow through momentum

The EUR/USD pair gained fresh traction during early NA session and is now building on to the momentum back above 1.0600 handle. 

The key US Dollar Index extended previous session's decline and has been the key factor lifting the pair to multi-day tops, near 1.0610-15 band. Moreover, possibilities of some stops getting triggered, on a decisive break through 1.0600 handle, could have further collaborated to the pair's sharp up-move in the past hour or so.

However, in absence of any major market moving releases / news / events, and lackluster trading action on Friday, seems to suggest that the current leg of up-move has been primarily led by short-covering rather than genuine buying. Hence, it would be prudent to wait for a follow through buying interest before confirming a near-term bullish break-out above a short-term descending trend-line resistance near 1.0600 handle.

Having said that, the ongoing slump in the short-end bund yields pointed towards mounting fears of political instability in the region. In fact, the two-year bund yields hit a new record low of -0.95% on Friday and might now contribute towards restricting further upside for the major.

On the economic data front, new home sales data and revised consumer sentiment index are slated for release during NY trading session.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet notes, "the 4 hours chart shows that the upward potential is well limited, not only because the pair retreated from the mentioned trend line, but also because it's again pressuring the 1.0565 region, a major Fibonacci support, whilst the 20 SMA maintains a bearish slope, despite being below the current level. Also, technical indicators in the mentioned chart have turned lower, with the RSI indicator already crossing below its 50 level. Should the price accelerate below the mentioned support, the next one comes at 1.0520. Seems unlikely the pair can break below this last, but if it does, 1.0470 is next."

"A recovery beyond the mentioned daily high could see the pair extending up to 1.0635, the weekly high, en route to 1.0660."
 

 


15:02 US: Focus on University of Michigan s consumer confidence Danske Bank

Research Team at Danske Bank suggests that in the US today, we are due to get the final figures from the University of Michigan in February.

Key Quotes

“Although the preliminary figure suggests that the index has fallen a bit in February, it remains well above the historical average. Optimistic consumers tend to spend more and hence the high consumer confidence is a good sign for economic growth.”


15:01 When is Canadian CPI and how could affect USD/CAD?

Statistics Canada will release its inflation figures tracked by the CPI for the month of January at 1330h GMT, along with Bank of Canada’s gauge of Core CPI.

Market consensus expects consumer prices to have ticked higher at an annualized 1.6% during last month and 0.3% on a monthly basis, both prints reflecting a continuation of the recent up trend.

Impact on FX

USD/CAD seems to have found some support in the 1.3080 area so far today amidst a continuation of the offered bias around the greenback, particularly since yesterday’s comments by US Treasury Secretary S.Mnuchin. Anyway, spot continues to navigate familiar ranges mainly on the back of US-CA yields spread differentials. A positive surprise today should see the pair testing the lower bound of the recent range around 1.3050, while a potential test of the 200-day sma should not be ruled out if data disappoint.

 

 

 

 

 

 

About Canadian CPI

The Consumer Price Index (CPI) released by the Statistics Canada is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of CAD is dragged down by inflation. The Bank of Canada aims at an inflation range (1%-3%). Generally speaking, a high reading is seen as anticipatory of a rate hike and is positive (or bullish) for the CAD.


14:47 CAD: January CPI likely to rise 0.4% m/m - TDS

Analysts at TD Securities is on consensus for Canada’s January CPI to rise 0.4% m/m (1.6% y/y) though risks are seen as tilted to the downside.

Key Quotes

“Gasoline prices should provide a strong boost and more than offset lower electricity prices. Continued weakness in food prices however lends downside risk while we also see scope for a weaker backdrop among the three new core metrics (CPI common, trimmed mean and median). Yet given the Bank of Canada’s focus on headline inflation, markets are likely to fade any further weakness in the core if accompanied by a stable or higher headline figure.”

“US: Data releases include new home sales (January) and the final reading on University of Michigan consumer sentiment (February). New home sales are expected to advance at a solid 6.3% clip to 570k units while consumer sentiment is expected to be little changed at 96.0 vs 95.7 in its preliminary print and down from 98.5 in January.  No Fed speakers are scheduled.”


14:40 USD/JPY plummets to lows near 112.30, US data eyed

The greenback continues to grind lower vs. its Japanese counterpart at the end of the week, with USD/JPY probing lows in the 112.30 region.

USD/JPY weaker, US yields tumbles

Spot is rapidly losing momentum today, coming down to test fresh 2-week lows in the 112.30 area and posting losses for the third session in a row so far.

The pair is echoing the poor performance from yields in the US money markets, where the 10-year reference is so far flirting with multi-day lows around 2.36% amidst a generalized downside sentiment.

In addition, the US Dollar Index is extending its leg lower today in response to yesterday’s comments by US Treasury Secretary S.Mnuchin, falling to weekly lows in the 100.70 area.

In the data space, US New Home Sales and the Reuters/Michigan index are due later.

USD/JPY levels to consider

As of writing the pair is retreating 0.30% at 112.27 facing the initial support at 112.03 (low Feb.2) followed by 111.98 (38.2% Fibo of the November-December up move) and then 111.73 (100-day sma). On the upside, a break above 113.05 (20-day sma) would open the door to 113.78 (high Feb.21) and then 114.36 (high Feb.16).


14:25 US consumer confidence and Canadas CPI in focus - BBH

Analysts at BBH note that the US reports new home sales and the University of Michigan's consumer confidence and inflation expectations survey.  

Key Quotes

“Earlier this week, January existing home sales rose 3.3% (three times more than expected and the December series was revised to show a smaller decline of 1.6% rather than 2.8%).  New homes sales fell by an outsized 10.4% in December and are expected to have bounced back in January (median forecast is 6.4%).”

“Canada reports January CPI figures today.  The headline is expected to rise 0.4% and lift the year-over-year rate to 1.6% from 1.5%.  The base effect may ease starting with the March report.  In any event, the report is most unlikely to impact expectations for next week's Bank of Canada meeting.  Bank of Canada is widely seen on hold for some time.”

 


14:21 Gold continues to scale new multi-month highs, fast approaching 200-DMA

Gold continued scaling higher and jumped to fres multi-month highs, all set to post fourth consecutive week of gains. 

Currently trading around $1257 region, a fresh wave of global risk-aversion trade, with major European equity indices trading with losses in excess of 1.0%, boosted demand for traditional safe-haven assets and lend additional support to the precious metal's ongoing bullish momentum to the highest level since Nov. 11.

In addition to this, continuous decline in the US treasury bond yields undermined the US Dollar demand and is supportive of the strong bid tone surrounding dollar-denominated commodities - like gold. 

Later during NY session, the US economic docket - new home sales and Revised UoM Consumer Sentiment index, would be looked upon for short-term trading opportunities. Meanwhile, next week's influential speeches by the US President Donald Trump on Tuesday and the Fed Chair Janet Yellen on Friday would now be key determinants of the metal's next leg of directional move.

Technical levels to watch

From current levels, the very important 200-day SMA near $1261 level is likely to act as immediate hurdle, which if cleared decisively is likely to accelerate the up-move towards $1276 horizontal resistance with some intermediate resistance near $1268 level.

On the downside, any retracement might now find fresh buying interest near $1250 support area and hence, further weakness now seems to be limited near $1242-41 support area.

 


14:06 US: Next week poses an important test for Trump administration - BBH

Analysts at BBH suggest that in the US, Trump's populism-nationalism has been retracted in several areas of foreign economic policy, but next week poses an important test.  

Key Quotes

“An important issue is the border adjustment (a tax on imports and no taxes on exports).  Leave aside the fact that the WTO allows for border adjustments for taxes but not for trade and the legal challenges that most likely would ensue; it does not appear that in its present form it can be approved by a simple majority in the Senate.  Treasury Secretary Mnuchin gave the noncommittal response yesterday about it and the strong dollar policy:  There are good and less good consequences.  However, late yesterday, Trump said he supports some kind of border adjustment, though he and Mnuchin noted the complexity of the current approach.”

“The largely inexperienced Trump team has their hands full.  There is the confirmation process for a Supreme Court justice.  There is the repealing and replacing of the national health care.  The debt ceiling and spending authorization limits are being approached and will need to be addressed.  Mnuchin indicated yesterday a desire to see the tax reform before Congress' August recess.  That means that impact is more of a 2018 event and the same goes for the infrastructure initiative.  Politically it may be more desirable to wait for next year and deliver the Democrats (and less sympathetic Republicans) a fait accompli during the off-year election period.  Could they, would they deny Trump of success by blocking fiscal stimulus that creates jobs?”

 


13:58 Canada: Consumer prices likely jumped in January BMO CM

Benjamin Reitzes, Senior Economist at BMO Capital Markets, expects that the Canadian consumer prices likely jumped in January, as energy prices continued their upward march in the month.

Key Quotes

“January is the start of a seasonally strong period for CPI, as most of the annual increase in prices generally comes in the first five months of the year. Gasoline prices look to be up about 3%, with the new carbon tax in Ontario and Alberta providing an extra lift (other energy prices were lifted as well). However, Ontario cutting the provincial sales tax from electricity bills will offset some of the inflationary impact of the new carbon taxes. Our call on CPI would push annual inflation up two ticks to 1.7%.”

“This is the third month we’ll be seeing the new trio of the Bank of Canada’s core CPI measures. The trio averaged 1.7% in December, ranging from the common component’s 1.4% to the weighted median’s 2.0%. We anticipate the average of the trio will hold about steady, reflecting the still sizeable spare capacity in the Canadian economy.”


13:55 UK: Market not overly impressed with the results of the two by-elections - BBH

Research Team at BBH notes that the UK market does not seem overly impressed with the results of the two by-elections held yesterday. 

Key Quotes

“As the polls warned, the government picked up a seat from the opposition party for the first time in years.  On the other hand, Labour held off a challenge by UKIP in an area in which Brexit camp easily carried the referendum.  The uphill fight for UKIP to win seats in Westminster reinforces our sense that despite the spin, the UK has not truly embraced the populist-nationalist moment as much as the hard Euro-skeptic wing of the Tories managed to oust the soft Euro-skeptic wing, with admittedly far-reaching implications.”


13:50 US: Good start of the year for the economy BMO CM

Sal Guatieri, Senior Economist at BMO Capital Markets, notes that the January numbers for the U.S. economy are mostly in, and the prognosis is good.

Key Quotes

“Unlike last year’s early stumble which foreshadowed a slowdown for the year, the economy is showing some pep early this year. In previous weeks, we saw the best payrolls gain in four months in January, a fifth straight increase in the ISM manufacturing index, and a near 16-month high for the non-manufacturing measure. And this week, the data were solid once again, provided you look below the surface of a few soft headline prints.”

“The post-election jump in confidence among businesses, homebuilders and households has translated into a decent bump in production, construction and spending. In fact, the NFIB small business index hit fresh 12-year highs last month, as more firms planned to increase output and staff, and a near-record number expect the economy to improve—a level of optimism often reserved for recoveries rather than late-cycle expansions. After slowing last year, hiring by small firms is poised to pick up. The ISM’s rising trend was supported by a solid advance in factory production in January, led by a recent pickup in business equipment—and February could be even better as the Empire State and Philly Fed measures popped to 2½-year and 33-year highs.  Although a pullback in volatile condos chopped housing starts in January, rising singles and permits suggest hammers will continue to swing in coming months. In fact, the number of units under construction (a much smoother series than starts) hit post-recession highs. The housing market should support the expansion for a seventh straight year, even as mortgage rates creep higher. Last, but not least, the biggest increase in “core” retail sales in nine months (and the sixth in a row) suggests consumers have plenty of gas left in the tank. They might be paying more for gas now than a year ago, but record-high inventories look to cap prices for a while.”

Bottom Line: The U.S. economy is off to a good start this year, led by robust consumer spending, vibrant housing markets, and a long-awaited upturn in business spending. It’s on track for 2½% growth, even before the fiscal stimulus door swings open.”

