HotForex Forex News

13:29 NZD/USD well-bid near session high around mid-0.70s

The NZD/USD pair remained well bid through mid-European session and was seen building on to its momentum back above mid-0.7000s.

Following the US President Donald Trump's failure to gain enough support to repeal and replace Obamacare, growing market skepticism over his ability to deliver on the promised tax cuts and infrastructure spending triggered a broad based US Dollar sell-off. 

This coupled with a continuous slide in the US treasury bond yields further collaborated towards boosting demand for higher-yielding currencies - like the Kiwi, and helped the pair to extend Friday's recovery move from sub-0.70 level.

With absent fundamental drivers, in-terms of any market moving economic releases, a scheduled speech by the Chicago Fed President Charles Evans would now be looked upon for some immediate respite for the US Dollar bulls.

   • US: Important week ahead - BBH

Technical levels to watch

Immediate resistance is pegged near 0.7075 level, which if cleared has the potential to lift the pair towards 100-day SMA hurdle near the 0.7100 handle en-route 0.7140-50 confluence resistance (50 & 200-day SMAs).

On the downside, retracement back below 0.7030-25 immediate support now seems to drag the pair to 0.6985 support area ahead of mid-0.6900s support area.

 


13:24 French election poll: 2nd Round: Macron/ Le Pen at 61/39

The latest Opinionway Poll on French presidential election reveals that Macron continues to lead both rounds.

Key Details via Livesquawk:

1st Round: Le Pen 26 (25), Macron 24 (Unch), Fillon 20 (19)

2nd Round: Macron/ Le Pen at 61/39 (63/37), Fillon/ Le Pen 58/42 (57/43)


13:11 USD/CHF risks a pullback to 0.9720 Commerzbank

In light of the recent price action, USD/CHF could slip back towards the 0.9720 area, suggested Karen Jones, Head of FICC Technical Analysis at Commerzbank.

Key Quotes

“The cross spent much of last week consolidating at the .9927 200 day ma and has seen a small bounce, this is indicated to stay capped circa 1.000. There is scope for further slippage towards the .9880/50 region. This is this years’ low, the 55 week ma and the 61.8% retracement. Downside risks are growing and below .9850 will introduce scope to .9720, the 78.6% retracement”.

“The market stays offered below the 20 day ma at 1.0035. Only above here would alleviate downside pressure and retarget 1.0248 11th January high and the 1.0328 2015 and 1.0344 December 2016 highs”.

 

 


13:09 USD/CAD stays depressed around 1.3330

The demand for the greenback remains subdued at the beginning of the week, taking USD/CAD to the lower bound of the range in the 1.3330/20 band.

USD/CAD weaker post-‘Trumpcare’

The selling pressure around the buck has picked up extra pace after Hose Republican rejected the American Health Care Act (‘Trumpcare’) at last Friday’s voting, sparking a wave of selling interest around the buck.

USD remains on the defensive on Monday as Trump’s initial ‘reflation trade’ keeps losing momentum while the future implementation of significant fiscal reforms has now became dubious.

In the meantime, CAD remains driven by US-CA policy divergence (mainly reflected in the 2-year yield spread differential) and crude oil dynamics albeit in a secondary role.

According to latest CFTC report, CAD speculative longs have decreased dramatically during the week ended on March 21, taking the currency to the net short territory for the first time since January 17.

Nothing expected data wise today, with only Chicago Fed C.Evans (voter, dovish) due to speak later in the NA session.

USD/CAD significant levels

As of writing the pair is losing 0.34% at 1.3331 and a break below 1.3313 (low Mar.23) would aim for 1.3297 (100-day sma) and finally 1.3262 (low Mar.21). On the other hand, the initial hurdle lines up at 1.3387 (high Mar.22) followed by 1.3496 (high Mar.14) and then 1.3536 (2017 high Mar.9).

 


13:03 EUR/GBP slide to fresh session low near 0.8630 level

After a weekly bullish gap, the EUR/GBP cross ran through fresh offers and turned lower for fourth session in the previous five.

Currently trading just below mid-0.8600s, a strong bid tone surrounding the British Pound failed to assist the cross to build on weekly bullish gap. Moreover, a fresh bout of short-covering around the GBP/USD major further collaborated towards accelerating the pair's downslide from three-day tops. 

Meanwhile, the release of better-than-expected German IFO Business Climate index for March remained supportive of a strong bid tone surrounding the EUR/USD major, which might extend some immediate support and limite further depreciating move. 

With the Brexit journey to officially begin on Wednesday, any news coming out of the UK PM Theresa May meeting with Scottish First Minister Nicola Sturgeon would influence the British Pound and infuse volatility across GBP pairs. 

Technical levels to watch

Bears would be eyeing for weakness below 0.8640 level (session low), the cross is likely to accelerate the slide towards 0.8615-10 strong support before eventually dropping to 0.8575 horizontal support.

On the upside, momentum above session peak resistance near 0.8675 level now seems to lift the cross beyond the 0.8700 handle towards its next hurdle near 0.8730-35 zone.

 


13:03 GBP/USD regains poise, 1.2600 a whisker away

After a brief period of upside consolidation seen over the last hours, the GBP/USD pair resumed its bullish march and now moves closer towards 1.2600, the highest levels since Feb 2.

The spot caught a fresh bid-wave as the US dollar ran through fresh sellers versus its main peers in mid-Europe, despite a tepid-bounce seen in the treasury yields across the curve, as the sentiment remains dented by the failure to pass the Healthcare bill by the US Congress.

Moreover, the renewed uptick in cable can be attributed to investors’ optimism, in anticipation of the UK PM May meeting with the Scottish First Minister Nicola Sturgeon, aimed at make a strong case for unity.

Also, markets gear up for the Article 50 trigger this Wednesday, as they finally seek clarity on Brexit and hence, boosts the GBP further. Next of note for the major remains the FOMC member Evan’s speech due later in the NA session, as markets digest the BOE FPC’s latest meeting minutes.

GBP/USD Levels to consider            

Carol Harmer, Founder of Charmer Trading Academy, explains, “Give it its due...we have broken 1.2529 and now looks set to reach the Feb yearly high of 1.2570...I think Cable will come under pressure at this point...but I also think seriously that Cable is a buy on dips.. Yes.. we are overbought. But we can go sideways to ease that...what we really want to see s a pullback to 1.2445/40 area and that I think will encourage buyers back into the market.”

“1.2445/40 would be a good level to go in and buy and I know yo cannot act like a bank trader...but even if it breaks here we will still see buyers coming in and defending any sort of weakness. So please be prepared,” Carol adds.

 


12:51 EUR/USD downside appears limited Danske Bank

Jakob Christensen, Chief Analyst at Danske Bank, sees the downside in the pair as limited.

Key Quotes

“For the majors, political uncertainty will be in focus this week, in particular with regard to USD and GBP”.

“The former may be hit by concerns about the wider ramifications of the futile attempt to repeal 'Obamacare' for the prospects of tax reform and fiscal policy in the US”.

“As positioning is still close to stretched long levels, it remains vulnerable to a beginning discount of the impact of Trumpflation. Overall, we see limited downside for EUR/USD from the current level”.

 

 


12:44 US: Important week ahead - BBH

Analysts at BBH suggest that there are three considerations in the week ahead for the US economy:  economic data, Fed comments, and an initial assessment of the implications of the failure to repeal and replace the Affordable Care Act.   

Key Quotes

“Although Q4 GDP may be tweaked higher to 2%, the most important piece of economic data will be the February personal consumption figures.  The pullback in the consumer is weighing on Q1 growth estimates, while the rise in business investment does not appear sufficient to counter it.  Although February retail sales (~40% of PCE) was soft, the January figure was revised sharply higher.  This means that the February PCE report should catch these developments.  The targeted core PCE deflator is expected to be unchanged at 1.7%.”

“We note the contrasting projections by the Atlanta and New York Federal Reserve's GDP trackers.  The Atlanta Fed's model has the US economy slowing to a 1.0% annualized pace in Q1. This would be just below the average Q1 pace beginning in 2010.  However, the New York Fed's model has the economy tracking 3.0%.   The market (Bloomberg median) is smack in between.”


12:33 FX option expiries for today NY cut

FX option expiries for today NY cut at 10:00ET, via DTCC, can be found below. 

EURUSD: 1.0680 (EUR 385m) 1.0790-1.0800 (495m) 1.0825-30 (535m) 1.0900 (235m) 1.1000 (300m) 

USDJPY: 111.00 (USD 390m) 112.00 (395m)

GBPUSD: None of note

AUDUSD: 0.7560-70 (AUD 405m) 

USDCAD None of note

NZDUSD: 0.7000 (NZD 395m) 0.7068-70 ( 855m)


12:28 ECBs Lautenschlaeger: ECB is prepared for any outcome of Brexit negotiations

European Central Bank (ECB) executive board member Sabine Lautenschlaeger crossed the wires last minutes, via Reuters, speaking on regulation and Brexit.

Headlines:

We will probably have many banking groups coming in due to Brexit

If a bank wants to move back-to-back it will have to be more urgent

Some will take months and some may even take 1 or 2 years

ECB is prepared for ‘any outcome’ of Brexit negotiations

Basel iii must be finalized as quickly as possible

Committee is close to reaching an agreement


12:19 Goldman Sachs: OPEC cuts extension not warranted

Analysts at Goldman Sachs said in their note published on Sunday that an OPEC output deal extension is not needed unless the supply and demand fundamentals deteriorate.

Key Quotes via CNBC:

"Our assessment of oil fundamentals and the rationale behind the production cuts do not warrant, in our view, such an extension barring either a sharp deceleration of demand growth or a sharp rebound in Libya/Nigeria production."

"We believe that the rebalancing of the oil market is in fact making progress despite the record high U.S. crude inventories."

"Oil prices above $60 per barrel would prove self-defeating in our view given the flattening of the oil cost curve and the unprecedented velocity of the shale supply response."


