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03:05 AUD/JPY rises to one-week high on Aussie data

  • AUD/JPY clocks one-week high. 
  • Upbeat Aussie wage growth data overshadowed to some extent by dismal construction sector data. 

AUD/JPY rose to 84.86 - the highest level since Feb. 14 after the Australian Bureau of Statistics (ABS) reported a better-than-expected fourth quarter wage growth figure. 

As of writing, the currency pair is trading at 84.78 levels. The Aussie Q4 wage price index printed at 0.6 percent quarter-on-quarter, beating the estimated of 0.5 percent. Also, the annualized number bettered estimate to print at 2.1 percent.

Still, the Aussie dollar has not been able to score big gains, possibly due to a big decline in the construction data. The Aussie construction work done fell 19.4 percent from the previous quarter's upwardly revised figure of 16.6 percent. The economists were expecting a drop of 10 percent. 

Ahead in the day, the AUD/JPY could find strong hands if the stock markets in Europe and US trade in green. 

AUD/JPY Technical Levels

A break above 84.99 (Feb. 6 low) would open doors for 85.60 (Feb. 13 high). A close above the same would allow for a stronger gain towards 86.56 (200-day MA). On the downside, breach of support at 84.53 (session low) could yield re-test of 84.00 (psychological level), under which a major support is seen at 83.32 (Feb. 14 low).   

 


02:53 Preview of the FOMC minutes - Nomura

Analysts at Nomura offered a preview of the FOMC minutes.

Key Quotes:

"The FOMC minutes from the 30-31 January meeting should provide additional color on what we perceived to be a marginally hawkish post-meeting statement (January FOMC Recap, Policy Watch, 31 January 2018).

In particular, the minutes are likely to provide added context on the addition of the word “further” in two key sentences of the forward guidance paragraph of the statement. Moreover, the minutes may provide a rationale for other language changes, including an upgrade to the FOMC’s near-term inflation outlook.

The minutes will not, however, be timely enough to provide a view on the Committee’s reaction to recent financial market developments. Thus far, most FOMC participants who have commented publically on financial markets have indicated that the turbulence from the past few weeks has not fundamentally reshaped their medium-term outlook.

The combination of market unrest, a strong core CPI print for January and the recently-passed budget agreement to boost federal spending appears to be engendering more interest than usual in Chair Powell’s first public remarks on 28 February before Congress (10am EST). In that sense, the January minutes may contain less information than usual given recent developments. We continue to expect a rate hike at the upcoming 20-21 March meeting, followed by three additional hikes in 2018 (Jun, September and December) and two hikes in 2019 (March and September)."


02:45 Australia wage price index rose 0.6 percent in December quarter

The Australian Bureau of Statistics (ABS) reported the fourth quarter wage price index at 0.6 percent quarter-on-quarter vs. an expected gain of 0.5 percent. The annualized figure printed at 2.1 percent vs. an expected figure of 2 percent. 

DECEMBER KEY POINTS (Source ABS)

TOTAL HOURLY RATES OF PAY EXCLUDING BONUSES

QUARTERLY CHANGE (SEP QTR 2017 TO DEC QTR 2017)

  • The trend and seasonally adjusted indexes for Australia both rose 0.6% in the December quarter 2017. This continued the moderate rate of wage growth recorded by the series over the last two years.
  • The Private and Public sector rose 0.5% and 0.6% respectively, seasonally adjusted.
  • The rises in indexes at industry level (in original terms) ranged from 0.1% for Accommodation and food services to 1.0% for Information, media and telecommunications.

ANNUAL CHANGE (DEC QTR 2016 TO DEC QTR 2017)

  • The trend and seasonally adjusted indexes for Australia both rose 2.1% through the year to the December quarter 2017. This was marginally higher through the year growth than has been recorded for both series during 2017.
  • Rises in the original indexes through the year to the December quarter 2017 at the industry level ranged from 1.4% for Mining to 2.8% for Health care and social assistance.

02:43 USD/JPY: piercing the descending 200-hour SMA, where next?

  • USD/JPY: to test higher Tenkan level?
  • USD/JPY:  through the first hurdle as being the descending 200-hour SMA.

USD/JPY has pierced the descending 200-hour SMA in the steep recovery channel formed from the recent lows at 105.54. Currently, USD/JPY is trading at 107.45, up 0.18% on the day, having posted a daily high at 107.46 and low at 107.24.

USD/JPY climbed by 0.6% over the day to 107.25/30 although there was a sell on rallies in play in European trade and the pair was unable to get to the previous highs at 107.37 and was faded on such attempts while supported by the ascending 10 hr SMA.