 

 

 


13:48 European stocks extend the drop

Equities in the Old Continent are intensifying its correction lower at the end of the week, with reference indices DAX, CAC40 and FTSE100 among others and the broader Stoxx50 all flirting with daily lows.

Poor financial results from giants Royal Bank of Scotland (RBS) and BASF AG are dragging the rest of their peers to fresh lows, partially fading the recent upside to multi-year tops.

Adding to the downside, the generalized cautious tone among traders is seen growing bigger in light of the upcoming speech by President Donald Trump (Tuesday) and Chief Janet Yellen (Friday) as well as key releases in the US docket.

At the moment, EuroStoxx50 is down nearly 1%, DAX losing 1.30%, FTSE100 shedding 0.70% and CAC40 losing 1.4%.


13:48 AUD/USD drops to session low, eyeing trend-line support near 0.7675

After an initial up-tick to 0.7720 level, the AUD/USD pair turned lower and extended previous session's retracement from 3-1/2 month peaks.

Currently trading 0.7685 region, the pair has now moved back to three week old familiar trading range and is fast approaching a short-term ascending trend-line support held since the beginning of Feb.

Despite of a softer tone surrounding the key US Dollar Index, and positive trading sentiment surrounding copper prices, a sharp fall in European equity markets seems to be driving flows away from riskier, higher-yielding currencies, including the Aussie.
 
The pair's inability to build on RBA Governor Phillip Lowe's comments-led minor up-tick provided first signs of bullish exhaustion and hinted towards possibilities of some near-term long-unwinding pressure. 

From the technical perspective, follow through retracement and a decisive break below the short-term ascending trend-channel support near 0.7675 region would further confirm the onset of a near-term corrective slide. 

Today's US economic docket, featuring the release of new home sales and Revised UoM Consumer Sentiment index might help traders to grab some short-term trading opportunities. 

Technical levels to watch

Bulls would be disheartened if the pair failed to defend 0.7675 support below which the slide could get extended immediately towards 0.7650 support ahead of 0.7620-10 strong support. On the upside, momentum back above 0.7700 handle now seems to confront resistance near 0.7715 level, which if cleared could lift the pair back towards multi-month highs resistance near 0.7740 level, en-route Nov. daily closing highs resistance near 0.7760 area.

 


13:43 CNY: Flat for the week - BBH

Analysts at BBH note that the Chinese yuan is flat this week and after aggressive rhetoric about naming China as a currency manipulator and the feint of recognizing Taiwan, the Trump Administration has changed tactics.  

Key Quotes

“It has endorsed the one-China policy, and Treasury Secretary Mnuchin indicated that no judgment would be made until the semiannual FX report is made in April.  Under the current criteria, by intervening to strengthen rather than weaken the yuan, China is not a currency manipulator.  There is talk of an effort to take a different approach; one that focuses on valuation rather than manipulation.”  

“Even on this measure, it is hard to say that the yuan is out of line.  Investors seem to recognize this, and when coupled with elevated capital controls, the downside pressure on the yuan appears to have eased.  Here the tell may not be the spot rate so much as the 12-month forward rate, where the points have steadily fallen over the last four weeks, the longest decline in eight months.  Also, the 12-month implied volatility has eased to nearly 6%, the lowest since the end of 2015.”


13:32 India FX Reserves, USD dipped from previous $362.79Bto $362.73B


13:21 Latest Opinionway poll: Macron stretches lead in the French presidential race

The latest Opinionway poll, released on Friday, showed Macron streching the lead against Le Pen in the French Presidential race. 

Key poll results:

   •   Macron leading the poll for the run-off by 61% as against 39% for Le Pen. 
   •   1st round - Le Pen 26%, Macron 23%, Fillon 21%
   •   Fillon would beat Le Pen in run-off by 58% vs 42%, if Fillon makes it to the 2nd round


13:19 WTI off highs, still above $54.00 ahead of rig count

Crude oil prices are coming down after recent highs, dragging the barrel of West Texas Intermediate to the low-$54.00s after highs near the $55.00 handle on Thursday.

WTI attention to US data

Prices for the barrel of the American reference for the sweet light crude oil are grinding lower today as traders keep adjusting to yesterday’s weekly report by the EIA.

According to the EIA, US crude oil supplies have increased by 0.564 million barrels during last week, less than initially estimated, while gasoline inventories dropped by more than 2.6 million barrels during the same period.

However, crude oil prices stay within the recent range amidst opposing forces coming from the high compliance with the OPEC/non-OPEC deal to cut the output and rising US production, as seen by the persistent pick up in US drilling activity.

Later in the session, the buck will be in the limelight as US New Home Sales and Consumer Sentiment are due. In addition, driller Baker Hughes will report on US oil rig count.

WTI levels to consider

At the moment the barrel of WTI is losing 0.55% at $54.15 facing the next support at $53.87 (low Feb.23) followed by $53.35 (low Feb.21) and then $52.94 (55-day sma). On the other hand, a surpass of $54.94 (high Feb.23) would open the door to $55.24 (2017 high Jan.3) and finally $56.79 (high Jul.6 2015).


13:10 EURUSD: Searching for a magic formula - HSBC

Analysts at HSBC suggest that the EUR is behaving as a politically-driven currency as the Dutch election (15 March) and the French Presidential election (first round on 23 April) have come squarely into view.

Key Quotes

“EUR-USD has fallen over 2% so far in February as the latest bookmakers’ odds show an increasing probability that Marine Le Pen could be elected as French President.”

“This EUR weakness has happened despite ongoing strength in the cyclical data: European PMIs were better than expected and the German IFO also beat expectations, for example. However, EUR-USD has ignored these releases and is still trading around its lowest levels since early January.”

“We think that the market will increasingly focus on these upcoming political risks as we get closer to the elections. Indeed, this is the basis for our forecast of EUR-USD falling to 1.01 by the end of Q1 before rallying later in the year after these risks have passed.”

 


13:05 US: Trade balance more apt to deteriorate than improve BMO CM

Michael Gregory, Deputy Chief Economist at BMO Capital Markets, notes that in 2016, U.S. international trade in goods and services resulted in a $502 bln deficit, slightly higher than 2015’s shortfall (by only $1.9 bln) but still well short of 2006’s record $762 bln deficit.

Key Quotes

“However, the latter comparison, representing a 34% net improvement over the decade, is less impressive when one accounts for America’s growing trade surplus in services. It came in at $248 bln in 2016, a threefold increase from a decade ago.”

“The trade deficit in goods alone was $750 bln in 2016, representing a modest 10% improvement from 2006’s record $837 bln shortfall. And, any improvement disappears when one further accounts for America’s shrinking petroleum trade deficit (owing to the shale oil boom). It came in at $57 bln in 2016, an 18-year low and down sharply from the record shortfall of $386 bln in 2008 (the latter was inflated by record-high crude oil prices). The remaining trade deficit in non-petroleum goods was $677 bln in 2016, the largest on record.”

“Although there are net gains from international trade, the benefits tend to be diffused while the costs or adjustments tend to be concentrated.”

“Despite accounting for less than 9% of the total trade deficit in goods, the Administration has become fixated on the $63 bln deficit with Mexico, which can be completely accounted for by the automotive sector (thus making autos the most likely sector for NAFTA alterations). But, there are other countries contributing significantly more than Mexico to America’s massive trade deficit.”

“In 2016, three countries—China, Japan and Germany—contributed more to the goods trade deficit than Mexico.”

“Administration has criticized all three nations for their “too-weak” exchange rates, but they have not faced the same wrath as Mexico. Moreover, compared to Mexico, these three trade imbalances are cast in an even more negative light when considering the relative value of two-way trade.”

“Looking ahead to 2017, the U.S. trade environment could change markedly, with NAFTA being renegotiated and the potential for export-helping/import-hurting corporate tax changes (the border adjustment tax). Apart from these policy changes, with U.S. domestic demand growth probably picking up (owing to some fiscal stimulus and deregulation), and the U.S. dollar likely appreciating (partly owing to Fed tightening), America’s trade balance is more apt to deteriorate than improve. How the Administration and Congress could react to a widening trade deficit remains a key source of uncertainty.”  


12:54 CAD vulnerable to CPI downside surprises - BNPP

Analysts at BNP Paribas suggests that Canada releases January CPI data today and market consensus is looking for a small uptick in the y/y rate to 1.6% from 1.5% in December and 1.2% in November.

Key Quotes

“We would expect the CAD to be particularly sensitive to downside surprises in light of markets pricing for risk of rate hikes later this year and note the currency weakened sharply on softer retail sales numbers released Wednesday. We forecast the BoC to remain on hold until late 2018. We continue to target USDCAD reaching 1.37 by the end of Q3.”


12:45 EUR/USD struggles to rise back above 1.0600

Having posted fresh three-week highs, the EUR/USD pair ran through fresh offers, which knocked-off the rate once again to 5-DMA region near 1.0575, before recovering some ground to now trade just a whisker short of 1.06 handle.

EUR/USD awaits US data for fresh impetus.

The EUR/USD pair manages to defend mild gains amid subdued trading seen around the greenback versus its main peers, as a lack of fundamental drivers  leave most EUR traders on the side-lines.

Meanwhile, lingering political tensions, in wake of the French election and Greece debt woes, keep a check on the EUR recovery. Looking ahead, apart from risk trends, the major could get influenced by the US new home sales and revised consumer sentiment data slated for release in the American session.

EUR/USD Technical Levels

In terms of technicals, the pair finds the immediate resistance 1.0604 (multi-week highs). A break beyond the last, doors will open for a test of 1.0634 (50-DMA) and from there to 1.0650 (100-DMA). On the flip side, the immediate support is placed at 1.0520 (Jan 6 low) below which 1.0500 (psychological levels) and 1.0478 (Jan 5 low) could be tested.

 


12:28 HUF expected to pick up pace in the longer run Danske Bank

Chief Analyst at Danske Bank Jakob Christensen expects the Hungarian Forint (HUF) to appreciate further in the next months.

Key Quotes

“Despite the spike in late January, EUR/HUF is now back at 308 in line with our forecast made in January”.

“We think that political election risks in France could weigh on HUF, but we also think that economic momentum in the Hungarian economy will continue to improve, mitigating the weakness”.

“Longer term, the positive external balance and undervalued exchange rate are supporting factors for the HUF. Hence, we think EUR/HUF will remain around present levels near term. We target 308 in 1M and 3M, strengthening to 306 in 6M followed by 304 in12M”.

 


12:21 GBP/USD bullish above 1.2610/15 UOB

According to FX Strategists to UOB Group, the pair’s outlook should turn to bullish on a close above 1.2610/15.

Key Quotes

“The sudden acceleration higher was unexpected as GBP surged and closed at 1.2548, not far below the day’s high at 1.2561. Upward momentum remains strong and there is room for the current rally to extend further towards 1.2610/15. That said, the pace of any further up-move would likely be slower. Support is at 1.2515 followed by 1.2470. The low of 1.2428 seen early yesterday is not expected to come into the picture”.

“The sharp rise and strong daily closing yesterday came as a surprise. While the overnight high of 1.2561 is still within our expected 1.2400/1.2580 consolidation range, the undertone has improved considerably. The immediate pressure is on the upside but GBP has to clear the major 1.2610/15 resistance to indicate that it has started on a sustained upmove (with an immediate target of 1.2705). Only a move back below 1.2470 would indicate the positive undertone has eased”.

 

 


12:09 We are raising our 2017 and 2018 GDP growth forecasts for the UK - HSBC

The Research Team at HSBC bank came out with its latest report on the UK economic growth outlook on Friday.

Key Quotes from the report:

“We are raising our 2017 and 2018 GDP growth forecasts for the UK, following the upward revision of Q4 GDP growth, from an already strong 0.6% to 0.7% q-o-q. We now see full-year growth of 1.9% (up from 1.2%) for this year, and 1.4% for 2018 (from 1.3%).”

“We have not changed our view that growth will slow meaningfully in sequential terms this year. But the UK clearly entered 2017 on a stronger footing than we expected in our last forecasting round. And, for now, the global cyclical upswing seems to be mitigating the downside risks.”