12:14 EUR/USD: Upside stalls at 1.0875 on IFO

The bulls appear to have taken a breather after the Asian upsurge, allowing a brief phase of consolidation in EUR/USD near the highest levels since Dec 2016. The spot stalls its bullish run as the USD buyers lurk amid bargain hunting, after the greenback slumped to the lowest levels since Nov last year against its major rivals.

The US dollar fell sharply across the board on the back of Donald Trump's defeat over the health-care replacement plan dented investors' appetite in the ‘reflation' trading theme. 

In the day ahead, the major is likely to regain poise and resume upmove towards 1.09 handle, as negative European equities and weaker treasury yields continue to underpin the funding currency EUR.  Moreover, upbeat German IFO surveys for March also provide fresh support to the common currency. German March IFO: Upbeat across all indicators

Markets also digest the news of the German Chancellor Angela Merkel winning the Saarland regional vote, her biggest victory in thirteen years. Meanwhile, focus now remains on the FOMC member Evans speech due later in the NA session, in absence of economic events from the US docket.

EUR/USD Technical Levels   

Karen Jones, Analyst at Commerzbank explains, “EUR/USD’s near term outlook is neutral to positive: The cross is the key band of resistance offered by the 1.0829 February high, the 1.0851 October low, 1.0875 December high and 1.0882 200 day moving average. In this area it may stall, however upside risks are growing. The market is immediately bid above 1.0760 – the low from the 24th March and dips should find support between the 1.0679 mid-February high and the 55 day moving average at 1.0664.”

 


12:09 PBOC: Will improve Yuan regime steadily with convertibility on capital account

The Chinese central bank (PBOC) came out with a latest statement on Yuan reforms this Monday.

Main Headlines via Reuters:

PBOC aims to enhance Yuan's role in investment, reserves and financial transactions

Will improve Yuan regime steadily push forward with Yuan’s convertibility on capital account


12:05 BOE FPC to evaluate risk of sterling dropping by 32% to hit 85 cents

CNBC reports the following headlines from the latest meeting minutes from the BOE's FPC (Financial Policy Committee) published on Monday morning.

Key Points:

Financial stability risk is broadly unchanged since the November meeting

The policy uncertainty is high in a number of countries

Will launch a review into quality of new consumer lending

UK household indebtedness remains high by historical standards and has begun to rise relative to incomes

Consumer credit has been growing particularly rapidly

Will assess the financial stability implications of firms' plans to adapt to the United Kingdom's withdrawal from the European Union

Will oversee banks contingency plans to handle a range of possibilities arising from Brexit talks

Will test the risks associated with sterling dropping by a further 32% from today's level to languish at a low of 85 cents by year-end.

Want to avoid any spillovers from any sudden adjustments to banks business models

2017 stress tests will test short-term and long-term, scenarios


11:37 EUR/USD: Upside stalls at 1.0875 on IFO

The bulls appear to have taken a breather after the Asian upsurge, allowing a brief phase of consolidation in EUR/USD near the highest levels since Dec 2016. The spot stalls its bullish run as the USD buyers lurk amid bargain hunting, after the greenback slumped to the lowest levels since Nov last year against its major rivals.

The US dollar fell sharply across the board on the back of Donald Trump's defeat over the health-care replacement plan dented investors' appetite in the ‘reflation' trading theme. 

In the day ahead, the major is likely to regain poise and resume upmove towards 1.09 handle, as negative European equities and weaker treasury yields continue to underpin the funding currency EUR.  Moreover, upbeat German IFO surveys for March also provide fresh support to the common currency. German March IFO: Upbeat across all indicators

Markets also digest the news of the German Chancellor Angela Merkel winning the Saarland regional vote, her biggest victory in thirteen years. Meanwhile, focus now remains on the FOMC member Evans speech due later in the NA session, in absence of economic events from the US docket.

EUR/USD Technical Levels   

Karen Jones, Analyst at Commerzbank explains, “EUR/USD’s near term outlook is neutral to positive: The cross is the key band of resistance offered by the 1.0829 February high, the 1.0851 October low, 1.0875 December high and 1.0882 200 day moving average. In this area it may stall, however upside risks are growing. The market is immediately bid above 1.0760 – the low from the 24th March and dips should find support between the 1.0679 mid-February high and the 55 day moving average at 1.0664.”

 


11:09 European Monetary Union M3 Money Supply (3m) declined to 4.9% in February from previous 5%


11:08 German March IFO: Upbeat across all indicators

The headline German Ifo business climate surprised markets to the upside, coming in at 112.3 points in March versus 111.0 seen last month and expectations of no change. While the current economic assessment also improved dramatically to 119.3 points in the reported month, as compared to 118.4 seen last month and 118.3 estimates.

Further, the Ifo Expectations Index – indicating firms’ projections for the next six months – also rose above expectations to 105.7 in March versus expectations of a 104.3 figure and 104.2 seen last.


11:04 European Monetary Union Private loans (YoY) meets expectations (2.3%) in February


11:02 USD/CHF plummets to lowest level since mid-Nov.

The greenback remained heavily offered across the board, with the USD/CHF pair sliding farther below the 0.9900 handle to hit the lowest level since Nov. 11.

Currently trading around 0.9840-35 band, the pair extended its break-down momentum below the very important 200-day SMA in reaction to the US president Donald Trump's failure to repeal Obamacare - one of his major campaign promises. The setback sparked concerns over his ability to push through the promised pro-growth economic policies and prolonged the post-FOMC US Dollar weakening trend. 

Meanwhile, a fresh wave of global risk-aversion trade was further seen benefitting the Swiss Franc's safe-haven appeal and collaborated to the pair's sharp downslide to over 4-month lows. 

Later during the NY session, speech by the Chicago Fed President Charles Evans would be looked upon for some immediate respite for the US Dollar bulls in absence of any major market moving economic releases.

Technical levels to watch

A follow through weakness below 0.9830-20 region (Feb. 10-11 lows) is likely to drag the pair below 0.9800 handle towards testing its next support near 0.9775-70 support area. 

On the upside, any recovery above 0.9875-80 immediate resistance, leading to a subsequent momentum above the 0.9900 handle, might now confront strong resistance near 0.9920-25 region (200-day SMA).

 


11:02 Germany IFO - Current Assessment came in at 119.3, above forecasts (118.3) in March


11:02 Germany IFO - Expectations above expectations (104.3) in March: Actual (105.7)


11:01 Germany IFO - Business Climate came in at 112.3, above expectations (111) in March


11:01 European Elections: Its economics vs. polls Goldman Sachs

Lasse Holboell Nielsen, Research Analyst at Goldman Sachs, explains that populist victories at the expense of mainstream parties in Europe’s upcoming elections would have profound market implications and quantify the probability that current heads of governments will be re-elected using a combination of economic factors and opinion polls.

Key Quotes

“The Dutch experience validates our approach. Robust economic data pointed ton high re-election prospects for PM Rutte, at around 65%-70%. Another Rutte-led government in the Netherlands is likely following the March 15 election.”

“Our model suggests that the re-election prospects of: (i) the Socialist government in France (in the June legislative elections rather than the May presidential election); (ii) the centre-right government in Norway (at the September election); and (iii) the centre-left government in Italy (if elections are called by end-year) are poor. Owing to low real wage growth and poor labour market performance, we find re-election probabilities of around 35%, 20% and 35%, respectively.”

“On the basis of economic data alone, the re-election probability of Chancellor Merkel at September’s federal election in Germany is around 55%. Adding information from polling data reduces this probability markedly, to around 25%.”

“More generally, we find that both voters’ economic conditions and poll data help predict governments’ re-election prospects in DM economies over the past 25 years. Over recent years, the accuracy of our economics-only model in predicting re-election is high (at 83%). But our models relying on polling data have performed somewhat less well.”

“In assessing the political outlook, markets are sensitive to polls at present, while paying less attention to economic drivers of electoral behaviour. By contrast, our results imply that it is economics that matters for election outcomes.”

“Of course, these estimated probabilities should be seen as only one input into an analysis of likely election outcomes. Our estimates capture historical patterns, but if voters’ inclination to reward or punish government shifts as the dimensions of politics increasingly move away from the traditional left / right axis, our model may be less valid.”


10:50 Deposit rate hike or not for the ECB? - Natixis

Research Team at Natixis notes that the Peter Praet held a very dovish line in an interview published this Friday in Il Sole 24 Ore, bringing up the uncertainty hanging over the outlook for underlying inflation and the appropriate stance for the NIRP (Negative Interest Rate Policy).

Key Quotes

“He also emphasized that the issue of sequencing the coming return to normal in the ECB’s monetary policy still hasn’t been discussed by the governors. The ECB Chief Economist’s comments in our opinion relativize Ewald Nowotny and Ignazio Visco’s recent interventions, which had stimulated market speculation about the likely deposit facility rate hike before the end of the APP (Asset Purchase Program).”

“As far as we are concerned, we are not pricing sequencing inversion into our scenario: we are still betting on the announcement by the ECB of APP recalibration next September, with the first deposit facility rate hike not coming until the end of 2018.”


10:48 Guide to Brexit Deutsche Bank

Research Team at Deutsche Bank points out that after Article 50 is triggered, sequencing is the key that opens all doors to Brexit and the current timeframe to conclude negotiations is unrealistic particularly if the deal requires ratification from all EU national parliaments (a mixed agreement).

Key Quotes

“The UK and EU27 must find a way to conclude a transitional deal without a lengthy sign-off process or the UK will drop out of the EU in March 2019 with no deal.”

“A transitional deal will be tricky but not impossible. Turkey shows the customs union is not intimately bound to the Single Market. The EEA Treaty might also provide a template. But the UK will have to accept budget contributions, pooling of sovereignty and compromise on freedom of movement.”

“Politics is the main risk. Behind the bluster, Secretary of State Davis has struck a more moderate tone in parliamentary testimony. But we are concerned the current strategy for a broad-based trade deal by 2019 risks jeopardizing the chances of a transitional agreement. The government’s wafer-thin majority in parliament has also yet to be resolved. Eurosceptic Conservative MPs and the right-wing UK press will push for a clean break, constraining Prime Minister May’s ability to compromise. An early general election would dilute their influence.”