The Fed minutes and speakers are key

The Fed minutes and speakers this week will be key for this pair, but there are a lot of speculative positions stitched into the price potentially overshadowing the outcome. 

USD/JPY levels

We have a 107.67 Tenkan line ahead that could be tough resistance on a break from the current highs.  Meanwhile, Valeria Bednarik, chief analyst at FXStreet explained that the 4 hours chart shows that technical indicators keep advancing well above their mid-lines, somehow supporting further gains ahead, while the 100 SMA maintains a strong downward slope, now around 108.30, suggesting that in the longer run, and advance is not that clear.


02:41 AUD/USD peeps above 0.79 on upbeat Aussie wage price index

  • AUD finds bids on better-than-expected Q4 wage growth data. 
  • Horrible Q4 construction work figure could play a spoilsport. 

AUD/USD hit a session high of 0.7902 after the Australian Bureau of Statistics reported a better-than-expected fourth quarter wage growth numbers. 

The Q4 wage price index came in at 0.6 percent quarter-on-quarter, beating the estimated rise of 0.5 percent and up from previous quarter's 0.5 percent. The annualized figure printed at 2.1 percent, bettering the estimate of 2 percent. However, the upbeat wage growth number has not had any positive impact on the Aussie 10-year yield, which continues to trade largely unchanged on the day at 2.89 percent. 

Further, the big drop in the fourth quarter construction work done (-19.4 percent, expected -10.0 percent) is likely working against the AUD bulls. The spot was last seen trading at 0.7893.

AUD/USD Technical Levels

On the upside, a break above .7934 (previous day's high) would shift attention to 0.7989 (Feb. 16 high). A daily close above the same would indicate the rally from the Feb. 9 low of 0.7759 has resumed. In such a scenario, bears would find stuck on a wrong side of the trade, thus unwinding of AUD shorts could end up pushing the spot well above 0.80. 

On the other hand, a sustained move below 0.7871 (upward sloping 50-day MA) could yield a sell-off to 0.7772 (100-day MA + 200-day MA) and 0.7744 (61.8% Fibonacci retracement of Dec-Jan rally). 

 


02:32 Japan Nikkei Manufacturing PMI below forecasts (55.2) in February: Actual (54)


02:31 Australia Construction Work Done below forecasts (-10%) in 4Q: Actual (-19.4%)


02:31 Australia Wage Price Index (YoY) came in at 2.1%, above forecasts (2%) in 4Q


02:31 Australia Wage Price Index (QoQ) above forecasts (0.5%) in 4Q: Actual (0.6%)


02:18 AUD/JPY sits above 200 hour MA ahead of Aussie wage growth data

  • AUD positive technical set up. 
  • Focus on Australia Q4 wage growth data. 

The AUD/JPY seems to have formed a base around 84.00 ahead of the Aussie wage growth numbers. 

The currency pair was last seen trading just above the 200-hour moving average (MA) of 84.60. Over the last two weeks, the sellers have persistently failed to push/keep the pair below 84.00 level.

Further, the daily relative strength index (RSI) diverged in the AUD-positive manner. So, the currency pair looks set for a decent corrective rally. 

That said, it all depends on the quality of the Australian Q4 wage growth figures due in about 20 minutes (expected 0.5 percent q/q). A better-than-expected data would add credence to the bullish technical set up and open doors for a move above 85.00. On the other hand, a horribly weak figure could yield a sustained break below 84.00. 

AUD/JPY Technical Levels

A break above 84.99 (Feb. 6 low) would open doors for 85.60 (Feb. 13 high). A close above the same would allow for a stronger gain towards 86.56 (200-day MA). On the downside, breach of support at 84.53 (session low) could yield re-test of 84.00 (psychological level), under which a major support is seen at 83.32 (Feb. 14 low).   

 

 


02:11 Japan s Asakawa: Recent Yen moves are one-sided

Japan's Vice Minister of Finance for International Affairs, Masatsugu Asakawa, hitting the wires today talking about recent market movements as they relate to the Yen.

Key highlights:

  • Recent Yen surges are 'excessive'; "cannot help" but call the moves one-sided.
  • Rising bond yields are the "beginning of a sea change".
  • US Economy will likely be robust, and interest rates will rise; important to not forget the impact that will have on other nations.

 


02:01 Australia Westpac Leading Index (MoM) declined to -0.2% in January from previous 0.3%


01:58 AUD/USD threatening the 20-hour SMA to the downside

  • AUD/USD about to break lower?
  • AUD/USD has plenty of data today.