“Bank of England still on hold We have not changed our forecasts for the currency, inflation or real wages: we still think inflation will push higher in the near term, but fall back quite sharply next year.”

“We also retain our view that the Bank of England will not raise rates this year or next, as inflation remains exchange-rate driven (and not demand-driven) and the political and growth climates remain uncertain.”


12:01 Greece Producer Price Index (YoY) rose from previous 5.1%to 9.7% in January


12:01 USD/JPY slides below 112.50 level, hits two-week lows

The USD/JPY pair traded with bearish bias for the third consecutive session and has now dropped to two-week low level near 112.40 region.

The pair remained under some selling pressure on Friday amid fading optimism surrounding the US President Donald Trump's proposed fiscal policies, which further dimmed prospects of a Fed rate-hike move at its upcoming meeting in March.

Thursday's comments from Treasury Secretary Steven Mnuchin, providing little details for the proposed tax reforms, did little to ease market concerns and collaborated to broad based US Dollar selling pressure, despite of the Fed's readiness to raise interest-rates "fairly soon".

Meanwhile, the prevalent cautious investors' sentiment, as depicted by weaker trading sentiment surrounding European equity markets and sliding bond yields, provided an additional support to the Japanese Yen's safe-haven appeal and dragged the pair to its lowest level since Feb. 9.

Later during NA session, second tier US economic releases - new home sales and Revised UoM Consumer Sentiment index, would be looked upon for some immediate respite for the US Dollar bulls.

Technical levels to watch

Currently trading around 112.45-40 region, immediate support is seen near 112.30 horizontal level below which the pair is likely to break through 112.00 handle and head back towards 111.65-60 multi-month lows support.

On the upside, recovery back above 112.60 level, leading to momentum above 112.80 region, now seems to lift the pair towards 113.20-25 resistance area ahead of weekly highs resistance near 113.75-80 region.

 


12:01 Italy Business Confidence above forecasts (104.6) in February: Actual (106.3)


11:52 Bubas Dombret: No financial stability risk seen from Brexit impact on financial market

Additional headlines crossing the wires from the Bundesbank (Buba) board member Dombret, via Reuters, as he continues to speak on the possible impact of Brexit on the financial landscape.

Key Headlines:

Don’t have good view yet of new US administration’s position on bank regulations, premature to make assumptions

Doesn’t matter where financial transaction carried out, as long as the rules are the same

Cleary many many banks assessing timeframe of moving operations to EU

Do not currently see pressing financial stability risk from Brexit impact on financial market


11:40 GBP/USD: Bears target 1.2500 amid tumbling UK yields

The GBP/USD pair reversed rapidly from fresh two-week highs (1.2571), and is now seen printing fresh daily lows at 1.2525 levels.

The latest leg lower in cable can be mainly attributed to the yield differential between the 10-year UK Gilts yields and treasury yields, which tilt in favor of the US dollar. The UK yields remain under pressure on account of the impending concerns surrounding the Article 50 trigger.

The US dollar index, which measures greenback’s strength against a basket of six major currencies, staged a bounce from daily lows of 100.81 and reverts to the familiar range near 100.95 region.

Meanwhile, the GBP markets ignore the second-liner UK BBA mortgage approvals data, which arrived at 44.7k versus 42k expectations. All eyes now remain on the US datasets for fresh incentive on the pair.

GBP/USD Levels to consider            

The supports are aligned at 1.2514 (daily pivot) and 1.2496 (5-DMA) and below that at 1.2474 (10-DMA). On the flip side, the upside barriers are lined up at 1.2571 (2-week high) and 1.2600 (zero figure) and below that at 1.2651 (daily R2).

 


11:37 United Kingdom BBA Mortgage Approvals above forecasts (41.9K) in January: Actual (44.657K)


11:26 USD: Current conditions remain favourable for carry trades MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the foreign exchange market has been very stable during the Asian trading session leaving the US dollar on the defensive against high yielding and commodity related currencies.

Key Quotes

“The ongoing improvement in global investor risk sentiment, low financial market volatility and improving global growth outlook continues to encourage the outperformance of carry trades in the near-term. The Australian dollar, South African rand, Russian rouble and Brazilian real are amongst the best performing currencies so far this year having increased by around 6-7%. Even the signal from the Fed that it plans to raise rates further “fairly soon” has failed to rock the boat. The US interest market remains unconvinced at the current juncture that the Fed will significantly speed up the pace of rate hikes in the coming years. The strengthening global economy is better able to absorb the impact of tighter Fed policy which is helping to dampen the potential negative impact on emerging market currencies as well.”

“The comments yesterday from US Treasury Secretary Mnuchin have further dampened the risk of disruption in the foreign exchange market. He signalled that there was no urgency to designate China as currency manipulator, and that he wants to wait until the US Treasury’s regular semi-annual review of the foreign exchange market in April to decide if China should be labelled a currency manipulator. He noted as well that he’s had “very good conversations” with his Chinese counterparts. The more methodical approach adopted by Treasury Secretary Mnuchin stands in contrast to comments from President Trump who told Reuters yesterday that “I think they’re the grand champions at manipulation of currency…we’ll see what happens”. His comments highlight that there is still a high risk that the Trump administration will adopt a more confrontational trade policies with China in the coming years.”

“US Treasury Secretary Mnuchin also provided a few further insights into the Trump administration’s tax plans. He stated that they wanted to pass “very significant” tax reform by August which appears ambitious in terms of timing. He believes that the tax reform and deregulation would help to boost US economic growth to at least 3%, potentially as early as next year. As part of the tax reforms, he is looking closely at border adjustments although he has “some concerns”. We continue to believe that a border tax adjustment is unlikely to be implemented given it lacks support within the Republican party, although we will continue to watch ongoing developments closely as it poses material upside risks to our current outlook for the US dollar.”


11:26 EUR/USD downside bias seems mitigated UOB

FX Strategists at UOB Group noted the likeliness of further downside in EUR/USD appears somewhat alleviated for the time being.

Key Quotes

“EUR traded sideways as expected albeit at a higher range than anticipated. The undertone has improved somewhat and we could see a slow ‘drift’ higher but 1.0620 is a major level and is expected to offer solid resistance. Support is at 1.0540 followed closely by 1.0520”.

“The downward pressure mentioned in recent updates is waning rapidly and the odds for an extension to 1.0450/55 have diminished. That said, only a move back above 1.0620 would indicate that the immediate downward pressure has eased. All in, EUR has to move and stay below 1.0540 by end of today or it is likely that it has moved into a 1.0530/1.0680 consolidation range (that could last for a while)”.

 

 


11:21 EUR/USD taps 1.0600 mark and retreats

The EUR/USD pair extended its recovery move from Wednesday's six week lows and momentarily rose above 1.0600 handle. 

The pair, however, quickly retreated from highs and reversed daily gains to currently trade around 1.0575-80 region amid generally directionless, subdued trading action on the last trading day of the week. 

Persistent greenback weakness, with the key US Dollar Index placed below 101.00 handle, helped the pair to build on to two-day old recovery momentum, just to run into some fresh offers around 1.0600 handle. This 1.0600 handle marks a short-term descending trend-line resistance, extending from Feb. monthly highs through Feb. 17 highs. 

Moreover, investors remain reluctant to buy Euro in wake of the ongoing political uncertainty in France and hence, preferred to take some profits off the table after 100-pips of up-move in three trading sessions. The pair remains on track to end in red for the third consecutive week.

Later during NA session, second tier US economic releases - New Home Sales and Revised UoM Consumer Sentiment index might provide some impetus for short-term traders.

Technical levels to watch

Subsequent retracement below 1.0565-60 area could drag the pair back towards 1.0530 horizontal support ahead of 1.0500 psychological mark. On the upside, 1.0600 handle remains important hurdle, which if cleared decisively might trigger a short-covering rally towards 1.0630 horizontal resistance, en-route its next resistance near 1.0660 level. 

 


11:17 Brexit is a two way street for market access - Bundesbanks Dombret

Andreas Dombret, member of the board of the Deutsche Bundesbank, while making a speech in London was quoted saying that prospects for post-Brexit market access through the UK looks rather dim.

Key headlines, via Livesquawk:

   •   Brexit is a two way street for market access
   •   ‘Economic Sanity’ can be counted on for directing Brexit talks
   •   Mistake for UK to roll back regulation
   •   Post-Brexit break from EU single market would end London’s role as gateway to Europe’s financial markets
   •   Skeptical EU access current equivalence regime can work for banks post-Brexit


11:03 USD/JPY interim low appears at 111.59 Commerzbank

In opinion of Karen Jones, Head of FICC Technical Analysis at Commerzbank, USD/JPY could have carved an interim low near 111.60.

Key Quotes

“The market has come increasingly under pressure following the failure to clear the 55 day ma at 114.90. We view the recent low at 111.59 as an interim low. Between these two limits the market is side lined. A close above the 115.62 19th January high is needed to reintroduce scope to the key short term resistance offered by the 16 month resistance line at 117.91”.

“Only below 111.59 would introduce scope to the base of the cloud, which lies at 109.92 and, if seen, we look for this to hold (this is also the 50% retracement of the move up from November). However this is not our favoured view - we also note that the recent move lower continues to indicate that this is the end of the corrective move”.

 

 


11:01 Italy Industrial Orders s.a (MoM) rose from previous 1.5%to 2.8% in December


11:01 Italy Industrial Sales n.s.a. (YoY) up to 9.4% in December from previous 3.9%


11:01 Italy Industrial Orders n.s.a (YoY) fell from previous 0.1% to -0.9% in December


11:01 Italy Industrial Sales s.a. (MoM) rose from previous 2.4%to 2.6% in December


10:52 US Dollar tumbles to lows near 100.80

The US Dollar Index – which tracks the greenback vs. its main competitors – is extending the downside to fresh lows in the 100.85/80 band.

US Dollar looks to data

The index is retreating for the third session in a row at the end of the week, accelerating the decline below 101.00 the figure after being rejected once again from recent tops in the 101.70/75 region.

Markets were disappointed yesterday after comments by US Treasury Secretary S.Mnuchin failed to unveil further details on the ‘phenomenal’ tax reform announced by President D.Trump last week, hitting the Dollar and US yields and encouraging more sellers to step in.

On the data front today, the final February print of the Reuters/Michigan Index is due along with New Home Sales.

US Dollar relevant levels

The index is retreating 0.08% at 100.87 and a break below 100.74 (low Feb.20) would open the door to 100.55 (20-day sma) and then 100.40 (low Feb.16). On the other hand, the next up barrier aligns at 101.34 (55-day sma) followed by 101.75 (high Feb.15) and finally 101.95 (23.6% Fibo of the November-January up move).


10:36 Spain Producer Price Index (YoY) rose from previous 2.8%to 7.5%


10:34 EUR/GBP jumps to 0.8450 level, recovers part of yesterday s lost ground

The EUR/GBP cross staged a minor recovery and reversed a part of Thursday's sharp reversal move from the vicinity of 0.8500 psychological mark.

Currently trading around 0.8450-45 region, testing session tops, a follow through recovery in the EUR/USD major, and consolidative price action around the GBP/USD pair, was seen lending some support to the EUR/GBP cross on Friday. 

A dull economic docket, and lack of significant drivers, has thus far helped the cross to defend two-month lows support near 0.8400 handle. It, however, remains to be seen if the ongoing recovery in the shared currency is backed by genuine buying or is just led by a bout of short-covering, against the backdrop of generally weaker greenback. 

Moreover, the underlying political uncertainty in France might continue to undermine the Euro, which is something traders would continue to monitor in determining the pair's near-term direction. Nevertheless, the cross might still be headed for its lowest weekly close since mid-December. 

Technical levels to watch

A follow through recovery is likely to confront immediate resistance near 0.8475 region ahead of 0.8500 strong hurdle above which the momentum could get extended towards 50-day SMA barrier near 0.8545-50 region.

On the downside, weakness below 0.8425 level might continue to find support near 0.8400 handle, which if broken decisively is likely to accelerate the slide towards 0.8370-65 intermediate support, en-route mid-Dec. lows support near 0.8340-35 zone.