“Politics will be equally problematic for the EU27. With populism increasingly felt across the continent, the EU must take account of the threat a successful Brexit would present of the European project. The differing national interests of EU27 states will be a theme of talks. Most importantly, Brexit negotiations are just one of several competing priorities for the EU over the next two years.”

“Economically, the UK must prevent a sudden exit from the customs union in March 2019 or risk seeing huge disruption to existing business models. It is also in the UK and EU’s interest to seek short-term regulatory equivalence for financial services, but this will be unsustainable long term due to regulatory divergence and the risks the City would pose for the Eurozone. The future for other service industries, making up over thirty percent of UK exports, looks bleak unless an EEA approach is pursued.”

“The UK’s ability to conduct third-country free trade deals is at best a redherring and at worst a waste of time and energy. They will face political, technical and structural headwinds. The primary focus of the negotiations must be to conclude a deal with the EU. Only once this is achieved should attention be turned to the rest of the world.”

“UK economic growth following last year’s referendum confounded pessimistic forecasts, but is unlikely to continue. There is growing evidence of the real income shock. The Bank of England seems to feel under pressure from rising inflation and robust growth to hike rates, but with little evidence of rising wages, caution on monetary policy is likely to prevail in the near term.”

“Medium-term, the success of a post-Brexit UK will rest on the industrial strategy. This is particularly true if net migration begins to fall, weakening demographics. The strategy should maximize the UK’s strengths in high tech manufacturing and education, but is not yet ambitious enough.”

“The market should hope for the best but plan for the worst. Time constraints, the scale and complexity of talks and the threat that a soft deal represents to EU means the UK faces an uphill battle to avoid a hard outcome. The political difficulties only look resolvable with an early UK general election. Our base case is that the UK will eventually compromise, but this will depend on a weakening economy and market pressure, with a full cliff-edge Brexit likely to be fully priced at some point in the next two years.”


10:40 CAC 40 future: 5046 should cap the upside Natixis

Alan Lemangnen, Research Analyst at Natixis, suggests that since the daily stochastic remains bullish for CAC 40 future, they cannot rule out new rallies to a resistance at 5046 (daily parabolic).

Key Quotes

“Only a break of this barrier would suggest an extension of the upside channel to the 5067-5078 area (daily Bollinger upper band) and the 5137 threshold (weekly Bollinger upper band) but we don’t favor such a view. Indeed, the stabilization in the daily volatility is an obstacle to a sustained rally and we recommend being vigilant as the contract can choose to take a breather by retreating to 4968-4977 ahead of eyeing 4934-4940 and 4914 (9-week moving average). The resistances are at 5046, at 50675078, at 5090-5100 and at 5137.”


10:33 OPEC market share remains above 2014 level Deutsche Bank

Research Team at Deutsche Bank notes that the OPEC market share remains well above the 2014 level even after production cuts of -1.4 mmb/d since the October 2014 baseline.

Key Quotes

“Today, OPEC produces 40.2% of the world's crude oil, down from the recent 41.3% peak in August 2016, but still up considerably from the November 2014 level of 38.8%. After cutting production to defend the bottom of the USD 22-28/bbl price band in 2001, OPEC crude oil market share fell to 35.9% in April 2002.”

“On the assumption of two years of demand growth of 1.4 mmb/d, and OPEC production remaining flat at the February 2017 level of 32,005 kb/d, OPEC crude oil market share would fall to 38.9% in 2019. While this is considerably below the current 40.2% level, it would still be above the November 2014 level which arguably contributed to the decision to allow maximum output, and well above the April 2002 trough. More positively, on our OPEC-13 assumption of 32,300 kb/ d, OPEC crude oil market share would remain at 39.2% in 2019. The decline in market share over the three years from 2016 to 2019 of -2.1% to -2.5% would still be less than the -3.3% suffered in the six months between August 2008 and February 2009.”

“This suggests that while market share concerns may well re-emerge in the near future, an extension of the Algiers Accord through the end of 2018 may not be as farfetched as some may believe.”


10:28 UK: Weaker Sterling means slower consumer spending Goldman Sachs

Andrew Benito, Research Analyst at Goldman Sachs, suggests that the main macro implication of Brexit is that Sterling import prices need to rise relative to export prices.

Key Quotes

“As the UK leaves the EU, access to key export markets will decline as the cost of international trade rises somewhat. The relative price of tradeable goods (and services) will also need to rise relative to non-tradeables. A weaker nominal level for Sterling anticipates and reflects those changes in the UK’s equilibrium real exchange rate. The rise in CPI inflation to 2.3%, and above the BoE’s 2.0%yoy target, reflects this process having begun.”  

“While a weaker currency helps usher in required adjustments to Brexit – including by supporting exports, and this effect applies even before the UK has negotiated the form of Brexit – it also reflects a new regime with lower real incomes than otherwise. We expect real consumer spending to slow to reflect that.”

“The consumer has, so far, been slow to show any sensitivity to a squeeze in real income growth. In this Daily, we explain why we expect consumer spending to slow this year and why we expect the BoE to ‘look through’ an inflation overshoot associated with that.”

How the BoE responds across 3 Acts of real exchange rate shifts...

We expect the BoE to ‘look through’ a temporary overshoot of the inflation target that owes to a required adjustment in relative prices – as it has in the past, even if the reason for the latest shift in the real exchange rate is different.”

“Our central case is that the BoE raises rates in 2019Q2 and not before. Above all, that view requires consumer spending to slow and some slack to open up to encourage the BoE to ‘look through’ an inflation overshoot that is part of the UK’s required adjustment to Brexit.”


10:28 Gold rises over 1% to hit one-month high on weaker USD

Gold regained traction and rose over 1% to touch a one-month high on Monday amid weaker greenback and global risk-aversion.

The US President Donald Trump's failure to gain enough support to get the crucial healthcare bill passed now seems to have raised concerns over his ability to push through the promised tax reforms and huge infrastructure spending. The skepticism triggered a broad based US Dollar sell-off, taking the key US Dollar Index to nearly two-month lows, and benefitted dollar-denominated commodities - like gold.

   • US: Trump Slump? – BMO CM

Also collaborating to Monday's strong up-surge was a fresh wave of global risk-aversion trade, which was seen boosting demand for the precious metal's traditional safe-haven appeal and lifted it to fresh monthly tops, back closer to the very important 200-day SMA.

In absence of any major market moving economic releases on Monday, fading Trump-reflation trade might continue to weigh on the buck and hence, a break through the key 200-day SMA hurdle now seems a distinct possibility.

Technical levels to watch

A follow through momentum above $1260 level (200-day SMA), leading to a subsequent strength beyond $1264 level (Feb. 27), now seems to lift the commodity beyond $1270 level towards testing its next hurdle near $1275-76 region.

On the downside, $1252-50 area now becomes immediate support to defend, which if broken could extend the corrective slide towards $1245 (Friday's weekly closing level). Any further weakness below $1245 support now seems to be limited and hence, is likely to find strong support near $1240 region.

 


10:27 UK: Weaker Sterling means slower consumer spending Goldman Sachs

Andrew Benito, Research Analyst at Goldman Sachs, suggests that the main macro implication of Brexit is that Sterling import prices need to rise relative to export prices.

Key Quotes

“As the UK leaves the EU, access to key export markets will decline as the cost of international trade rises somewhat. The relative price of tradeable goods (and services) will also need to rise relative to non-tradeables. A weaker nominal level for Sterling anticipates and reflects those changes in the UK’s equilibrium real exchange rate. The rise in CPI inflation to 2.3%, and above the BoE’s 2.0%yoy target, reflects this process having begun.”  

“While a weaker currency helps usher in required adjustments to Brexit – including by supporting exports, and this effect applies even before the UK has negotiated the form of Brexit – it also reflects a new regime with lower real incomes than otherwise. We expect real consumer spending to slow to reflect that.”

“The consumer has, so far, been slow to show any sensitivity to a squeeze in real income growth. In this Daily, we explain why we expect consumer spending to slow this year and why we expect the BoE to ‘look through’ an inflation overshoot associated with that.”

How the BoE responds across 3 Acts of real exchange rate shifts...

We expect the BoE to ‘look through’ a temporary overshoot of the inflation target that owes to a required adjustment in relative prices – as it has in the past, even if the reason for the latest shift in the real exchange rate is different.”

“Our central case is that the BoE raises rates in 2019Q2 and not before. Above all, that view requires consumer spending to slow and some slack to open up to encourage the BoE to ‘look through’ an inflation overshoot that is part of the UK’s required adjustment to Brexit.”


10:19 USD/JPY rallies corrective and should reverse downside again - Natixis

Micaella Feldstein, Research Analyst at Natixis, explains that the USD/JPY cross has retreated markedly since March 10, when it peaked at 115.51, breaking below important technical thresholds around 113-113.16 and the support at 111.60 (declining trendline).

Key Quotes

“The erosion of this last threshold sends a very strong sell signal, all the more so as the daily volatility has increased sharply and as the daily indicators have turned around.”

“Against this backdrop, rallies should be seen as corrective and the cross should reverse downside again to 110.82-111, 110-110.20 and 109.30-109.43 (declining trendline). A break below the latter threshold would open the door to 108.70 (weekly Bollinger lower band). The resistances are at 111.60-111.80, at 112.43, at 113-113.16 and at 114.67-114.80.”