AUD/USD is testing the 200-hr SMA on the downside after the first piece of data for the day, albeit without a move as traders sit tight ahead of Q4 wage price data. (Australia - Westpac Leading Index for January: -0.24% m/m (prior +0.27%)). Currently, AUD/USD is trading at 0.7916, up 0.08% on the day, having posted a daily high at 0.7922 and low at 0.7905.

Overnight, gold and metals were lower on a strong greenback with US yields dominating the markets yet again. The commodity-linked Aussie was changing hands in a chop, sliding on a strong greenback to 0.7885 from 0.7908 highs. 

Next hour is critical

The next hour or so should be critical for the bulls defending key support and analysts at Westpac offered a preview of the data that will be eyed closely by the RBA:

"This week’s data highlight for Australia is the Q4 wage price index at 11:30amSyd/Mel. RBA governor Lowe said last week that wages growth probably needs to pick up to about 3.5%yr in order for the RBA to hit its 2.5% average inflation target. Instead, the survey has been bumping around 1.9-2.0% since Q3 2016 and consensus for Q4 2017 is 0.5%qtr, 2.0%yr.

Released at the same time is Australia Q4 construction data, an input to the GDP report due 7 March. The headline reading is currently being distorted by imported liquefied natural gas processing platforms (Q3 +15.7%, Q4 expected to unwind much of this) but the details provide some interest in various sectors of construction."

AUD/USD levels

Ona break to the downside, the bullish channel will be at risk of a break down that was formed from the 200-D SMA down at 0.7769. Valeria Bednarik, chief analyst at FXStreet explained that in the 4 hours chart, the price is unable to recover above a flat 20 SMA, currently around 0.7920, but struggling around a horizontal 200 EMA and the mentioned Fibonacci level. "Indicators hold below their mid-lines with different directional strength, anyway leaning the scale toward the downside," Valeria added.


01:51 NZD/USD testing Tuesday s low in overnight session

  • NZD/USD drifting lower for the third day straight.
  • Rising bond yields driving up the USD.

NZD/USD shifted lower on Tuesday, seeing 0.7340 in the overnight session.

The US Dollar is gaining against the major currencies as bond yields are on the rise, with the 2 and 10-year Treasuries trading near multi-year highs as inflation fears begin to take their toll on financial markets.

The Kiwi was unmoved following a statement from Reserve Bank of New Zealand (RBNZ) Governor Grant Spencer, and as noted by an ANZ piece, "the RBNZ Governor appears before the Finance and Expenditure Committee today at midday to discuss the RBNZ’s annual report. There will likely be some headlines, but we are not expecting anything ground-breaking."

With the Kiwi declining for three straight days, and no data on the docket for New Zealand until the Retail Sales figures on Thursday at 21:45 GMT, market sentiment will continue to control the direction of the pair going into the rest of the week.

NZD/USD Technicals

The pair has declined into the 8-day EMA, but long-term charts still show strong bullish pressure, with the pair still trading far above the 34 EMA and 200-day SMA. Current support can be found at yesterday's low of 0.7335, 0.7314, and 0.7277, with resistance at 0.7410 and 0.7436.


01:18 South Korea s Lee Ju-yeol: prepared for faster Fed hikes

The head of the Bank of Korea, Lee Yu-yeol, commenting on the Federal Reserve and their rate increase strategy going forward.

Key highlights:

  • Bank of Korea is prepared for faster than expected rate hikes from the Fed.
  • No need for the BoK to mechanically react to Fed rates increases.

01:12 Commodity exports remain reasonably firm, but . . . - Westpac

Analysts at Westpac explained that the prices for New Zealand’s key agricultural commodity exports remain reasonably firm, with robust global demand providing a supportive backdrop.

Key Quotes:

"Looking ahead, we expect key commodity prices to come under pressure, as growth in China slows, and global supply increases in some markets. Yet despite relatively buoyant prices, confidence in the rural sector is weak; with apparent nervousness about the impact of impending regulatory changes probably a key concern.

As we outlined in our last Fortnightly Agri Update, most of New Zealand’s key rural exports have started 2018 on the front foot. Dairy prices have improved noticeably since the start of the year – although this has partly been due to concerns that poor weather may curtail NZ production. Some of these concerns have eased following recent wet weather, and in last night’s GlobalDairyTrade auction prices stalled. The overall GDT index was down 0.5%, and Whole Milk Powder prices edged up a smidgeon (up 0.3% to US$3,246). Higher prices over the last couple of months have prompted us to lift our milk price forecast to $6.50 this season earlier this month. However, we still expect prices to moderate in 2018 as growth in China slows and global production increases (particularly in Europe).