 


10:19 EUR/PLN looks oversold at current levels Danske Bank

Jakob Christensen, Chief Analyst at Danske Bank, noted the Polish Zloty seems to have appreciated too fast too soon in recent weeks.

Key Quotes

“The PLN has staged a slightly faster comeback than we thought in January. Part of the reason is the improvement in macro data but also a weaker momentum in the Trump reflation trade”.

“Our short-term (ST) model now suggests that the EUR/PLN is very oversold, estimating a fair value of 4.42. Our ST model should be treated with caution, but we nevertheless think that the macroeconomic improvement has been factored in and that political risk in Europe in relation to the upcoming French election will start to be a negative factor for the PLN”.

“Longer term we see possible pricing in of monetary tightening as positive for PLN. As a result, we expect the PLN to weaken slightly near term, forecasting the EUR/PLN at 4.32 (4.37 previously) in 1M, 4.34 in 3M, falling to 4.30 in 6M and 4.26 in 12M, respectively”.

 


10:13 GBP/USD scope for a test of 1.2593 Commerzbank

Karen Jones, Head of FICC Technical Analysis at Commerzbank, noted Cable could attempt a visit to 1.2593 following the recent price action.

Key Quotes

“The market has bounced off its 55 and 100 day moving averages at 1.2411/05, it looks set to challenge the 1.2593 8 th February high. This guards the top of the channel at 1.2683. Only above 1.2683 would allow for further strength to the 1.2776 December high. Between here and 1.2836 lies several Fibonacci retracements and major resistance and we suspect that it will struggle here”.

“We suspect that prices will need to go sub 1.2250 in order to alleviate immediate upside pressure and trigger losses to the 1.1988/80 recent low. Immediate support is the 1.2347 February low”.

 

 


10:08 USD/JPY reverts towards daily lows amid fresh USD selling

Having failed several attempts to touch 113 handle, the USD/JPY pair drifted back to the familiar range near 112.75 levels, as the US dollar stalled its corrective mode and reverted to the red zone amid persistent weakness seen around treasury yields.  

The spot is last seen exchanging hands at 112.73, flirting with session lows struck at 112.67. The European traders reacted negatively to the US treasury secretary Mnuchin’s comments and sold-off the greenback across the board.

Moreover, a negative start to the European markets refueled risk-off moods on the market, which added to the renewed weakness in the major. Focus now remains on the US new home sales and revised consumer sentiment data for fresh momentum on the prices.

USD/JPY Technical levels to watch 

The major finds immediate resistance at 113.06/09 (20 & 5-DMA). A break above the last, the major could test 113.29 (10-DMA) and 113.47 (1h 200-SMA) beyond the last. While to the downside, the immediate support is seen at 112.53 (10-day low) next at 112.28 (Feb 3 low) and below that at 112 (round figure).

 


10:08 GBP/USD eases from highs, near 1.2550

After clinching session tops near 1.2570, GBP/USD has given away some pips and has returned to the mid-1.2500s ahead of the European open.

GBP/USD probing multi-day highs

The pair is looking to extend yesterday’s strong advance beyond the 1.2500 handle, or multi-day peaks, amidst a generalized lack of direction in the global markets and a tepid recovery of the greenback.

Cable is navigating within familiar range however, on its way to close the week with gains and consolidating the recent breakout of the 1.2500 limestone.

Nothing noteworthy from the UK docket this week, with USD-dynamics and the broader risk appetite trends acting as the exclusive drivers for the price action, relegating – albeit momentarily – Brexit developments to a secondary role.

Later in the session, US New Home Sales and the Consumer Sentiment gauge for the month of February are due in an otherwise calm data front.

GBP/USD levels to consider

As of writing the pair is losing 0.04% at 1.2552 and a break below 1.2505 (20-day sma) would aim for 1.2425 (low Feb.23) and finally 1.2379 (low Feb.15). On the upside, the next resistance lines up at 1.2571 (high Feb.24) ahead of 1.2585 (high Feb.9) and then 1.2680 (high Jan.26).


10:01 Denmark Retail Sales (YoY) down to -1.3% in January from previous 0%


10:00 Austria Industrial Production (YoY) fell from previous 2.3% to 2.1% in December


10:00 Sweden Consumer Confidence (MoM) declined to 104.5 in February from previous 104.6


09:56 RBNZ: OCR to stay on hold for some time yet, but the next move is likely to be up - Westpac

Analysts at Westpac suggests that with inflation back in the target band and some downside risks abating, the RBNZ has shifted away from its earlier modest easing bias, and adopted a neutral stance at the time of the February Monetary Policy Statement.

Key Quotes

“We still expect that the Official Cash Rate will remain on hold at the current record low of 1.75% for quite a while longer. To offset the weakness in imported prices and generate a rise in domestic inflation, the Reserve Bank needs domestic spending and investment to continue trucking along. And that will require continued support in the form of low borrowing rates.”

“But while the OCR is on hold for now, if the economy continues tracking the way it has recently, the next move in rates is likely to be up.  We don’t expect to that to happen quickly, with the first rate hike not pencilled in until early 2019. Even then, rate hikes are expected to be gradual. Inflation is expected to linger in the bottom part of the target band for much of the next two years even with the OCR at a record low, and GDP growth is expected to moderate through the latter part of the decade.”


09:53 China: Major changes in its economic team - Rabobank

Michael Every, Head of FMR at Rabobank, notes that the Wall Street Journal reports today that “China Shakes Up Economic Team as Power Shift Looms”; the suggestion is that President Xi Jinping is about to change China’s top banking regulator, the commerce minister, and the top economic planning official for his own technocratic associates.

Key Quotes

“Potentially, this could mean every bit as much a shock for markets as Trump is proving, if we are to infer from the headline that China might finally adopt more restructuring and less reliance on debt. Surely, that would mean a sharp drop in commodity prices, bond yields, Chinese equities, and currencies such as AUD, etc.? Logically, CNY should also fall too, of course.”

“After all, yesterday we heard news that Liaoning province reported a staggering 23% y-o-y drop in nominal GDP in 2016, pointing to the dodginess of Chinese official data before that date and/or the size of the economic disruption that can take place underneath the glossy headline GDP numbers.”


09:53 USD/CAD back below 1.3100 handle, inching closer to weekly low

Having posted a session high near 1.3120 region, the USD/CAD pair ran through some fresh offers and has now drifted into negative territory for the second consecutive day.

Currently trading back below 1.3100 handle, around 1.3085 region, a fresh wave of US Dollar selling pressure during early European session dragged the pair back closer to previous session's sharp reversal swing lows. 

Uncertainty surrounding the US President Donald Trump's fiscal policies, which has been supportive of the US Dollar strength since the November election, continues to dampen expectations for an immediate Fed rate-hike move and weighing on the greenback across the board. 

Even a softer tone around oil markets, which tends to dent demand for the commodity-linked currency - Loonie, has failed to provide any immediate respite, albeit might lend some support closer to weekly lows near 1.3075 area. 

Friday's economic docket features the release of Canadian CPI figures, due later during NA session, and should provide fresh impetus for the pair's next leg of directional move. From the US, new home sales data and revised UoM Consumer Sentiment index might also help traders to grab some short-term trading opportunities.

Technical levels to watch

Immediate support on the downside is seen near 1.3080-75 region below which the pair is likely to head towards 1.3025 horizontal support ahead of 1.30 psychological mark. On the upside, sustained recovery above session peak resistance near 1.3120 level could get extended towards 200-day SMA hurdle near 1.3145-50 region. On a convincing move above 200-day SMA barrier, the pair seems all set to aim back towards reclaiming 1.3200 round figure mark.

 


09:50 China FinMin: No intention of using currency devaluation in response to Trump

Livesquawk reports headlines from the Chinese finance minister, citing that he has no intention of using currency devaluation in response to Trump’s comments on weaker Asian currencies.


09:47 NZD: Riding the waves - Westpac

Analysts at Westpac suggest that New Zealand’s economic fundamentals look very attractive against the lacklustre global backdrop which has seen the NZD retrace its late-2016 decline against the US dollar and they expect it will remain well supported for the next few months.

Key Quotes

“The kiwi is expected to lose some altitude over 2018 as growth here starts to ease off.”

“It’s been a bumpy few months for the New Zealand dollar, with the Kiwi continuing to be buffeted by global forces. The strongest of these have emanated from the US. In the wake of Donald Trump’s election to the presidency, his initial consolatory tone and plans to boost fiscal spending were greeted positively. We also saw the Fed hike the funds rate in December, and market expectations for future hikes being brought forward. These developments gave the US dollar a shot in the arm, and saw the NZD/USD fall by around 7% through late-2016.”

“However, since entering office, sentiment towards the new president has soured in some quarters. And combined with a lack of detail around policy, the US dollar has come under downwards pressure.”

“At the same time, the New Zealand economy has continued to look like a standout. GDP growth has been firm. Dairy prices have held on to most of their gains from the past year. And inflation has finally picked up. We still think it’ll be some time before the Official Cash Rate starts to rise. But with New Zealand’s economic fundamentals looking rosy against a still lacklustre global backdrop, the Kiwi has been well supported. In early 2017 the NZD/USD has picked up, retracing most of the decline we saw in late 2016. We expect that it will linger around 71 cents through the first half of 2017.”

“We expect the Fed to hike the funds rate twice this year, with a continued gradual tightening further ahead. At the same time, the RBNZ is expected to stand pat. These conditions should see the NZD/USD ease back through 2017, before heading down towards the mid-60s through 2018 as growth in New Zealand eases back.”


09:46 France Consumer Confidence in line with expectations (100) in February


09:43 Sell AUDUSD: Patience will be rewarded - BNPP

Analysts at BNP Paribas have initiated two short AUDUSD trade recommendations: through cash (targeting 0.74) and through buying the 9m risk-reversal which currently trades at 8-year levels of cheapness.

Key Quotes

“AUDUSD has rallied to post US-election highs above 0.77 and this has corresponded with a build-up in long AUD positioning to a score of +31 (on our scale of -/+ 50), which represents the most extreme level since 2012. The likely to be the catalysts for AUDUSD to correct lower are the market increasing pricing for Fed tightening or a correction lower in risky asset prices which have started to look rich according to our measures which are indicating that the compensation for investors taking risk is very low.”

“Speaking on Friday, RBA Governor Lowe said he thinks commodity prices are going to “come back off again” and that he did not expect iron ore to stay around 90 dollars. We also remain short NZDJPY targeting 78.60.”

 


09:40 Australia: Sound but not stellar economy Westpac

After stumbling in 2016, the prospects for the Australian economy are looking much better this year in view of the analysts at Westpac.

Key Quotes

“National income will receive a healthy boost from a sharp rise in ironore prices (off the back of improved conditions in China), export volumes are expected to record further strong gains, and the drag from mining investment will continue to wane.”

“The jobs market is expected to improve this year, supporting a recovery in household spending growth. But the recovery in employment growth is expected to fade in 2018, as a downturn in housing investment (from current elevated levels) weighs on activity. Given the relatively sluggish outlook for the labour market, we expect the RBA to keep its policy rate on hold this year and next. Conditions in Australia’s labour market also have important implications for trans-Tasman migration flows. Without a sustained improvement in Australia’s labour market, we may well see further upside surprises to net migration here in New Zealand.”


09:37 Metals prices slip a sign of stress building AmpGFX

Even though the USD is broadly weaker in recent days, metals prices have fallen notes Greg Gibbs, Director at Amplifying Global FX Capital and suggests that this may be an indication that some of the confidence in the global economy is slipping.

Key Quotes

“Apart from uncertainty over US policy, market confidence is also facing headwinds from political risk in Europe.  Furthermore, China has been gradually tightening monetary conditions this year, and concern over its pace of debt creation remains elevated.”

“Emerging and commodity currencies have benefitted this year from stronger global economic indicators, a weaker USD and perhaps also as a haven from a Eurozone and Brexit political risk. These gains may stall, at least against JPY and gold, if global uncertainty remains elevated.”