10:14 US: Trump Slump? BMO CM

According to Sal Guatieri, Senior Economist at BMO Capital Markets, softer data on consumer spending and trade warranted a downward revision to their US Q1 growth estimate (to 1.8%), while uncertainty about future fiscal stimulus raises a downside risk for their 2017 growth call (2.4%) 

Key Quotes

“What would the start of another year be without a downward revision to our U.S. growth forecast? Faced with recent weakness in consumer spending and a surge in imports (U.S. firms stocking up ahead of the BAT?), we shaved nearly half a percentage point from our Q1 growth estimate to 1.8%. Instead of gaining pep, the economy looks to have slowed from the already modest pace of 1.9% in Q4. Even worse, the infamous “residual seasonality” problem that has bedeviled the BEA’s estimate of Q1 growth for over a decade—typically carving more than one percentage point from the final tally—suggests further downside risk (the official figure is reported on April 28). This was not the storyline many, including us, touted a few weeks ago in the face of a sharp upswing in investor, household and business sentiment. What gives?”

“Has the Trump bump fizzled? Probably not, as the economy’s underlying health appears intact, with the housing sector continuing to rumble forward, business spending on an upswing, and consumers likely simply recharging their batteries. Last week’s reports showed the Chicago Fed National Activity Index trending at two-year highs the past three months. A 6.1% bounce in new home sales in February to the second highest level in nine-years took the sting out of a 3.7% spill in existing home sales (which were partly hamstrung by a shortage of listings and continue to trend near decade highs). Machinery orders rose for a sixth straight month in February, up an annualized 12.5%.”

“Accordingly, manufacturers are smiling again, with several regional survey measures staying elevated in March (and the Kansas City Fed index hitting a six-year peak). As for consumers, taking a breather isn’t unusual after spending at a heated 3.4% annualized pace the past three quarters. Strong job and income growth, a positive wealth effect from rising equity and house prices, and still-cheap credit should keep shoppers clicking away at online shops and trekking to the malls. Given the still-positive economic backdrop, we actually upgraded our Q2 GDP growth estimate slightly to 2.7%, thereby leaving our 2017 figure unchanged at 2.4%.”

“Alas, whether we will need to take the scalpel out again will depend on whether the February personal spending report surprises to the downside (it’s due next Friday, with real spending expected to stabilize after dipping 0.3% in January). Further out, the timing and scope of fiscal stimulus is key. While we did not assume much direct fiscal boost in our forecast this year (an assumption that will prove prescient if Republicans get lost in the healthcare-reform maze or exit further splintered), we were counting on “animal spirits” arising from expected stimulus to support business spending and the economy.”

“Should sentiment measures take a turn for the worse because of increased uncertainty about tax reforms and infrastructure spending, we would likely need to slice our 2017 outlook. And, if congressional Republicans can’t unite to pass key legislation on fiscal policies, the economic outlook won’t be the only thing at risk come the 2018 midterm elections.”


10:01 When is German IFO and how this could affect EUR/USD?

German IFO Business Climate Overview

The German Ifo surveys for March are lined up for release later today at 8GMT. The headline Ifo Business Climate Index is expected to stay unchanged at 111 in March. The Current Assessment sub-index is seen a tad weaker at 118.3 this month, while the Ifo Expectations Index – indicating firms’ projections for the next six months – is expected to show a mild improvement and could come in at 104.3 in March, as compared to February’s 104.0 reading.

Deviation impact on EUR/USD

Readers can find FX Street's proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined between 3 and 40 pips in deviations up to 2.4 to -3.2, although in some cases, if notable enough, a deviation can fuel movements of up to 60 pips.

 How could affect EUR/USD?

The German IFO Surveys are expected to show mixed results across all indicators, which stall the recent bullish streak in the EUR/USD pair, while an upside surprise in the headline numbers could send the rate above 1.0900 levels, fresh 2017 highs.

Key notes

German IFO and retail sales amongst market movers today – Danske Bank

“German Ifo expectations are also due to be released Today. Ifo expectations saw a fall in January to 103.2 from 105.5 in December 2016, but increased to 104.0 again in February.” 

About German IFO Business Climate

This German business sentiment index released by the CESifo Group is closely watched as an early indicator of current conditions and business expectations in Germany. The Institute surveys more than 7,000 enterprises on their assessment of the business situation and their short-term planning. The positive economic growth anticipates bullish movements for the EUR, while a low reading is seen as negative (or bearish).

 


09:52 NZD/JPY: Rebounds cannot be ruled out - Natixis

In view of the analysts at Natixis, given that the daily stochastic is in oversold territory, rebounds cannot be ruled out for NZD/JPY, but it will take a recovery back above the resistance at 79.60 (daily Bollinger moving average) to invalidate the descending channel in evidence in the daily chart, opening the way for a sharp rebound towards the resistance at 81.40 (upper band of daily Bollinger).

Key Quotes

“That is not our baseline scenario, however. Keep an eye rather on the support at 77.60 (monthly Bollinger moving average), as a break below this level would instil new downward momentum towards the support at 76.30 (50% Fibonacci retracement of the wave from June 2016 to January 2017/ 69.04-83.80) before the ones around 75.30-75.50 (Fibonacci projection) and around 73.90-74.10 (half-yearly Bollinger moving average).”

“Take advantage of any rebounds towards 79.60 to sell the NZD/JPY (setting the stop loss above 80.50).”


09:49 USD/JPY tumbles to 4-month lows amid broad based USD weakness

The USD/JPY pair remained under heavy selling pressure on Monday and has now dropped to its lowest level since Nov. 18 near 110.20-15 band. 

A fresh wave of greenback selling pressure, with the key US Dollar Index sliding to the lowest level since early Feb. in reaction to the US president Donald Trump's failure to push through the healthcare reform bill, has been a key factor weighing on the major. 

Adding to this, the prevalent risk-off sentiment, which tends to benefit the Japanese Yen's safe-haven appeal, further collaborated to the offered tone surrounding the major.

With a lighter US economic docket, traders on Monday will focus on speech from the FOMC member Charles Evans for some immediate respite for the US Dollar bulls.

In the meantime, broader market risk sentiment would remain a key determinant of the pair's movement during European trading session.

Technical levels to watch

From current levels, the 110.00 handle would be looked upon to extend some immediate support. A convincing break below this immediate support would turn the pair vulnerable to extend its downward trajectory further towards its next support near 109.20 area, with some intermediate support near 109.75-70 zone. 

On the upside, any recovery move above 110.60 immediate resistance now seems to confront strong resistance near the 111.00 handle, above which a bout of short-covering could lift the pair towards 111.25-30 resistance area.

 


09:42 EUR/USD neutral to positive Commerzbank

In view of Karen Jones, Head of FICC Technical Analysis at Commerzbank, EUR/USD’s outlook is now neutral to positive.

Key Quotes

“The cross is the key band of resistance offered by the 1.0829 February high, the 1.0851 October low, 1.0875 December high and 1.0882 200 day moving average. In this area it may stall, however upside risks are growing. The market is immediately bid above 1.0760 – the low from the 24th March and dips should find support between the 1.0679 mid-February high and the 55 day moving average at 1.0664”.

“We stay overall neutral below 1.0830/82. Should this be breached we would have to allow for the 1.0978/1.1000 region to be reached. This area is where the 100% Fibonacci extension of the January-to-February advance, projected from the February low, coincides with the 50% retracement of the move down from the May peak”.

 

 


09:33 Russias Novak sees a possible extension to oil output cuts

In an interview on ‘Bloomberg Markets’ today, Russia’s energy minister Alexander Novak discusses a possible extension to oil output cuts. 

Key Headlines:

See a possible extension to oil output cuts

There is an option to extend output cuts beyond June

A ministerial meeting is required to decide on extension of cuts    

We have asked more market and compliance data from the OPEC

 


09:28 Sluggish USD/JPY market Deutsche Bank

Taisuke Tanaka, Strategist at Deutsche Bank, explains that the USD/JPY remains weak as the short-term impetus for the markets is less the fundamentals or medium-term interest yield outlook than a combination of positions and event flows.

Key Quotes

“The USD/JPY faces several bearish factors in the near term. (1) The USD/JPY failed to hold at the over-¥115 level after the Fed's recent rate hike as position adjustments prevailed. (2) The next Fed rate hike is not expected until June and does not look to be a bullish factor for now. (3) It will take some more rate hikes before yen carry moves become active enough to spur the USD/JPY higher. (4) UST yields have been unexpectedly soft, sapping the momentum of speculators such as programs linked to yields. (5) US President Donald Trump's withdrawal of the proposed healthcare reform legislation has raised doubts over the viability of other major policies. Domestically, (6) Prime Minister Shinzo Abe's approval ratings have fallen due to a scandal involving his wife, raising worries over the outlook for Abenomics; and (7) settlement-related fund flows in the approach to the fiscal year-end, such as profit-taking by corporations and institutions, may have worked against the USD/JPY somewhat. In addition, (8) speculations that the ECB would move toward normalization of their current super-easing policy earlier than having been expected are hitting strong USD stories against not only EUR but also JPY.”

“Along these lines, the USD/JPY might drop to ¥108 if doubts over the feasibility of Trump's policies should spark a negative reaction in the stock markets. Moreover, USD/JPY bulls may be reluctant to rebuild their long positions in April ahead of the US Treasury Department's foreign currency report and startup of a US-Japan economic dialogue.”

“However, the implications of the above are different from a medium-term perspective. Regarding (1)-(3), the Fed continues to seek the opportunity for further rate hike steps. (4) We believe yields will turn back upward as the resilience in the US economy is confirmed. (5) We feel it would be premature to dismiss the chances for Trump's tax reform scheme (e.g. breaks for middle class, corporate tax cuts) based on the healthcare plan's fate (although his tax plans could become more simple). (6) There are no urgent expectations of macroeconomic policy measures under Abenomics, nor are there any apparent alternatives to Abe as leader. (7) Most of the settlement-related flow should have been completed by mid March. (8) The Fed’s monetary tightening steps are expected to go faster than ECB’s exiting steps from super-easing.”

“Consequently, we maintain our basic view that the USD/JPY will return to ¥115-120 in the next 3-6 months without staying at below-¥110 level so long.”


09:27 US Dollar hurt by Trumpcare, testing 99.00

The greenback – in terms of the US Dollar Index – is sharply lower at the beginning of the week, currently hovering over the critical support at 99.00 the figure.