Solid farm gate prices for most export commodities, however, have done little to bolster confidence in the rural sector. Confidence is lingering well below what we would expect given the current level of commodity prices (see chart). Undoubtedly, this reflects a number of developments. Weather conditions have been adverse in some regions with parts of the country suffering drought conditions in late 2017/early 2018, the dairy sector has watched with concern the spread of mycoplasma bovis, while the tighter labour market nationwide is also probably influencing the sector. But we suspect the plunge in confidence also has plenty to do with the change in government. The latest Federated Farmers confidence survey released earlier this month reported increased concerns about climate change and the ETS, while regulation and compliance costs were the top concern amongst survey respondents.

Changes signalled by the new Government that is likely to affect the rural sector include:

  • commitment to a legally binding carbon emissions target
  • no new taxpayer funding for irrigation
  • support for less intensive land use (such as forestry)
  • no new mines on conservation land, and
  • tighter restrictions on foreign ownership of land.

The details around some of these policies are still to be confirmed, but evidently, farmers are fearful that ultimately they will increase their cost of doing business. This may mean farmers are reluctant to undertake significant investment on farm while uncertainty around how government policies will be implemented persists.

Weak confidence in the sector is also affecting the rural property market, most noticeably via soft sales volumes. To date, there has been little downward pressure on prices, with the combination of low-interest rates and relatively healthy farm gate prices meaning sellers aren’t being rushed into accepting lower prices. However, this combination won’t last forever. And the increasing focus on the environmental costs of farming is likely to see some land prices to come under pressure. In particular, the price of land used for dairying (which is likely to face the most significant cost increases as new environmental regulations are introduced) is expected to fall. In contrast, prices for less carbon-intensive uses of land such as horticulture and forestry could get a relative boost."


01:01 USD/JPY closes higher for third day in a row on rising bond yields

  • Yen declining against strengthening US Dollar.
  • USD getting boosted by rising bond yields.

USD/JPY closed higher for a third consecutive day to end Tuesday's trading, entering the overnight session trading just beneath Tuesday's high of 107.37.

With China's institutions still off to celebrate Chinese New Year, the Asia session will continue to have limited volumes. The US and Canadian markets also had the start of the week off, but traders returned Tuesday and the theme was decidedly USD-positive, with the US Dollar gaining against the major bloc of currencies, spurred on by the continued lift in bond yields. The 2-year Treasury note hit its highest value since 2008, and the 10-year is also trading near a four-year high, and the Dollar can expect continued support from the bond markets as yields increase in the face of rising inflation.

Wednesday will see the Nikkei Manufacturing PMI at 00:30 GMT, followed by a speech by Bank of Japan (BoJ) Board Member Funo at 01:10, and the Industrial Activity Index at 04:30, with foreign investment figures rolling in much later at 23:50. The US sees Markit PMI data at 14:45, with the FOMC Minutes due at 19:00.

USD/JPY Technicals

Daily candles show the pair challenging the 8 EMA, and strong bullish potential from the hammer signal dropped on Friday. H4 charts have the pair trading just over the 34 EMA, but volumes remain thin and the price has remained trapped under 107.37; support is being provided by 106.82 and 105.66, with resistance built in at 107.56 and 108.15.


00:35 ZEW disappointed, although . . . - ANZ

Analysts at ANZ noted that the ZEW index of investor sentiment for Germany eased to 92.3 in February, from a series high of 95.2 in January. 

Key Quotes:

"It was still the second highest reading for the index ever suggesting little impact from the recent volatility in markets. 

The ZEW survey of expectations for the euro area was 29.3 vs 31.8. German producer prices rose 2.1% y/y in January vs 2.3% y/y. 

Prices of intermediate goods rose 3.1% y/y and consumer goods prices rose 1.5% y/y. Capital goods prices rose 1.2% y/y."


00:33 Forex today: traders returned and bid up the greenback

Forex today saw the return of volume and traders in the US coming back form a long weekend; The dollar was firmer again against all the major currencies and US yields were higher. 

US 10yr treasury yields moved up from Friday's 2.88% closing to 2.93% before consolidating after the short term and 2-year auction. The 2yr yield jumped from 2.19% to 2.24% as being the highest level since Sep 2008. The Fed fund futures yields point to four hikes by end-2019. The DXY closed at around 89.72 +0.69%.