“The Fed minutes said that a few participates thought that “equity prices might in part reflect investors' anticipation of a boost to earnings from a cut in corporate taxes or more expansionary fiscal policy, which might not materialize.”

“If uncertainty over US policy remains elevated, US and global equities are vulnerable to a correction, which may further cause some correction in commodity and EM currencies relative to JPY and Gold, and perhaps also against the beleaguered USD.”


09:36 NOK stays supported near term Danske Bank

Analyst at Danske Bank Mathias Mogensen noted the Norwegian Krone remains well underpinned in the short term.

Key Quotes

“While yesterday’s oil investment survey out of Norway was no game changer in terms of the near-term monetary policy outlook, the release clearly reduces the downside risk to growth in 2017”.

“As long argued, a normalisation in growth and real rate spreads together with valuation arguments should work in favour of a stronger NOK. As long as data does not warrant a rewidening of the NOK risk premium, we should see NOK support”.

 

 


09:34 China: Growth on the up for now - Westpac

Research Team at Westpac notes that the momentum in the Chinese economy picked up through 2016, boosted by expansionary fiscal policy and ongoing strong growth in credit.

Key Quotes

“Property construction rebounded, and growth in publicly-financed infrastructure spending remained strong. Meanwhile, growth in the services sector has remained relatively stable, as improving employment prospects and a turnaround in the housing market have led to better conditions for the household sector. In addition to the growing middle class, a better backdrop for Chinese households will support demand for New Zealand’s consumer-orientated exports.”

“GDP growth is expected to hold up at 6.6% this year, as the Chinese authorities will be keen to maintain a strong economy in the lead up to the National Congress in November. But growth is forecast to step down to 6% in 2018 as fiscal stimulus is pared back, while private investment hasn’t shown any signs yet of strengthening to fill the gap. The global trade environment presents risks for the Chinese economy, as any large tariff or Border Tax would pressure China’s foreign reserves and growth outlook. That said, the rising share of services over time means that China is not as reliant on trade as it was a decade ago.”


09:29 WTI to average at $ 56 this year - Barclays

In a research note published by Barclay’s on Friday, provided oil-price outlook for 2017 and 2018.

Key Points:

WTI average for 2017 - $ 56

WTI average for 2018 - $ 64

2017 Brent forecasts remains unchanged

Look for AQ 216 average of $ 62

Downgrade 2018 Brent forecast to $ 67


09:28 US: A weak dollar policy - AmpGFX

According to Greg Gibbs, Director at Amplifying Global FX Capital, US Treasury Secretary Mnuchin concerns over the impact of a BAT on the USD is yet another example of how the US administration appears to prefer a weaker USD and are focused on improving USA trade competitiveness.

Key Quotes

“From an economic stability perspective, an appreciation of the USD would smooth out the implementation of a BAT, helping reduce the price adjustment and labor and capital resource reallocation that would otherwise be needed inside the USA.  A stronger USD might help alleviate political opposition to the BAT in Congress.”

“However, Mnuchin would appear to prefer a BAT without USD appreciation.  He seems to want the disruptive price changes that would be required; seeing them as a way to fuel an improvement in the trade balance and boost GDP; albeit with winners and losers, disruption, and the risk of generalized inflation.”

“Mnuchin did pay lip-service to the long-standing US Treasury’s so-called ‘strong USD policy’.  He noted that a strong dollar was a reflection of relative US economic strength and was a good thing in the long run.  But it is abundantly clear that a stronger USD does not suit the US administration’s current focus on boosting US trade performance and growth.”

“Furthermore, this week, one of Mnuchin’s first acts was to call IMF Managing Director Lagarde to express his wish for her to vigorously pursue her mandate to report on fairness of all member countries' exchange rate policies, (U.S. Treasury Secretary Urges IMF to Police Exchange-Rate Policies of Members - WSJ.com).”

“By linking his preference for a weaker USD to his support for a BAT, Mnuchin adds to uncertainty over US tax policy, making currency a part of an already complicated discussion. It also highlights how sensitive the administration is to US trade relations, adding to global concerns over protectionist policy trends.  This may tend to weigh on USA and global economic confidence.”

“At present, this appears to be undermining the USD.  It may soon take the steam out emerging market and commodity currencies, while maintaining upward pressure on JPY and gold.”


09:24 EUR/USD offered below 1.0664/94 Commerzbank

According to Karen Jones, Head of FICC Technical Analysis at Commerzbank, the pair should stay offered below the 1.0664/94 area.

Key Quotes

“The market is seeing a small near term rebound following its recent failure to close below last weeks low at 1.0521. We continue to target recent lows at 1.0352/40, but it make take a little longer to get there. The market will remain directly offered below the 20 day ma at 1.0664 and the 3 month downtrend at 1.0694”.

“The market will remain directly offered below short term downtrend at 1.0694. Above here lies 1.0820/26, which represents the 50% retracement and the top of the cloud”.

 

 


09:15 Gold extends bullish trajectory, climbs to fresh 3-1/2 month high

Gold continued gaining traction through Asian session on Friday and extended its up-move further beyond $1250 level to hit fresh 3-1/2 month highs.

Fading expectations of a Fed rate-hike action in March, against the backdrop of uncertainty over the US President Donald Trump's fiscal policies, continues to weigh on the US Dollar and boost demand for dollar-denominated commodities - like Gold. 

The ongoing slide in the US Treasury bond yields reaffirms market expectations that the Fed is more likely to stand pat in March and is supportive of the bid tone surrounding the non-yielding yellow metal.

Gold also benefitted from safe-haven demand amid mildly cautious trading sentiment surrounding equity markets. 

In absence of any major market moving economic releases on Friday, persistent US Dollar selling should continue boosting the yellow metal further towards testing the very important 200-day SMA hurdle.

Technical levels to watch

Currently trading around $1253 level, immediate resistance is pegged near $1258, which is followed by strong hurdle near $1262-63 region (200-day SMA). On the flip side, $1250-48 zone now seems to protect immediate downside, which if broken could trigger a profit taking slide back towards $1241-40 horizontal support.

 


09:11 EUR/USD struggling around 1.0580, US data eyed

The single currency is looking to stabilize following yesterday’s sharp rebound to the upper-1.0500, with EUR/USD now gyrating around 1.0580.

EUR/USD upside halted near 20-day sma

The selling sentiment around the buck has re-emerged on Thursday after US Treasury Secretary S.Mnuchin failed to shed more light on the planned tax reform by the Trump’s administration, only noting the commitment to pass the bill by August.

Spot has thus managed to stage quite a sharp rebound from fresh lows in sub-1.0500 levels to the boundaries of 1.0600 the figure, where the rally seems to have run out of legs for the time being.

Nothing worth mentioning data wise in Euroland, whereas New Home Sales and the final February reading of the Reuters/Michigan index will take centre stage across the pond.

EUR/USD levels to watch

At the moment the pair is up 0.06% at 1.0587 facing the initial hurdle at 1.0594 (55-day sma) followed by 1.0658 (20-day sma) and finally 1.0682 (high Feb.16). On the flip side, a breach of 1.0492 (low Feb.22) would target 1.0452 (low Jan.11) en route to 1.0339 (2017 low Jan.3).


08:58 China boosts oil imports in January

China Customs published their latest import data on oil for the month of January.

Key Details:

China’s imports from Russia y/y +36.5% at 1.08m bpd

From Saudi y/y+ 18.9% at 1.18m bpd

From Iraq y/y +43.2% at 825,820 bpd

From Angola y/y +63.5% at 1.17m bpd

Iran is an exception this time, at minus 1.3% y/y at 402,750 bpd


08:48 Forex Today: USD corrects higher in Asia, US data eyed

It was a quiet Asian affair on Friday, with minor-buying interest seen emerging around the US dollar, with markets correcting yesterday’s heavy sell-off, which was intensified by the US Treasury Secretary Mnuchin’s interview. There were no relevant economic events reported in Asia, except for RBA Governor Lowe’s speech, which had limited impact on the Aussie’s overnight retreat from multi-week tops.

Later today, we have an empty European docket to end the week, while from the UK, there is only the BBA mortgage approvals data on the cards. The NA session is relatively eventful, with the Canadian CPI, followed by the US new home sales and revised UoM consumer sentiment data.

Main topics in Asia

RBA Lowe speech: Discards further rate cuts

Lowe: "Hard to say that Aussie is fundamentally overvalued"

RBA's Lowe: "Commodity prices will pull back from current levels"

RBA’s Lowe: There are more effective ways to stimulate demand than to cut rates now

Bitcoin hits record highs on ETF approval talk, RSI in overbought region

Bitcoin hit a record high of $1193.92 on speculation that the first Bitcoin exchange-traded fund (ETF) is set to receive approval from the US financial regulator.

Mnuchin takes a BAT to the dollar – AmpGFX

Greg Gibbs at AmnpGFX provides an in-depth understanding of yesterday’s Mnuchin’s take on the Border Adjustment Tax (BAT) and its implications on the US dollar.

Key focus for the week ahead                                                  

US data preview - Nomura

Analysts at Nomura offered a preview of the forthcoming and final US data of the week.

EUR/JPY: Further deterioration in store - Natixis

According to Micaella Feldstein, Research Analyst at Natixis, caution is in order as the EUR/JPY cross is flirting with the support at 119.61 (weekly Bollinger moving average).

BBG Survey: Australia’s Q4 GDP seen at 0.7% q/q

The latest Bloomberg survey offers hints on what to expect from next week’s Australian Q4 GDP release.


08:40 AUD/USD struggling to gain follow through traction, set for a corrective slide?

The AUD/USD pair caught some fresh bids near 0.7700 handle and jumped to fresh session peak, turning positive for the third consecutive session. 

Comments from RBA Governor Phillip Lowe dampened expectations of further interest rate cut action by the central bank and extended support to the major. Moreover, positive sentiment surrounding commodity space, especially copper prices, further boosted demand for commodity-linked currencies, including the Aussie. 

Meanwhile, continuous slide in the US Treasury bond yields undermined the greenback demand and drove some additional flows towards higher-yielding currencies and collaborated to the pair's up-move on Friday. 

The up-move, however, lacked conviction as bulls seemed exhausted, against the backdrop of overnight retracement from multi-month tops. Moreover, the pair has failed to attract any substantial follow through buying interest despite of broad based US Dollar sell-off, which points towards higher possibilities of some corrective slide ahead of the weekend.

The pair retreated from highs and is currently trading around 0.7710-15 region. Later during NA session, the release of new home sales and revised UoM Consumer Sentiment index could trigger the expected profit-taking move. 

Technical levels to watch

From current levels, multi-month highs near 0.7735-40 region remains immediate hurdle, which if cleared decisively has the potential to lift the pair towards 0.7770-75 region (Nov. monthly highs), en-route 0.7800 round figure mark.

On the flip side, weakness below 0.7700 round figure mark could get extended towards a short-term ascending trend-line support, currently near 0.7680-75 region, which if broken convincingly would negate any near-term bullish bias and accelerate the slide towards 0.7640 horizontal support before the pair eventually drops to 0.7610 strong support.

 


08:27 Oil: Risks still appear on the upside - Natixis

Micaella Feldstein, Research Analyst at Natixis, suggests that the risks still appear on the upside for WTI crude as the daily indicators have turned around and as the daily volatility tends to increase.

Key Quotes

“The buy signals on the weekly indicators also pleads for a larger rally in the coming sessions.”

“A break above 54.40-54.60 (daily Bollinger upper band) would add weight to this bullish view, unleashing strong upside potential to 56.30 (Fibonacci extension), to 57.20 (monthly Bollinger upper band) and even to 58.60-58.80 (Fibonacci extensions). The supports stand at 53.30, at 52-52.20, at 50.80 and at 48.90.”


08:24 Global Economy: Shifting sands - Westpac

According to the analysts at Westpac, the prospects for the global economy are looking a bit brighter in 2017, although the outlook is marred with uncertainty – especially the path of US fiscal and trade policy.