US Dollar holds on to 99.00

The index has plummeted to the 99.00 area, or fresh YTD lows, after the ‘Trumpcare’ bill failed to see the light on Friday, sparking concerns on the ability of the Trump administration to pass further fiscal reforms, as promised earlier in the year.

The buck came down to test levels last seen in early November near 99.00 the figure, where it is now attempting to consolidate ahead of the opening bell in Euroland.

On the positioning front, USD speculative net longs have retreated to 3-week lows on the week to March 21 as per the latest CFTC report, collaborating with the bearish note surrounding the buck.

Nothing noteworthy in the US data space, as only Chicago Fed C.Evans (voter, dovish) is due to speak later in the NA session.

US Dollar relevant levels

The index is losing 0.54% at 99.05 facing the next support at 98.56 (200-day sma) followed by 98.24 (10-month support line) and finally 96.94 (low Nov.4 2016). On the upside, a break above 99.81 (high Mar.24) would aim for 100.27 (high Mar.20) and then 100.74 (55-day sma).


09:22 NZD/JPY cross is now due a breather - Westpac

Imre Speizer, Research Analyst at Westpac, explains that the cross has reached its 78 target (signalled by a break below 80.30) and is now due a breather.

Key Quotes

“Eventwise, it’s busy week ahead in Japan with the end of the month now approaching. Feb retail trade is out Wednesday and then Friday brings jobs, CPI, IP and housing starts. With the impact of higher crude prices/ weaker ¥ now very clearly waning, the peak in terms of imported energy inflation is almost upon Japan.”

3 months ahead: The BOJ’s defacto tapering of its asset purchases should support the yen. In addition, bouts of Trump disappointment will weigh on risk sentiment and boost the safe-haven yen. We seen NZD/JPY remaining below 80 over the next few months.”

 


09:22 Forex Today: USD dumped amid risk-off, German IFO in focus

Risk-off trades dominated Asia at the beginning of a new week, as the Asian traders reacted negatively to Friday’s Trumpcare bill failure to seek the US House clearance, which came as a big blow to the Trump administration and raised questions on Trump’s ability to deliver on his campaign policies as well as on the Republican capacity to govern effectively. Investors sold off risky assets such as the equities and sought safety in the yen, gold and treasuries. The yen emerged the biggest gainer, while the greenback was dumped to fresh four-month troughs just ahead of 99 handle against its six main competitors.

Heading into Europe, risk-aversion remains at full steam and keeps the funding currency Euro broadly underpinned, with the German Ifo release next on tap in the European session. Also, speeches from the ECB executive board member Praet and Fed official Evans is scheduled later today amid a fairly quiet calendar.           

Main topics in Asia

Weekend highlights: GOP failings, Merkel victorious, OPEC extending supply cut accord?

After the GOP leaders postponed the vote on healthcare overhaul and delayed it to Friday, all eyes were on the event where the US House of Representatives were finally unable to agree on an alternative to the Affordable Care Act. 

USD/JPY: A big figure down in Asia risk-off as Trumpcare fails

The USD/JPY pair is meandering near fresh four-month lows, with downside opening up for a test of 200-DMA support at 109.20, as the bears remain in control amid risk-aversion at full steam.

Ex-Fed’s Lockhart: Two more hikes are reasonable

More comments flowing in from the Former Atlanta Fed Reserve (Fed) President Dennis P. Lockhart, as he crossed the wires, via Bloomberg, earlier on the day.

Gold gains altitude, nears 200-DMA

Gold is shining brightly this Monday morning as the risk-off tone in the markets is forcing investors to pour money into the safe haven yellow metal, which is trading just a shy away from the 200-DMA located at $1259.25.

Key focus for the week ahead         

GBP/USD at multi-week tops above 1.25 ahead of a Big week

The GBP/USD pair extended its bullish momentum on Monday, now flirting with fresh five-week highs reached near 1.2530 stepping into a Big week ahead.

EUR/USD keeps 2017 highs near 1.0850, IFO eyed

EUR/USD so far manages to keep the trade in the upper bound of the daily range, testing 1.0850 ahead of key German data.

UK PM May heads to Scotland to make a case for unity

UK PM Theresa May will visit Scotland on Monday to make a case for unity before her government triggers Article 50.

Trump to sign an executive order Tuesday promoting domestic oil, coal and natural gas

Bloomberg out with latest headlines on Trump, noting that the US President is set to sign an executive order this Tuesday, which is aimed at promoting domestic oil, coal and natural gas.

Week Ahead Trump Administration Fails with Healthcare Bill

The USD ended the week with a muted market reaction as the Trump administration pulled the healthcare bill as there was a lack of support from Republicans to pass the bill into law.

 


09:08 German IFO and retail sales amongst market movers today Danske Bank

Research Team at Danske Bank suggests that German IFO assessment and retail sales data will be amongst the major market moving events for today.

Key Quotes

“German Ifo expectations are also due to be released Today. Ifo expectations saw a fall in January to 103.2 from 105.5 in December 2016, but increased to 104.0 again in February. We believe it will have increased a bit further to 104.3 in March. Other survey indicators still indicate optimism in the business economy but German consumer confidence has started to trend lower and in coming months,we expect the same correction in the strong business sentiment seen recently.”

“German retail sales for February are also due for release. In January, we saw a monthly decline of 1.0% but we estimate a bounce back in February to 0.6%, as consumer confidence remains at a high level and low unemployment supports consumption. Note also that German unemployment figures are scheduled for release on Friday.”

“We also have two speeches from ECB executive board members. Peter Praet is set to speak on Monday, with Benoit Coeuré due to speak on Friday. The speeches are of special interest to market participants, as speculation about whether the ECB could hike rates before the termination of the QE programme has started to be priced in.”

“On the date front today, in the euro area we are due to get the February figures for loan growth and M3 money supply growth. Loan growth increased for three consecutive months, from 1.8% yearly growth in October 2016 to 2.2% in January 2017. We estimate it increased further to 2.4% in February.”

 “The main event this week is set to be the UK's triggering of Article 50 on Wednesday. The first part of the negotiations will be centred on the 'divorce bill' for the UK. The EU has made it clear that substantial progress on this issue will have been delivered before starting negotiations on a new trade deal.”


09:02 AUD: Technical indicators favor the peeling back more of the recent gains - BBH

Analysts at BBH explain that the only major currency weaker than the Canadian dollar last week (-0.2%) was the Australian dollar (-1%) and the technical indicators favor the peeling back more of the Aussie's recent gains.  

Key Quotes

“The similar correlation between the Australian dollar and the two-year rate differential is at 0.48, and over the past decade, it rarely is above 0.5.  The Aussie's pullback last week held $0.7600, which is an important congestion area and the 61.8% of the gains it has scored since briefly dipping below $0.7500 on March 9.   The technical indicators favor the peeling back more of the Aussie's recent gains.   The price action reaffirms and strengthens the resistance around $0.7700 and sets up an important test on $0.7500, with modest support seen first near $0.7550.” 


08:57 EUR/USD keeps 2017 highs near 1.0850, IFO eyed

EUR/USD so far manages to keep the trade in the upper bound of the daily range, testing 1.0850 ahead of key German data.

EUR/USD up on ‘Trumpcare’

Spot opened Monday’s session with an important gap to the area near 1.0850, fresh yearly tops, after the House of Republicans voted against the American Health Care Act, known as ‘Trumpcare’ last Friday.

The vote poured cold water over the future implementation of further fiscal measures from the new US administration, triggering a significant risk-off sentiment across the markets.

The US Dollar Index has plummeted after the opening bell in Asia today, dragging the buck to the 99.00 neighbourhood, levels last traded in early November.

Adding extra support to EUR, speculative net shorts have been trimmed to levels last seen in June 2014 during the week ended on March 21 according to the latest CFTC report.

On the data front, the German IFO is due along with the speech by  ECB’s P.Praet, while Chicago Fed C.Evans (voter, dovish) is due to speak later in the NA session.

EUR/USD levels to watch

At the moment the pair is up 0.44% at 1.0846 facing the immediate hurdle at  1.0873 (high Dec.8 2016) followed by 1.0882 (200-day sma) and finally 1.1300 (high Nov.9 2016). On the flip side, a breakdown of 1.0838 (low Mar.27) would target 1.0759 (low Mar.24) en route to 1.0704 (low Mar.16).


08:47 Oil producers consider output cut extension as support grows - BBG

Bloomberg carries an article on oil markets, noting that oil producers asked OPEC to make a recommendation in a month on the possibility of prolonging the supply curbs, after they backed output cuts extension at their meeting in Kuwait held over the weekend.

Venezuela’s Oil Minister Nelson Martinez noted on Sunday, “We are ready to support” extending the deal, which took effect in January.”

Mohammed Al Rumhy, energy minister for non-OPEC producer Oman, “It does make sense to extend the agreement for another six months.” 


08:41 NZD/AUD cross at a crossroads - Westpac

According to Imre Speizer, Research Analyst at Westpac, after breaking below key support at 0.9280, the cross has returned to that area and is now at a crossroads and any higher than 0.9350 would cast doubt on our medium-term bearish outlook.

Key Quotes

“Australian industrial commodity prices have lost some altitude in recent days but Australia’s export performance should remain a key positive for AUD, even though we have to wait until 4 April for the next official data.”

“This week’s Australian data calendar The data calendar remains very quiet ahead of a very busy start to April.”

3 months ahead: NZD/AUD is starting to reflect the outperformance of AU commodities as well as better AU economic data ahead. We target the 0.8800 area multi-month, which coincidentally is close to fair value according to our model which captures interest rates, commodities, and risk sentiment. The cross is now only 4% overvalued, compared to 9% late last year.”


08:34 GBP/USD at multi-week tops above 1.25 ahead of a Big week

The GBP/USD pair extended its bullish momentum on Monday, now flirting with fresh five-week highs reached near 1.2530 stepping into a Big week ahead.