As for other currencies, the euro dropped from just a few pips below 1.2400 to a low of 1.2319 before drifting higher to close around 1.2335 weighed by a disappointing Feb ZEW German investor sentiment survey from the European session when the Tsy-Bund 10s spreads were pushed out to 217.85 from 213.50 on Monday. In other data, the German Producer Prices m/m Jan, 0.5% vs the consensus of 0.3% and prior 0.2% - ( YY Jan, 2.1%, consensus 1.9%, prior 2.3%).

GBP/USD was higher in European trade on a Business Insider report on Brexit that said the European Parliament will call for the UK to have a 'privileged' single market access post-Brexit. Cable rallied to 1.4015, (close to Monday's recovery high), on the report from 1.3932. In the US session, cable was seeing offers to 1.3964 and was a chop on the way through European session highs until 1.4024 and just shy of the ascending 100 hourly SMA. Offers emerged again on a higher DXY and yields sending cable back to the 21 hourly SMA at 1.3984 for the pair to close a few pips shy of 1.40 the figure. 

EUR/GBP fell to 0.8812 in European trade, to an 11-day low and was trading within a range between 0.8846-0.8867 before another offer to 0.8807 in London/NY handover. the US session was choppy with a bearish bias and the pair closed around 0.8815.

USD/JPY climbed by 0.6% over the day to 107.25/30 although there was a sell on rallies in play in European trade and the pair was unable to get to the previous highs at 107.37 and was faded on such attempts while supported by the ascending 10 hr SMA. The Fed minutes (Fed speakers) will be the next major catalyst for this pair, but there are a lot os speculative positions stitched into the price potentially overshadowing the outcome. We have a 107.67 Tenkan line ahead that could be tough resistance on a break from the current highs. 

As for the commodity currencies, NZD/USD was slightly weaker at 0.7345 by the close weighed down by a lower GDT dairy auction with prices down 0.5%. Gold and metals were lower too and the Aussie was changing hands in a chop, sliding on a strong greenback to 0.7885 from 0.7908 highs.

Key events ahead:

Analysts at Westpac highlighted the key forthcoming events:

"This week’s data highlight for Australia is the Q4 wage price index at 11:30amSyd/Mel. RBA governor Lowe said last week that wages growth probably needs to pick up to about 3.5%yr in order for the RBA to hit its 2.5% average inflation target. Instead, the survey has been bumping around 1.9-2.0% since Q3 2016 and consensus for Q4 2017 is 0.5%qtr, 2.0%yr.

Released at the same time is Australia Q4 construction data, an input to the GDP report due 7 March. The headline reading is currently being distorted by imported liquefied natural gas processing platforms (Q3 +15.7%, Q4 expected to unwind much of this) but the details provide some interest in various sectors of construction.

In London trade, we will see advance Feb readings on European manufacturing sentiment (likely to remain strong) and UK Dec employment data, with consensus for the unemployment rate to remain at 4.3%, a low since the early 1970s. BoE governor Carney testifies to a parliamentary committee.

The US calendar features Jan existing home sales data and the minutes from the Fed’s end-January policy meeting. This should be a little dated since the meeting was held before the strong market reaction to Jan wages and CPI readings."

Key notes:

  • NZD/USD traders await the RBNZ Governor - ANZ
  • Global dairy prices held broadly steady overnight, but . . . - ANZ
  • US indexes edged lower after six days of consecutive gains
  • Gold: steepest daily drop in about 1.5 years stalls as DXY's advance slows

 

 

 

 

 

 


00:19 Dollar Index closing its third consecutive day in green

  • Greenback profits from rising US Yields to post more gains
  • US Dollar bullish run stalled during American trading

The USD Index, that measures the US Dollar performance against a basket of currencies, is nearing the psychological 90.00 mark after posting another positive trading session, gaining 0.57% on the day. The greenback has had the edge over most of its major pals, which has carried the weighed index to 4-day highs, setting a top for the day at 89.80.

DXY claimed most of its gains during European trading, with the US yields gaining traction and carrying the greenback, keeping the positive correlation between both assets. Auctions for several bills and the 2-year note resulted in rising returns for the bond bidders, which confirmed the current yield surge.

During the American session, the bullish run has stalled, with the index trading in a tight range between 89.50 and 89.70 the whole session.

Technical levels

The Dollar Index needs to break above today’s 89.80 intraday high to keep the bullish ride going. Next targets could be set at the psychological 90.00 mark, followed by the 90.56 where the index set a double top two weeks ago.

On the downside, most immediate support is set at 89.40, followed by 89.00. Below, this year’s low at 88.28 still looms.


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