Key Quotes

“While there are upsides if the Trump administration is successful in promoting growth, this is countered by the risk of potential deterioration in the global trade environment.”

“The outlook for the global economy is looking a bit brighter, with growth this year and next expected to pick up a touch to 3.5%. And with commodity prices and global inflation comfortably up from their troughs, central bankers around the world will be breathing a little easier as the strong disinflationary impulse has largely passed.”

“But the global economy is not out of the woods yet. In many countries, record levels of monetary stimulus continue to play an important role in propping up demand. And there’s a lot clouding the outlook. At the forefront is the path for US fiscal and trade policy as the Trump administration gets its feet under the table, but simmering away in the background is political uncertainty in Europe, with elections this year in France, the Netherlands and Germany, while the United Kingdom is expected to formally begin negotiations to exit the European Union.”


08:20 US: Mnuchins attitude on BAT reveals a preference for a weaker USD - AmpGFX

The WSJ reported that Mr. Mnuchin said the administration is “looking seriously” at the House plan that includes border adjustment and was well aware of concerns raised by specific industries notes Greg Gibbs, Director at Amplifying Global FX Capital.

Key Quotes

“The Treasury Department had its own concerns, he added, “about what the impact may be on the dollar” from a border-adjusted tax.”

“(A BAT is under serious consideration, but Mnuchin prefers if it didn’t boost the USD.)”

“A Border Adjustment Tax (BAT) is widely expected to place significant upward pressure on the USD.  It would significantly shift the fortunes in favor of exporters and import-competing producers, while undermining import dependent companies, including large retailers.”

“As such industry is split and there is fear that it may cause significant economic disruption and inflation.  Nevertheless, it should tend to boost demand for US producers, lift employment and capital investment, narrow the trade deficit and boost national GDP; all key goals of the Trump Administration (and arguably any government).”

“However, to the extent that the policy drives up the USD, many of these potential benefits of the policy may diminish.”


08:07 AUD/JPY bounces to 5-DMA amid moderate risk-aversion

The AUD/JPY cross is flirting with daily tops of 87.08, where 5-DMA intersects, and looks to extend the bounce in early Europe amid persisting risk-off moods.

AUD/JPY awaits Australian Q4 GDP

The AUD/JPY pair advances +0.17% to 87.04, extending recovery from Thursday’s low reached at 86.64. The cross is seen consolidating the Asian recovery over the last hour, as the USD/JPY pair continues to waver in a tight range below 10-DMA.

At the same time, AUD/USD trades little changed ahead of 0.77 handle, in wake of RBA Governor Lowe’s comments delivered today, citing that he would like AUD level lower, although discarded further rate cuts.

Next on tap for the major remains the US new home sales and revised consumer sentiment data due on the cards later today, which may have an influence on the USD price-action, eventually impacting both the AUD and JPY.

Technical Levels

Higher side: 87.62 (daily R2), 88 (round figure)

Lower side: 86.64 (Feb 22 low), 86.07 (50-DMA)

 


07:52 NZ economy: Finding the sweet spot - Westpac

Analysts at Westpac expect New Zealand’s annual GDP growth to top 3% over the next couple of years, as a wave of building work progresses and higher dairy prices provide some relief to rural regions.

Key Quotes

“Population has boosted activity, and is likely to continue to do so as long as job prospects remain favourable here. Higher interest rates are likely to take the edge off house prices and consumer spending.”

“The New Zealand economy finished 2016 on a high note. We estimate that GDP growth reached 3.3% for the year, with standout contributions from building activity, consumer spending and business services. That would be the fastest pace of growth we’ve seen yet during this upturn – though that’s partly because recent revisions to the GDP figures have shaved back the pace of growth over the last few years.”

“The country is now entering its seventh year of sustained growth. The damage wrought by the Global Financial Crisis is becoming more distant, and activity has now returned to around its non-inflationary potential. We wouldn’t normally expect to see growth accelerating at this late stage of the economic cycle. But there is another atypical aspect of the current cycle: a record surge in net migration has lifted the population growth rate to above 2%, which is unusually high by the standards of a Western economy. In per capita terms, the pace of GDP growth has been more modest in recent years.”


07:48 EUR/JPY: Further deterioration in store - Natixis

According to Micaella Feldstein, Research Analyst at Natixis, caution is in order as the EUR/JPY cross is flirting with the support at 119.61 (weekly Bollinger moving average).

Key Quotes

“Note that a break below this threshold would signal further deterioration in the technical pattern, undermining the prospects for a significant rally in the coming days.”

“It would indeed pave the way for a new leg lower to 118.50 (38.2% Fibonacci retracement of 109.53-124.12 upside wave / june 16-dec 16) last threshold ahead of 117.35-117.50 (Fibonacci extensions) and 116.20-116.30 (declining trendline). The resistances stand at 120.25120.34 at 120.88-121, at 121.36-121.44 and at 122.85.”


07:32 China said to mull tightening some private bond offerings - RTRS

Reuters reports latest headlines from China, citing that the Chinese government is said to be mulling tightening some private bond offerings.


07:21 BBG Survey: Australias Q4 GDP seen at 0.7% q/q

The latest Bloomberg survey offers hints on what to expect from next week’s Australian Q4 GDP release.

Key Points:

Gathered together 25 estimates in their survey Median is 0.7% q/q

High estimate is 1.0%, low of 0.4%

For the y/y - 24 forecasts

Median is 1.9%

Range 1.5% to 2.2%


07:15 USD: Take a beating AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, notes that the USD is taking a bit of a beating this week, and US yields are lower following the Fed Minutes on Wednesday, even though the minutes said that many FOMC members want to raise rates “fairly soon”. 

Key Quotes

“However, the minutes offered a pretty scattered view on the outlook, and said US government policy direction is generating heightened uncertainty.  It suggested that near-term economic activity, in particular, business investment, may require progress on tax and regulation reform.  Alas, evidence of progress is lacking.”

“Furthermore, the Fed commented four times in its minutes that strength in the USD was a risk to its growth and inflation outlook.”

“Comments made by US Treasury Secretary Mnuchin and President Trump on Thursday may tend to weaken the USD further.  They reinforced the impression that the administration prefers a weaker USD, is focused on “leveling the playing field” on trade, and highlight the difficulties in developing and passing tax policy legislation.”


07:11 US: State of the strong USD policy in jeopardy? - BBH

Research Team at BBH notes that there had been some concern that the Trump Administration was going to jettison the more than 20-year strong dollar policy.  

Key Quotes

“Trump himself has been critical of many countries, including Japan, Germany, and China.  The targets are not so new.  They can be found in recent Treasury Department reports.  What is new is the tone and channel of communication.  Mnuchin makes it sound like it is primarily a stylistic rather than a substantive difference.”  

“Mnuchin appears to have given the nod to a strong dollar policy.  However, the way he did does not quiet all the doubts.   He said that the strong dollar reflected the confidence in the US and the outperformance of the US economy.  This is consistent with our emphasis on divergence as a major driver of the dollar.  He recognized that a strong dollar is not an unalloyed good, and in both the short and long-term, there are drawbacks and advantages.”  

“By linking the strong dollar to a level, Mnuchin demonstrates he does not quite get it.  The strong dollar policy was never about the level of the dollar.  After all, there have been large fluctuations in the dollar since Rubin initiated the strong dollar policy in 1995, and through it, the strong dollar policy has not been abandoned.  The strong dollar policy was meant as a signal to US trade partners and creditors that the US would no longer use the dollar as a weapon to get concessions as was the case from 1985-1995.   Until Mnuchin signals this element of the strong dollar policy, investors may not be completely comfortable with the US commitment.”  

“Of course, sometimes the Treasury Secretary must be a cheerleader.  Mnuchin is playing this role.  He claimed that the dollar's rally since November was a vote of confidence in Trump.  The opinion polls do not support this self-serving explanation.  In fact, the latest Quinnipiac University survey found that those thinking that Trump is a good leader has not fallen four percentage points below 46% of the popular vote he won.   There has been a dramatic deterioration in the difference between those who approve and those who disapprove Trump over the past month.  There was a 13 point gap in his favor, and now its is a 17 point gap against.”

“Also, we note that broad measure of the dollar has been trending higher since mid-2014.  It fell only one month in H2 14.   In 2015, there were only three months that the Fed's real broad trade-weighted dollar fall.  In 2016, the dollar fell in February-April and then rallied rest of the year, except for August when it fell by less than 1%.   The 2.3% rally last November was the largest monthly advance in the cycle, but not to include a role for monetary policy and for developments in Europe (like extending QE longer than expected) may make for good TV but not robust analysis.”


07:09 Kazakhstan ups oil output forecast for 2017 to 81mn tonnes

Kazakhstan’s economy ministry revised higher its yearly oil  supply forecasts based on 2016 outcomes late-Thursday, as cited by Oilprice.com.

The ministry upped its oil output forecast for 2017 to 81 million tonnes versus earlier statistics predicting 79.5 million tons of production for the current year.

Kazakhstan is the largest oil producer in Central Asia and ranks 18th in the world.


06:43 USD/JPY regains bids in Asia, 113 back on sight?

The USD/JPY pair is seen trying hard to take on the recovery from 10-day troughs, but in vain, as the recovery remains restricted amid a broadly muted US dollar and mild weakness seen around the US treasury yields.

The spot is last seen exchanging hands at 112.75, having posted a day’s high at 112.95 and day’s low at 112.59. Moreover, the bulls extend its struggle to retest 113 handle, as negative Japanese equities underpin the safe-haven flow for the yen, hence, keeping a check on the USD/JPY recovery.

Nothing of note for the major in terms of economic data until the US session, and therefore, persisting RO-RO sentiment will continue to drive markets as dust settles over the Mnuchin’s interview aftermath.

USD/JPY Technical levels to watch 

The major finds immediate resistance at 113.06/09 (20 & 5-DMA). A break above the last, the major could test 113.29 (10-DMA) and 113.47 (1h 200-SMA) beyond the last. While to the downside, the immediate support is seen at 112.53 (10-day low) next at 112.28 (Feb 3 low) and below that at 112 (round figure).

 

 


06:32 Australia: Rebound in Q4 GDP coming? - NAB

According to the analysts at NAB, economic partials point to a rebound in Australia’s real GDP in Q4 of +0.9% q/q.

Key Quotes

“This follows a surprise contraction in growth in Q3 (-0.5% q/q) which partly stemmed from temporary disruptions (including weather-related disruptions to construction). The year-ended rate of growth will lift a little to 2.1% from 1.8% in Q2.”

GDP by expenditure components is showing a relatively broad-based bounceback. Most expenditure components look to have been flat-to-higher in Q4, although partials suggest the rebound in dwelling investment (1.3%) and public investment (0%) was a little underwhelming. That said, we see some upside risk to the forecast based on partial data this week, although we will review this forecast following business indicators, balance of payment and government finance statistics released on Monday and Tuesday.”

Another big jump in the terms of trade will again contribute to income measures of GDP. Higher commodity prices will contribute to a 9.2% rise in the terms of trade in Q4, following up the 4.5% jump in Q3. That will have some positive flow-on effect for company profits, while labour income growth looks to have improved modestly due to better employment growth relative to Q3 and fairly steady (albeit subdued) wages growth.”

“On a production (or industry gross value added) basis, the non-mining recovery may have lost more momentum, although the evidence is mixed. The NAB business survey showed weaker business conditions in Q4, which included disappointing outcomes for retail trade, as well as some pull-back in the outperforming services industries. However, the slump appeared to turn around late in the quarter and continued to strengthen going into early 2017. Nevertheless, other timely indicators for the services sector were encouraging in Q4, while the mining industry is becoming less of a drag on the economy.”

“Our forecasts are similar to those published in the RBA’s latest Statement of Monetary Policy which suggested real GDP growth of around 2%. Consequently, this outcome is unlikely to have big implications for monetary policy, with the RBA likely to remain firmly on hold in the near-term. We recently revised our expectations for monetary policy to include a 25bp cut to the cash rate in November. We remain comfortable with that view which is underpinned by our expectation for the economy to weaken more than the RBA expect in 2018, keeping pressure on the labour market.”