The spot leaps in Asia amid broad based US dollar weakness, as markets digest reports of the Trump administration’s failure to pass the Healthcare bill through the Congress. Moreover, steep losses in the treasury yields on the back of persisting risk-off trades, boosts the demand for the GBP as an alternative higher-yielding currency.

Additionally, reports of the UK PM May’s visit to Scotland today, in order to meet the Scottish First Minister Nicola Sturgeon and make a case to ‘build a more United nation’, lends support to the British pound against its American counterpart.  

All eyes now remain on the historic triggering of Article 50 on Wednesday, which will set the tone for the pound in the coming months, while the growth numbers from the US and UK will also remain in the spotlight this week.

Later today, amid a lack of fundamental news from the UK docket, the spot will continue to get influenced by the USD dynamics and risk sentiment ahead of the FOMC member Evan’s speech due later in the NA session.

GBP/USD Levels to consider            

A break above 1.2550 (psychological levels) would expose 1.2569 (Feb 24 high), above which the spot may test supply around 1.2673 (Jan 26 high). On the other hand, a breakdown of support at 1.2495 (5-DMA) could yield a sell-off to 1.2419 (50-DMA) and 1.24 (zero figure).

 


08:20 CAD has been particularly choppy BBH

Analysts at BBH explain that while short-run streaks have characterized the recent price action of several currencies, the Canadian dollar is an exception and has been particularly choppy.  

Key Quotes

“The US dollar's recent peak against the Canadian dollar was on March 9, nearly a week before the Fed's hike, and took a big step down on the announcement.  It covered half of this year's range over eight sessions, moving from CAD1.3535 to CAD1.3265.   The CAD1.3250 is the 50% retracement of the US dollar gains since late January's low near CAD1.2970.  The 61.8% retracement is near CAD1.3185, while the 200-day moving average is a little above CAD1.3190.”

“We note that the (60-day) correlation between (percentage) change of the two-year interest rate differential between the US and Canada and the exchange rate is around 0.65, the strongest in more than a decade.   The RSI and Slow Stochastics are somewhat more favorable than the MACDs, but they may turn with any additional US dollar gains.”


08:17 USD is under renewed downward pressure - Westpac

The US dollar is under renewed downward pressure following the US Administration’s failure to get enough support for its healthcare repeal bill notes Imre Speizer, Research Analyst at Westpac.

Key Quotes

“The bill was seen as the first of the major reforms in the new Administration’s fiscal agenda, and its failure will be read as a sign of further challenges to come. Thus, the market is unwinding a good chunk of the post-US election long-USD trade. A break in the US dollar index (DXY) below 99 would signal further weakness ahead.”

“This week’s event calendar has a heavy slate of mostly second tier data – Markit’s services PMI, the Conference Board and Michigan consumer surveys, the Richmond and Chicago PMIs, pending home sales and the third and final update for Q4 GDP. Fedspeak includes Evans, Kaplan, George, Rosengren, Williams and Mester.”

3 months ahead: Incremental news continues to signal there will be less tangible Trump stimulus than many had assumed. The struggle to craft legislation for a new health care bill that can pass the House, where Republicans enjoy a strong 21 seat majority is just the latest example. Tax reform and infrastructure will potentially run afoul of the same challenging political realities in a few months: even if Senate filibuster risks can be dodged via the 2018 reconciliation bill (needing just a simple majority vote) the Republican party remains divided on infrastructure, border adjusted taxes and gutting government agencies. We suspect the USD will falter into mid-year, but resume its uptrend thereafter.”


08:12 Trump trade witnesses major set-back - ANZ

Analysts at ANZ explain that the failure of Donald Trump’s replacement healthcare bill to make it through congress will be viewed by the market as a major set-back for the ‘Trump trade’ (although market moves late on Friday were a little surprising).

Key Quotes

“But perhaps a far more important question is how this failure (and what it means for the passage of other policy proposals) will affect wider economic (business and consumer) sentiment. In theory, policy gridlock such as this was meant to be far harder to occur at a time when one party controlled the Presidency and both houses. But it clearly highlights that divides remain, and it means that the policy paralysis that was often evident over recent years (when no party had outright control) could linger.”

“Some have even proposed that that paralysis is a reason why businesses have been reluctant to go out and invest given the uncertainty that a lack of fiscal policy direction created. With fiscal policy uncertainty rising again the risk is that business and consumer sentiment reverse recent gains, which would have growth consequences. For markets, that doesn’t sound like an ideal situation. Not only would they then be grappling with unwinding some of the euphoria priced in by Trump’s fiscal plans, but also dealing with the possibility of a softening tone in some of the underlying economic data.” 


08:05 WSJ: A 10% pullback in the US equities is overdue

The Wall Street Journal (WSJ) carried an article earlier on Monday, highlighting that a correction in the US equities is long due and that it would be healthy for the market.

Key Points:

Many investors and analysts fear a postelection rally that has driven the S&P 500 up roughly 10% has cleaved share prices from the underlying fundamentals that tend to drive gains over time, such as interest rates and corporate earnings

What's due now, some investors say, is a correction: a 10% pullback from the indexes' March 1 highs

They contend such a retreat would tamp down speculation, deflate pockets of froth in popular investments and provide buying opportunities for those still on the sidelines

Such declines serve an important function in a healthy market cycle

What goes up often comes down


07:53 EUR/JPY: Downside opens up towards 119.30, risk-off persists

A generalized strength seen in the Japanese yen so far this session, in the wake of risk-off markets, continues to weigh heavily on the EUR/JPY cross.

EUR/JPY: Losing sight of 120 handle

The EUR/JPY pair now drops -0.44% to trade at 119.69, hovering with a striking distance of two-day lows struck at 119.61 earlier today. The immense selling pressure seen behind USD/JPY outweighs the gains seen in the EUR/USD pair amid broad based US dollar weakness, triggered by tumbling treasury yields, after the US President Donald Trump’s failed to replace the healthcare bill through congress.

Later today, the unwinding of Trump trade will continue to dominate markets, while the German Ifo business climate data and Fedspeaks will be closely eyed for fresh take on the cross.

EUR/JPY: Technical Levels

Higher side: 119.90/120 (5-DMA/ round number), 120.52/67 (10-DMA/ round number)

Lower side: 119.48 (Classic S2/ Fib S3), 119 (zero figure)

 


07:53 Sterling outperformed all the major currencies since March 15 - BBH

Research Team at BBH explains that the sterling rallied a little more than four cents since the Fed's hike as the hawkish dissent at the Bank of England and a less neutral sounding statement, coupled with a better than expected retail sales report (despite softer income growth), helped sterling outperform all the major currencies since March 15.

Key Quotes

“Over this period, sterling has not closed below its five-day moving average (~$1.2465) and to do so now could signal a pullback of two cents toward $1.2320, the 50% retracement of the recent advance, and the 20-day moving average.   On the upside, a move above $1.2530 signals scope for another half-cent rise before meeting what is likely to be stiffer resistance.” 


07:49 NZD/USD is likely to be mainly a reflection of USD behaviour - Westpac

Imre Speizer, Research Analyst at Westpac, suggests that with the RBNZ well and truly sidelined (confirmed by last week’s OCR Review Statement) and economic news minor until the mid-April CPI release, NZD/USD is likely to be mainly a reflection of US dollar behaviour.

Key Quotes

“The latest setback there is the failure of the healthcare repeal bill - if the resultant unwind of long-USD positions persists, then NZD/USD should continue higher during the weeks ahead, into the 0.7150-0.7300 range.”

“The data calendar this week is light and minor: building permits and ANZ’s business confidence survey (both on Friday). The latter holds some interest for markets, both for its headline confidence reading and its inflation expectations components.”

3 months ahead: Against a backdrop of large oscillations in NZD/USD during the past six months, we err on the side of negativity for the next few months. Our main rationale remains our expectation the US dollar will resume its trend higher amid a tighter Fed and stronger US economy. We target 0.6900.”

 


07:44 Commodities: Hiccup in Trumps pro-growth policy taking its toll - ANZ

Analysts at ANZ explain that a hiccup in Trump’s pro-growth policy agenda has seen investor sit back and assess the impact on commodity markets.

Key Quotes

 “Crude oil prices were slightly higher on Friday but recorded its third weekly loss as growing output and inventories continued to weigh on the market. Baker Hughes data showed the number of oil rigs operating in the US rose another 21 to 625 last week. This followed on from an EIA report that showed US crude oil production rose for a fifth week to 9.13 mb/d. However, the market is likely to respond well to news that OPEC members are close to extending the production cut agreement. The small compliance committee consisting of five members (as well as Oman) recommended the agreement be extended when the wider group meets in May. Kuwait went even further, suggesting it should be continued until the end of the year. It did report that compliance in February was 106% for OPEC members, while non-OPEC nations were are 64%. That resulted in a overall compliance of 94%.”

Base metals prices were largely weaker as the market grappled with conflicting fundamentals. Zinc bucked the trend as supply side disruptions seemed to escalate late last week. Flooding in Peru has caused disruptions at mines owned by Volcan Cia Mineral SA and Cia Mineral Milpo SAA. The miners have been forced to suspend operations and dig into stockpiles as roads and railways are unusable. Copper prices dipped slightly as Escondida workers returned to work. However, the situation remains fragile, with workers returning to the old contract for 18 months before another vote.”

“Spot iron ore prices continued to fall under the weight of selling in futures markets across Asia. The sell-off has been instigated by fresh curbs on lending in the housing market in China. The PBOC said newly divorced couples will be considered a second home buyer (which brings additional lending requirements). The central bank also barred the use of leverage financial products as down payment for loans. However, with the outlook for steel demand in infrastructure and housing markets remaining strong, we don’t see this weakness developing in to a major sell-off.”

Gold posted a second straight weekly gain as the USD continued to weaken under concerns that the failure to scrap Obamacare would hinder Trump’s pro-growth policies. However, the PGM market has seen some action, with strong data from the European car sector sending palladium to a fresh two year high.”