06:27 US tax reform in jeopardy - BBH

Analysts at BBH suggest that the focus in the market is shifting away from the Federal Reserve as the focus is shifting to fiscal policy.  

Key Quotes

“President Trump speaks to a joint session of Congress on February 28.  It could be the most important speech of the first 100 days of the Administration.”

“The most important part of the speech for investors and businesses will talk about tax reform.  Treasury Secretary Mnuchin still seems optimistic about tax reform and hopes to have it completed by the Congressional recess in August.  He did not provide a full-throated endorsement of the border adjustment.    Without the estimated $1 trillion revenues that it was supposed to generate, the ambitious tax cuts must be scaled back in terms of size or duration.”    

“Parliamentary maneuvering can allow the tax reform be passed with a simple majority if it would not generate a larger deficit on a 10-year horizon.  This is why you may recall, why Bush's tax cuts expired.  Mnuchin created some wiggle room suggesting that the dynamic calculations by the White House may be more optimistic (on growth) than Congress (e.g. nonpartisan Congressional Budget Office).”    

“The Republicans plan on two main sources of revenue.  Abolishing taxes associated with the Affordable Care Act (Obamacare) and the border adjustment.  However, the replace and repeal of the national healthcare is caught up on the replacement component and may not generate the tax savings that had been anticipated.”

“Moreover, at least two Republican Senators have come out against the border adjustment (Perdue from Georgia and Cotton from Arkansas).  Mnuchin's words were guarded, but it did not sound as if it would be endorsed by the President next week. Without it, Republicans will either have to scale back its ambitious efforts or to find a compromise with some Democrats.”

“Rather than a large-scale once in a generation tax reform, without the border adjustment there will either be a more common tax cut plan and/or a larger deficit.  A larger deficit would conflict with another concern of some of Trump's team, as well as some Republicans in Congress.    At the same time, some of the largest foreign holders of US Treasuries, including China and Japan, are paring back on their Treasury holdings.”


06:20 RBNZ: Market pricing only 50% chance of a hike in Nov - Westpac

Imre Speizer, Research Analyst at Westpac, notes that the market pricing for the RBNZ continues to retreat and it now implies the first hike will be in Feb 2018 (compared to Nov 2017 prior to the Nov MPS).

Key Quotes

“The chance of a Nov hike is seen as 50%.”

“The RBNZ’s Nov MPS projected via its OCR forecast that it would remain on hold until late 2019. Inflation has risen during the past few quarters but at 1.3% remains well shy of the 2.0% target. Moreover, our economists forecast CPI gains from here will be very gradual. To offset the weakness in imported prices and generate a further rise in domestic inflation, the RBNZ needs domestic spending and investment to continue trucking along. And that will require continued support in the form of low borrowing rates.”


06:09 Sources: China said to name Guo Shuqing as head of banking regulator - BBG

Bloomberg quoting sources familiar with the matter, China has appointed financial-sector expert Guo Shuqing as the new head of the nation’s banking regulator - China Banking Regulatory Commission (CBRC).

Guo’s appointment comes as the CBRC, together with the central bank, and the securities and insurance regulators, work together to beat back growing risks from China’s massive shadow-banking sector, Bloomberg adds.


06:04 Australia is the world s second-best equity market since 1900 BBG

According to a study by Credit Suisse Group AG and the London Business School, as cited by Bloomberg, the best equity markets over the past 117 years were commodity-rich nations such as South Africa, Australia, the US and Canada, while Denmark and Sweden yielded the highest bond returns.

Meanwhile, at the time of writing, the Australian benchmark, the ASX 200, drops -0.84% to 5,735 and the Japanese Nikkei 225 index slips -0.52% to 19,272. Mainland Chinese benchmark, the Shanghai Composite index declines -0.28% to 3,242 levels.


05:52 AUD Q4 2017 forecast revised higher, but outlook remains bearish Morgan Stanley

Analysts at Morgan Stanley have upgraded their AUD price-forecast for Q4 2017, but retained relatively bearish outlook for the currency.

Key Quotes via Livesquawk:

“We revise up our forecast for the AUD to 0.70 by 4Q17 (from 0.65), but retain our relatively bearish outlook for the currency.”

“Our upward revision reflects a marking-to market of the continued rally in bulk commodities, which we believe has been a key factor behind the appreciation of the currency since year-end.”

“Meanwhile, tightening front-end rate differentials still represent an opposing force, pulling the AUD lower.”

“We believe this will continue to be the case, given substantial slack in the Australian labour market and a weak outlook for housing, which means the RBA is unlikely to tighten policy any time soon.”


 


05:37 EUR/USD pauses 2-day rebound, clings to 5-DMA

The bulls appear to take a breather in the Asian session after two consecutive sessions of recovery-gains, as the treasury yields are seen recovering some ground and in turn pushing the US dollar higher across the board.

EUR/USD capped below 10-DMA at 1.0595

Currently, the EUR/USD pair trades almost unchanged at 1.0578, and looks to consolidate recent gains, fuelled by the extension of declines in the US dollar across the board, in response to dwindling bets of a March Fed rate hike and rising uncertainty over the Trump administration’s progress towards the US tax reforms.

The major also remains underpinned by an updated report from Germany's central bank suggests the Governing Council is on course to conclude its easing-cycle. From a wider perspective, any recovery attempts in the EUR/USD pair look fragile, as the common currency remains undermined by mounting geopolitical concerns and resurgence of Greek debt crisis.

Meanwhile, in absence of economic events in the EUR calendar, the major will get influenced by the US new home sales and revised consumer sentiment data, slated for release in the NA session.

EUR/USD Technical Levels

In terms of technicals, the pair finds the immediate resistance 1.0595 (10-DMA). A break beyond the last, doors will open for a test of 1.0634 (50-DMA) and from there to 1.0650 (100-DMA). On the flip side, the immediate support is placed at 1.0520 (Jan 6 low) below which 1.0500 (psychological levels) and 1.0478 (Jan 5 low) could be tested.

 


05:10 Mnuchin takes a BAT to the dollar AmpGFX

Greg Gibbs at AmnpGFX provides an in-depth understanding of yesterday’s Mnuchin’s take on the Border Adjustment Tax (BAT) and its implications on the US dollar.

Key Quotes:

“The WSJ reported that Mr. Mnuchin said the administration is “looking seriously” at the House plan that includes border adjustment and was well aware of concerns raised by specific industries. The Treasury Department had its own concerns, he added, “about what the impact may be on the dollar” from a border-adjusted tax.”

“(A BAT is under serious consideration, but Mnuchin prefers if it didn’t boost the USD.)”

“A Border Adjustment Tax (BAT) is widely expected to place significant upward pressure on the USD (as we discussed in our report on Tuesday (EUR feeling pinch, Trump tax policies would boost USD).  It would significantly shift the fortunes in favor of exporters and import-competing producers, while undermining import dependent companies, including large retailers.” 

“As such industry is split and there is fear that it may cause significant economic disruption and inflation.  Nevertheless, it should tend to boost demand for US producers, lift employment and capital investment, narrow the trade deficit and boost national GDP; all key goals of the Trump Administration (and arguably any government).“

“However, to the extent that the policy drives up the USD, many of these potential benefits of the policy may diminish. “


 


05:03 Goldman Sachs sees gradual drawdown in global oil inventories

Goldman Sachs says in a recent note that the global oil market is showing signs of tightness and will continue to see a gradual drawdown in inventories. 

The investment bank also sees the higher base demand growth this year projected at 1.5 million bpd fully offset increased production in the US. 

As per Reuters report, Goldman analysts said yesterday, “we do not view the recent U.S. builds as derailing our forecast for a gradual draw in inventories, with, in fact the rest of the world already showing signs of tightness.”


04:54 EUR/JPY is chipping away at 100-DMA hurdle

The bid tone around the Yen weakened in Asia, allowing for a minor technical correction in the EUR/JPY pair to the 100-DMA resistance seen at 119.32. 

Focus on Franco-German yield spread

The demand for the common currency remains at the mercy of the France-German 10-year yield spread. Marine Le Pen victory is largely perceived to be a risk-off event, thus EUR/JPY cross could resume the fall if the polls show Le Pen in the lead. 

Meanwhile, the Yen side of the story could be affected by the action in the stock markets and treasury yields. 

EUR/JPY Technical Levels

The cross printed a high of 119.44 earlier today and is now seen trading around 119.30 levels. A break above the 5-DMA level of 119.55 would expose 120.06 (10-DMA). On the downside, breach of the session low of 119.08 could yield a sell-off to 118.59 (Wednesday’s low). 

 


04:52 GBP/USD: Slightly offered amid broad USD correction

The GBP/USD pair is seen on a retreat from two-week tops reached at 1.2561 a day before, as the greenback attempts a tepid-bounce in Asia, correcting the previous heavy losses.

However, the major remains confined in a 30-pips narrow range, as markets continue to assess the implications of the US Treasury Secretary Mnuchin’s on the US economy and greenback. Dollar Hit By Washington Grind

While a lack of fresh fundamental drivers so far this session also adds to the subdued trading activity around cable. Next on tap for the spot remains the US datasets and CFTC report, which will provide fresh impetus.

GBP/USD Levels to consider            

At 1.2540, the supports are aligned at 1.2514 (daily pivot) and 1.2496 (5-DMA) and below that at 1.2474 (10-DMA). On the flip side, the upside barriers are lined up at 1.2561 (2-week high) and 1.2600 (zero figure) and below that at 1.2651 (daily R2).

 


04:30 Bitcoin hits record highs on ETF approval talk, RSI in overbought region

Bitcoin hit a record high of $1193.92 on speculation that the first Bitcoin exchange-traded fund (ETF) is set to receive approval from the US financial regulator.

As per Reuters report, three ETFs that track the value of Bitcoin have been filed with the U.S. Securities and Exchange Commission for approval.

The reports are doing the rounds that even the People’s Bank of China (PBOC) is set to issue its own virtual currency. As of now, the Bitcoin isn’t responding to the PBOC news.

The BTC/USD was last seen trading around $1182.78 levels.

Technicals - overbought RSI with price at record highs

This is a textbook case - overbought RSI with price at record highs. A pullback could be seen, possibly to the 10-DMA level of $1091. 76 levels. Both 5-DMA and 10-DMA are sloping upwards, so, the pullback could be short lived.

Take note of the fact that the RSI is overbought on all three major time frames - daily, weekly and monthly.


04:25 Mexico President Nieto: Talks with US officials proof of interest in building a constructive relationship

Reuters reporting comments from the Mexican President Pena Nieto, following his talks with the US officials on Thursday.

Key Headline:

Talks with the US officials proof of interest in building a constructive relationship     


04:15 Gold: Bull eyeing a test of 200-DMA ahead of US data

Gold prices on Comex are consolidating the latest upmove to fresh multi-month highs in the Asian session this Friday, as the bulls gather pace for the next leg higher.

Gold cheers reduced odds of a March hike

Currently, gold trades marginally lower at $ 1250, aiming for a retest of three and a half month highs reached yesterday at $ 1252.05. Gold rallied hard yesterday as markets cheered the Fed minutes, which revealed reduced expectations of a March rate hike and boosted the non-interest bearing gold at the expense of the treasury yields and US dollar.

Moreover, gold also benefited from uncertainties surrounding Trump’s administration policies, after Treasury Secretary Mnuchin’s raised doubts over the impact of Trump’s policies on the US economic growth this year. At the same time, his comments also raised uncertainty of over progress towards US tax reform

Looking ahead, the yellow metal may take cues from the risk-trends ahead of the US datasets, including the new home sales and revised UoM  consumer sentiment, due to be reported in NA session.

Comex Gold Technical Levels                                  

The metal has an immediate resistance at 1255 (round figure) and 1259.15 (200-DMA). Meanwhile, the support stands at 1245.53 (daily pivot) below which doors could open for 1241.53 (5-DMA).


03:59 AUD/USD - signs of exhaustion, eyes sub-0.77 levels

AUD/USD is extending the overnight retreat from the high of 0.7740 in the Asian session, now trading around 0.77 levels.

Lowe would like it lower

Reserve Bank of Australia’s (RBA) Lowe was out on the wires earlier today stating the Aussie dollar may not be overvalued, but the central bank would surely like it lower.

However, the Aussie’s losses could be better explained by the bullish exhaustion as shown by the daily RSI indicator. The rising wedge formation on the price chart since late January has been accompanied by the falling top formation on the RSI.

Moreover, the pair has rallied close to 600 pips from the December 23 low of 0.7160. Thus, a technical correction cannot be ruled out.

AUD/USD Technical Levels

The spot was last seen trading around 0.7705. Only a daily close above the previous session’s high of 0.7740 would signal continuation of the rally to 0.7778 (Nov 8 high), above which the 2016 high of 0.7835 could be put to test. On the downside, 10-DMA at 0.7685 could offer support, which, if breached could yield a pullback to 0.7649 (Feb 21 low). The next major support is lined up at 0.7609 (Jan 24 high).

 


03:54 China Press: China has no reason to raise interest rates in the short term

The China Securities Journal reporting headlines earlier on the day, citing that the Chinese central bank (PBOC) has no need to raise rates in short term.


03:46 Market pricing for steady rates in 2017 seems reasonable

RBA Governor Lowe continues to take questions in front of the House of Representatives' Standing Committee on Economics at the moment.

Key Responses:

Repeats recent upbeat comments on global fiscal outlook

Some tightening in conditions for property developers in some markets

We do not expect the rate of inflation to fall further

Expect unemployment rate to stay near current level for a while

Market pricing for steady rates in 2017 seems reasonable


03:46 PBOC set to issue crypto currency

As per Bloomberg report, the People's Bank of China is set to use more digital tech and is planning to issue its own version of the crypto currency. 

It is said that the trial runs are on, although the central bank has not announced any official date for the launch of the digital currency. 

Bitcoin's or for that matter any crypto currency's appeal lies in the fact that it is decentralized. Thus, it would be interesting to see if the PBOC backed crypto currency would be equally loved by the markets. 
 


03:38 RBAs Lowe: There are more effective ways to stimulate demand than to cut rates now

RBA Governor Phillip Lowe is on the wires, via Reuters, responding to the questions in front of the House of Representatives' Standing Committee on Economics.

Key Headlines:

Australia is going to have to make its cities denser

need more transport infrastructure investment

There are arguments for rate easing to lift growth, but would only push up borrowing and house prices

There are more effective ways to stimulate demand than to cut rates now


03:17 PBOC sets Yuan reference rate at 6.8655

The People's Bank of China set Yuan reference rate at 6.8655 compared to Thursday's fix of 6.8695


02:48 USD/CNY fix projection: 6.8642 - Nomura

Analysts at Nomura offered their projections for the USD/CNY fix.

Key Quotes:

Our model1 projects the fix to be 53 pips lower than the previous fix (6.8642 from 6.8695) and 132 pips lower than the previous official spot USD/CNY close of 6.8774. The basket implied change is 163 pips lower than the previous official spot USD/CNY close (6.8611 from 6.8774).


02:45 USD/JPY heavy with technicals pointing to

Currently, USD/JPY is trading at 112.70, down -0.04% on the day, having posted a daily high at 112.81 and low at 112.59.

USD/JPY is consolidated in a quiet start to the end of the week for Asia. The major has been trading in a 25 pip range for the best part of the market overnight after dropping below the 113 handle where the yen was perhaps catching a modest bid yesterday in equity markets.

Risk-off markets favour the yen and is sensitive to the 10-year differential where US yields on the long end dropped significantly when US Treasury Secretary Mnuchin said a long bond (50yr to 100yr) is worth consideration, and that tax reform by August is the aim. Meanwhile, looking back to the FOMC minutes, analysts at Bank of Tokyo Mitsubishi explained that they have been classed by the market as more on the dovish side and while we would question how long that conclusion will last, they explained that there is certainly scope for it to last over the relatively short period of a week when there are no major data releases or events to alter sentiment. 

Key risk events ahead

The same analysts noted the key risk events ahead for the Yen: "The payrolls will not be released as usual on the first Friday due to the shorter February and hence will not be released until 10th March. Event risk appears more skewed toward risk aversion if political risks intensify in Europe again and hence yen strength is our bias for the week ahead, especially when coupled with the current momentum in the wake of the FOMC minutes."

USD/JPY levels

USD/JPY short-term technicals have been bearish and USDJPY remains capped and heavy in Tokyo albeit with a slight bid on the hourly sticks. Spot was easing under the base of hourly cloud support and analysts at Scotiabank argued that a weaker tankan (moving average) signal supports the outlook for a little more short-term weakness. 112.50 is first support ahead 112.07 30th Jan low guarding Feb lows of 111.58. "Only below 111.59 would introduce scope to the base of the cloud, which lies at 109.92 and, if seen, we look for this to hold (this is also the 50% retracement of the move up from November).," argued analysts at Commerzbank, adding, "The topside remains capped by the 55 day ma at 114.96."


01:49 US data preview - Nomura

Analysts at Nomura offered a preview of the forthcoming and final US data of the week.

Key Quotes:

"New home sales:

New home sales decelerated notably in December, registering an annualized rate of 536k, which is a 10.4% m-o-m decrease. In January, we expect new home sales to have rebounded. Mortgage applications for home purchases were up modestly in January. The sales of single family homes index in the National Association of Home Builders (NAHB) housing survey inched downward in January, but remained at an elevated level. Yet, the NAHB reported that industry headwinds such as labor shortages and supply-side constraints still persist. In addition, a sharp decline in new home sales in December warrants some positive payback in this volatile series in January. Therefore, we forecast an 8.2% m-o-m increase to an annualized rate of 580k (Consensus: +6.3% to an annualized rate of 570k).

University of Michigan consumer sentiment:

The preliminary February estimate of consumer sentiment from the University of Michigan survey fell slightly from 98.5 to 95.7. The decline was largely due to a modest drop in consumer expectations for the future rather than the assessment of current conditions. The sharp partisan divergence in sentiment seen after the election widened again in this issue. Given the starkly partisan response to the election, the asymmetry in consumer responses raises questions about the degree to which the post-election bounce in consumer sentiment will translate into stronger spending. In the final estimate for February, we hope to learn some additional color on the development of consumer sentiment. Consensus expects a steady reading of 96.0 for the final estimate of this consumer sentiment index for February. As for inflation expectations, the median of consumers’ 5- to 10-year inflation expectations has remained relatively steady despite some monthly volatility. The FOMC tends to look through monthly fluctuations. We will keep an eye out for any sustained deviation from the current trend in upcoming reports." 


01:27 RBA sees China s growth rate continuing

Lowe has been taking questions in front of the House of Representatives' Standing Committee on Economics at the moment.

The RBA sees China's growth rate continuing.

Previous comments:

  • RBA's Lowe: "Commodity prices will pull back from current levels" 
  • Lowe: "Hard to say that Aussie is fundamentally overvalued"
  • RBA's Governor Lowe states global economy firmer footing

Extra reading:

RBA's Lowe vs. Aussie vs. households 180% 'dark cloud' debt-to-income

AUD/USD remains in a tight range, currently trading at 0.7717, up 0.05% on the day, having posted a daily high at 0.7722 and low at 0.7707.


01:14 RBA s Lowe: Commodity prices will pull back from current levels

Lowe is taking questions in front of the House of Representatives' Standing Committee on Economics at the moment.

The RBA thinks that commodity prices will pull back from current levels and Lowe doesn't expect Iron ore to sustain at USD90 tonne. Lowe also said with the market pricing in for an unchanged cash rate seem reasonable.

Previous comments:

  • Lowe: "Hard to say that Aussie is fundamentally overvalued"
  • RBA's Governor Lowe states global economy firmer footing

Extra reading:

RBA's Lowe vs. Aussie vs. households 180% 'dark cloud' debt-to-income

AUD/USD's range has widened to 20 pips is now trading at 0.7715, up 0.03% on the day, having posted a daily high at 0.7722 and low at 0.7705.


01:01 Lowe: Hard to say that Aussie is fundamentally overvalued

Lowe who is continuing to take questions in front of the House of Representatives' Standing Committee on Economics at the moment.

Lowe already stated that he does not see the rate of inflation falling any further and the reduced unemployment rate should be possible and be keeping close to the current level.

More recently, he says that it is hard to say that the Aussie is fundamentally overvalued but said it would be better if the currency were lower. He explained that commodity prices go up further then the Aussie would be expected to follow and the interest rate differential would also affect the Aussie. 

AUD/USD has printed lows of 0.7705 trading in a very narrow range around the headlines of just 15 pips or so. 


00:46 RBA s Governor Lowe states global economy firmer footing

Lowe is upbeat on the global economy and said the current rate is consistent with reaching the CPI goal when taking questions in front of the House of Representatives' Standing Committee on Economics.

Lowe does not see the rate of inflation falling any further and the reduced unemployment rate should be possible and be keeping close to the current level.

We are seeing a muted reaction in AUD/USD so far.

RBA's Lowe vs. Aussie vs. households 180% 'dark cloud' debt-to-income

 


 


00:33 NZD/USD sitting on key support, eyes 0.73 handle

Currently, NZD/USD is trading at 0.7230, up 0.03% on the day, having posted a daily high at 0.7234 and low at 0.7228.

NZD/USD is consolidated after meeting highs overnight at 0.7246 in an extension of the rally from 0.7140 and through and away from the aligning 20 and 50 smas on the 4-hour sticks. The US dollar index is around 0.2% lower on the back of Treasury Secretary Mnuchin commenting on the potential issuance if 50/100ye bonds that led to the underperformance in the long end yield curve. US 10yr treasury yields fell from 2.45% to 2.38%, while the 2yr fell from 1.22% to 1.19%. He also stated that tax reform will come by August as their aim. FOMC member Lockhart said the data supports 2-3 hikes this year. Kapaln said the Fed should move sooner than later. On the data front, Jobless claims were 244k (vs 240k expected), maintaining a tight path.

Meanwhile and domestically, at its February interest rate decision, the RBNZ kept the OCR on hold at 1.75% as fully expected, noted analysts at Westpac, adding, "With inflation expected to lift only gradually, we see a very low probability that recent OCR cuts will be reversed any time soon. Market pricing for a rate hike by end- 2017 had been 100% in the early weeks of 2017 but is now back to about 50/50."

NZD/USD outlook

For the day ahead, the analysts expect a neutral play in a 0.7130-0.7250 range unless the latter breaks. Longer term, the same analysts suggested that the Fed’s tightening cycle plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar, pushing NZD/USD down to 0.7000 or lower. "Granted, the NZ economy is strong and dairy prices have risen, but these forces are subservient to the US dollar’s trend."

NZD/USD levels

 NZD/USD has rallied and penetrated the 20 day sma at 0.7223 having rallied from the 50 sma on the same time frame at 0.7147. the move has broken the previous resistance of 0.7120 and 14th Dec highs of 0.7118. Placement here on a daily closing basis, the price 0.7300 as the psychological target. To the downside, 0.7080 guards 0.6950 and 20th July 2016 lows.

AUD/NZD correction could extend to 1.0600 area - Westpac


00:03 US data reviewed: steady downtrend in Initial jobless claims - Nomura

Analysts at Nomura offered a review of the Initial jobless claims.

Key Quotes:

"For the week ending 18 February, initial jobless claims were up 6k to 244k, and the prior week was lowered to 238k from 239k. The 4-week moving average was 241k, down 4k from the previous week's revised average."

"The steady downtrend is as expected, and we continue to expect this series to trend downwards as labor market conditions stay healthy. The data for three states (Virginia, Wyoming, and Hawaii) were estimated by the Department of Labor, as these states did not report the claims data likely because of a shorter workweek."

"This implies that some revision in the upcoming issue is likely, but the magnitude of the revision may not be big as these states only account for a small part of the headline number."


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