Agriculture markets were largely weaker, led by losses in soybeans. After falling through the key USD10/bushel, fund liquidation picked up and looks likely to continue for the mean time.”


07:38 EUR has approached an important technical milestone BBH

Analysts at BBH points out that the euro has tested, backed off, and has again approached an important technical milestone around $1.0820-$1.0830 which corresponds to the 50% retracement of the sell-off since the US election. 

Key Quotes

“It is also where the euro peaked in early February.  The early December high was near $1.0875, and the 61.8% retracement $1.0935.  The MACDs and Slow Stochastics are getting stretched.  In this situation, be on the lookout for a reversal pattern that would turn the indicators lower.  In terms of levels, $1.07 looks significant, and the euro has not traded below it since the Fed hiked, and the populists were denied the reins of power in the Netherlands.”


07:32 USD net longs increased, JPY sold for third consecutive week - ANZ

Research Team at ANZ lists down the CFTC positioning data for the week ending 21 March 2017.

Key Quotes

Leveraged funds were net buyers of USD for the third straight week. Overall net long USD positions increased by USD2.6bn to USD19.2bn, the highest in eight weeks. However, the USD has weakened after Trump’s failure to pass the healthcare bill, suggesting some paring back of long USD positions since late last week.”   

USD buying was seen broadly with the main exception of the EUR. Same as the week prior, funds reduced their net EUR shorts by USD2.1bn to USD9.3bnHowever, GBP saw net selling for the third straight week.Net short GBP positions increased by USD0.5bn to USD5.3bn ahead of the UK’s scheduled EU exit trigger on 29 March.”

JPY was sold for the third consecutive week, contrary to its price action during the week. Overall net short positions increased by USD0.2bn to USD4.2bn. Funds also added USD0.9bn to the overall net short CHF positions to USD1.6bn.”  

It was a mixed bag for commodity currencies. Partially reversing last week’s selling, AUD saw net buying of USD0.5bn to take its overall net long position to USD3.4bn. Meanwhile, CAD and NZD saw combined net selling of USD3.7bn. There was a net selling of USD3.1bn in CAD, turning the net CAD position to an overall short of USD2.4bn. Funds also reduced net long NZD positions by USD0.6bn to USD0.2bn, the lowest overall longs since March 2016.”

EM currencies saw a second straight week of net buying led by the MXN. Funds reduced net short MXN positions for the second week running by USD0.3bn to USD0.04bn. RUB also saw net buying of USD0.1bn whereas BRL saw little change in positioning from the week before.”

Net short UST positions were trimmed further by 129.4k contracts after the Fed raised rates, the least shorts since last November. Meanwhile, funds reduced net long crude oil positions for the fourth consecutive week, to the lowest since last December.”


07:14 Moody s: Earnings of Chinese steel companies will likely weaken in 2017

The US-based ratings agency, Moody’s Investors Services, published its latest report on the Chinese steelmakers, titled “Softening Demand, Increased Inventory Will Weigh on Prices and Reduce 2017 Earnings".

Key Points:

Earnings of Chinese steel companies will likely weaken in 2017

Primarily because of a slight weakening of domestic demand amid continued excess capacity and a build-up of steel inventory early in the year

"These factors will together depress steel prices, which have reached a four-year high, while elevated raw material prices and reduced exports will also weigh on the earnings of producers"

"Domestic steel consumption will decline as property investment, the largest driver of local steel demand, will likely slow this year following the government's tightening of policy in an effort to curb property-price growth"


07:07 Ex-Feds Lockhart: Two more hikes are reasonable

More comments flowing in from the Former Atlanta Fed Reserve (Fed) President Dennis P. Lockhart, as he crossed the wires, via Bloomberg, earlier on the day.

Headlines:

He would have been a yes on the rate hike

Two more hikes are reasonable 

 


07:04 AUD/USD 100-SMA now below 200-SMA

A decline in the 100-period below the 200-period moving average has been spotted on the hourly AUD/USD charts.

Due to the time lag involved in MA crosses, each event must be evaluated individually. In the current scenario, the recently printed high prices on the hourly AUD/USD charts are at relatively narrow distance to the SMA cross which could be used as technical hotspot by traders wanting to take advantage of the marginal rally. The risk scenario is an overshoot beyond the 200 SMA.

06:59 USD/JPY: A big figure down in Asia risk-off as Trumpcare fails

The USD/JPY pair is meandering near fresh four-month lows, with downside opening up for a test of 200-DMA support at 109.20, as the bears remain in control amid risk-aversion at full steam.

Risk-off persists at the start of a brand new week, as treasury yields and equities are sold-off into unwinding of the Trump trade, after Friday’s Healthcare bill failed to clear the House vote.

The Healthcare bill failure raised questions over the Trump administration and its ability to introduce tax reforms and fiscal spending plans, which knocked-off the buck to the lowest levels since November 2016 against its main competitors.

Attention now turns towards the FOMC member Evan’s speech, which will fill up an otherwise quiet US calendar. Meanwhile, the sentiment on the European markets will drive the yen markets.

USD/JPY Technical levels to watch             

The major finds immediate resistance at 110.68 (daily pivot). A break above the last, the major could test 110.87/111 (5-DMA/ round figure) and 111.31 (classic R2/ Fib R3) beyond the last. While to the downside, the immediate support is seen at 110.05 (classic S2/ Fib S3) next at 109.68/50 (classic S3/ psychological levels) and below that at 109.20 (200-DMA).

 


06:27 Ex-Feds Lockhart: Fed is not behind the curve - BBG

Former Atlanta Fed Reserve (Fed) President Dennis P. Lockhart was on the wires earlier on the day, via Bloomberg, expressing his take on the Fed’s monetary policy stance.

Key Points:

Fed's decision based on data, not fiscal outlook

Fed colleagues somewhat more confident on outlook.

Fed is not behind the curve


06:07 Trump to sign an executive order Tuesday promoting domestic oil, coal and natural gas

Bloomberg out with latest headlines on Trump, noting that the US President is set to sign an executive order this Tuesday, which is aimed at promoting domestic oil, coal and natural gas.

Key Headlines:

The document lays out a broad blueprint for the Trump administration to dismantle the architecture that former President Barack Obama built to combat the phenomenon, according to details shared with Bloomberg News.

The order will compel federal agencies to quickly identify any actions that could burden the production or use of domestic energy resources, including nuclear power, and then work to suspend, revise or rescind the policies unless they are legally mandated, are necessary for the public interest or promote development. 

 


06:04 GBP/USD jumps above 1.25 on broad based USD weakness

GBP/USD jumped to a session high of 1.2523 as the trading desks dumped the US dollar in response to Trump’s withdrawal of the health care bill. 

May heads to Scotland

UK PM Theresa May is set to meet Scottish First Minister Nicola Sturgeon today. May is to make a case for unity before she triggers Article 50 - which would mark the beginning of the two-year long divorce process from the EU. 

News flow out of Scotland could affect the demand for the British Pound. Meanwhile, European desks may offer US dollar as well, given the speculation is on the rise that Trump may not be able to deliver on fiscal front as efficiently as expected earlier.

GBP/USD Technical Levels

The spot was last seen trading around 1.2522. A break above 1.2531 (Thursday’s high) would expose 1.2569 (Feb 24 high), above which the spot may test supply around 1.2673 (Jan 26 high). On the other hand, a breakdown of support at 1.2495 (5-DMA) could yield a sell-off to 1.2419 (50-DMA) and 1.24 (zero figure).


05:54 Bubas Wuermeling: ECB s next policy moves are in flux

Reuters reporting weekend’s comments from the German central bank - Bundesbank (Buba) director Joachim Wuermeling on the ECB’s monetary policy program.

Main Headlines:

European Central Bank next policy moves, and the order they come in are still up in the air

Could include a rate hike or sales of bonds

"The forward guidance of the ECB council now presumes that interest rate hikes are currently to be expected at the earliest after the end of net monetary policy purchases"  "But here too, everything is in flux."

More here


05:49 Russia prepares for Oil at $40 Bloomberg

As per the Bloomberg report, Russia’s budget in 2017-2019 is based on the assumption that oil prices will remain around $40/barrel.

This is bad news for oil bulls as Russia’s oil price forecast goes against international oil industry experts that barrel prices will rise to $60 and remain there over the long term.


05:47 Irans NIOC: Iran s oil exports was 2.265 M bpd in Feb 20 till March 20

An official source in National Iranian Oil Company (NIOC) stated that Iran's oil exports was 2.265 M bpd in Feb 20 till March 20.

The source further added that Iran's condensate exports was 800T bpd in Feb 20 till March 20 and does not have any condensate on ships.


05:42 EUR/USD consolidates the bullish opening gap, 1.0875 eyed

After having managed to close at 1.0800 levels last week, the EUR/USD pair ran through a fresh buying-wave and opened Asia Monday with a 40-pips bullish gap, as the Asian traders sold-off the buck in a reaction to the weekend’s news of the Trumpcare bill failure to seek the House approval.

The healthcare failure raised questions on Trump's ability to deliver on his campaign promises and also on the Republican Party to capacity to govern effectively, thereby rattling investors’ confidence and triggered risk-off moods across the boards, with the greenback diving across the board alongside the treasury yields.

Moreover, reports of German Chancellor Angela Merkel’s party victory in elections in the western state of Saarland, also emerged in favor of the euro, adding to the further upside in the EUR/USD pair.

Looking ahead, we have an eventful, with a bevy of Fed speakers on the cards apart from a host of crucial macro releases from both continents. In the meantime, focus now shifts to the German Ifo Business climate data and FOMC member Evans speech due later today.

EUR/USD Technical Levels   

Valeria Bednarik, Chief Analyst at FXStreet noted, “he EUR/USD pair has been contained by a major mid-term resistance, the 1.0820 level which represents the 50% retracement of the post-US election's decline, although pullbacks from the area have been quite shallow, which implies a high risk of a bullish breakout. In the daily chart, the Momentum indicator maintains its bullish slope, now within overbought territory, whilst the RSI indicator consolidates around 62, reflecting the latest range-bound trading.”

“In the same chart, the 20 DMA heads north below the current level after crossing above the 100 DMA, all of which supports additional advances, particularly on an upward extension beyond the 1.0820/30 region. Shorter term, the 4 hours chart shows that the price has settled a few pips above a horizontal 20 SMA, whilst technical indicators lack directional strength, also reflecting the latest lack of directional strength rather than suggesting buying exhaustion.” Valeria added.

 


05:36 UK PM May heads to Scotland to make a case for unity

UK PM Theresa May will visit Scotland on Monday to make a case for unity before her government triggers Article 50.

May is set to meet Scottish First Minister Nicola Sturgeon, who wants to hold a new referendum on Scottish independence. According to a copy of her speech, May is due to say “As Britain leaves the European Union, and we forge a new role for ourselves in the world, the strength and stability of our Union will become even more important,”.


05:20 White House denies report that Trump handed Merkel a bill for NATO services

White House denies report that President Donald Trump handed German Chancellor Angela Merkel a bill for around $374 billion for the money her country "owed" the North Atlantic Treaty Organization (NATO) for defending it.

The above headline that that Trump handed Merkel a bill for NATO services, was earlier reported by the UK Times.


05:13 PBOCs Zhou: China preparing to further open its financial sector

Bloomberg reporting headlines from PBOC Governor Zhou Xiaochuan’s speech, delivered at a gathering of Asian leaders Sunday during a panel talk at the Boao Forum for Asia.

Key Points:

China preparing to further open its financial sector -  areas of potential liberalization include banking, insurance, investment banking, securities firms, and payment systems

"China would like to see that when we open wider in the financial sector, whether we can access some things. China is very interested to see that Chinese investors, especially private investors, should get better treatment overseas in other countries." 


05:09 Treasury yields drop after Trump cancels vote on health care bill

Treasuries rallied, pushing the yields lower after President Trump withdrew the health care bill on Friday as it failed to gain enough support to pass in Congress.

At the time of writing, the yield on the 10-year Treasury note was down 3.4 basis points at 2.366%. The 2-year yield was down 1.2 basis points at 1.236%. 

The 10-year yield trades below 100-DMA level of 2.381%. Meanwhile, the 30-year yield closed below 100-DMA for the first time since October. 

The risk aversion seen this Monday morning is likely to keep the treasuries in demand. Moreover, Trump’s failure in pushing the health care bill has forced investors to question his ability to push forward other legislative measures, including tax cuts and regulatory reforms.


05:07 China Jan-Feb industrial profits jump 31.5% y/y

China’s National Bureau of Statistics (NBS) published the latest industrial profits data for Jan-Feb, via Reuters.

Key Details:

China's industrial profits rose a combined 31.5% in January and February from the same period a year earlier

A statistics bureau official noted, “The profit increase was mostly due to faster growth in prices of coal, steel and crude oil, He Ping.”


04:50 Crude oil subject to OPEC/non-OPEC accord on extensions - ANZ

Analysts at ANZ noted that crude oil prices were slightly higher on Friday but recorded its third weekly loss as growing output and inventories continued to weigh on the market.

Key Quotes:

"Baker Hughes data showed the number of oil rigs operating in the US rose another 21 to 625 last week. This followed on from an EIA report that showed US crude oil production rose for a fifth week to 9.13 mb/d. However, the market is likely to respond well to news that OPEC members are close to extending the production cut agreement. The small compliance committee consisting of five members (as well as Oman) recommended the agreement be extended when the wider group meets in May. Kuwait went even further, suggesting it should be continued until the end of the year. It did report that compliance in February was 106% for OPEC members, while non-OPEC nations were are 64%. That resulted in a overall compliance of 94%."


04:47 China Individuals can no longer buy new commercial property in Beijing

Beijing Municipal Commission of Housing and Urban Rural Development website lists new rules which say individuals cannot buy new commercial property in Beijing. 

Personal loans for buying the commercial property have been suspended as well. However, individuals can still buy second hand properties. 

As per the new rules, the new commercial property can be sold only to enterprises, public entities and social organizations. 

Iron ore and other base metals could feel the heat of Beijing’s crackdown on property markets. 


04:35 Gold gains altitude, nears 200-DMA

Gold is shining brightly this Monday morning as the risk-off tone in the markets is forcing investors to pour money into the safe haven yellow metal, which is trading just a shy away from the 200-DMA located at $1259.25.

Safe havens rally

Trump withdrew the health care bill on Friday after it failed to gain enough support to pass in Congress.

Thus, investors are worried whether President Trump will be able to push through with his next set of policies… especially on the fiscal front and that is forcing them to unwind risk positions in favor of the safe haven assets like gold and the treasuries.

Moreover, the falling odds of Trump delivering on tax/fiscal front also means slower-than-expected/no Fed rate hikes, which further strengthens gold’s appeal as a haven asset.

Gold may jump above the 200-DMA level of $1259.25 later today if the risk aversion worsens as suggested by the sell-off in the AUD/JPY pair.

Gold Technical Levels

At the time of writing, the metal was trading at $1256/Oz levels. A break above $1259.25 (200-DMA) would expose $1263.87 (Feb 27 high). A daily close above the same would establish higher lows and higher highs formation and open doors for $1300 (zero figure). On the other hand, a breakdown of support at $1244.83 (session low) could yield a sell-off to $1233.20 (5-DMA) and $1208.08 (Mar 28 low).

 

 


04:34 NZD/USD s bid stalling at 0.7052 as risk-off revs up in Tokyo

NZD/USD is currently trading at 0.7044 with a high of 0.7052 and a low of 0.7018.

A major setback for the Trump trade - ANZ

NZD/USD's initial opening bid has met a road block as markets turn heavily risk off in Tokyo. Markets are fleeing from the dollar on the back of last Friday's vote not to replace the healthcare bill that Trump had tried to get through congress. This is being viewed by the market as a major setback for the ‘Trump trade’. 

While the bird is effectively rangebound between 0.7000 and 0.7090, analysts at Westpac's longer term on a 1-3 month outlook,  sees potential for higher to the 0.7150-0.7300 area during the month ahead, as USD longs are pared. "Further out, 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 towards 0.6900. Weaker dairy prices plus the RBNZ’s emphatic reminders it is on hold for a long time should also weigh. (21 Mar)."

NZD/USD levels

NZD/USD's key first support is at 0.7016 and a break of there targets the 0.6950/60 levels. These are the key supporting areas guarding 0.6880 and March lows. On the flip side, a drive higher targets the double-bottom of potential resistance at 0.7130 on the 4hr chart in mid-Feb and late Fed business. 0.7245 comes as the late Jan/early Feb support and double top resistance Feb 16th and 23rd. 


04:18 PBOC sets USD/CNY at 6.8701 vs 6.8845

PBOC sets USD/CNY at 6.8701 vs 6.8845


04:03 AUD/JPY screams risk-off

The risk-off tone seen earlier this month looks set to continue and probably worsen this week, given the AUD/JPY pair has dropped to a near three-month low of 84.06 this Monday morning.

Trump fails in his first test

Trump’s failure to get the health care bill passed is forcing investors to question whether the Author of ‘The Art of the Deal’ would be able to deliver on fiscal front.

This is evident from the drop in the US dollar index and the strength in the safe haven Japanese Yen. Aussie dollar which has been a major beneficiary of the Trump-led rally in the commodities is now under pressure as well.

THus, the AUD/JPY cross is widely considered as a barometer of risk sentiment. The pair was last seen trading around 84.05 levels. The losses clearly point to worsening of the risk aversion during the day ahead.

S&P 500 futures are already down close to 0.80%, which is line with the sell-off in the AUD/JPY pair.

AUD/JPY Technical Levels

The daily ADX line has bottomed out and is now sloping higher, which indicates the bears are gaining strength. A break below 84.00 (zero figure) could yield 83.74 (Dec 29 low). A daily close below the same would attract fresh offers and take the pair down to sub-83.00 levels. On the higher side, key resistance levels are 84.96 (5-DMA) and 85.19 (50-DMA). Only a daily close above the 50-DMA would shift risk in favor of a technical correction to 85.85 (Mar 9 low).

 


03:47 USD/CNY projection: 6.8716 - Nomura

Analysts at Nomura offered their projections for today's fix.

Key Quotes:

"Our model1 projects the fix to be 129 pips lower than the previous fix (6.8716 from 6.8845) and 160 pips lower than the previous official spot USD/CNY close of 6.8876. The basket implied change is 203 pips lower than the previous official spot USD/CNY close (6.8673 from 6.8876)."


03:42 Will AUD/USD rally if the unwinding of Trump trade gathers pace?

US President Trump withdrew his health care bill after it failed to gain enough support to pass in Congress. This is seen as a huge blow to President Trump.

Moreover, the vote was seen as a litmus test of President Trump’s legislative ability. Hence, experts fear the failure to get the health care bill passed could force markets to question the Trump’s ability to deliver on other campaign promises - massive tax cuts and infrastructure spending.

The resulting unwinding of the Trump trade could see US dollar take a beating across the board. As of now, The Dollar Index is down 0.41% at 99.20 levels, while the AUD/USD is trading dead flat around 0.7630.

Aussie to focus on commodities

There is a risk that Aussie may underperform or may even drop against the US dollar as even the commodity prices are likely to feel the heat of the unwinding of the Trump trade.

Comex copper is down almost 1% and that could be the reason for the flat action in the Aussie dollar this Monday morning. With little first tier data due for release today, the focus remains on the commodity prices.

AUD/USD Technical Levels

A break below 0.76 (zero figure) would expose 0.7570 (support offered by the trend line drawn from Dec 29 low and Mar 9 low). A violation there could yield further sell-off to 0.7491 (Mar 9 low). On the higher side, breach of resistance at 0.7639 (Mar 22 low) would expose 0.7663 (Mar 17 low) and 0.77 (zero figure).

 


03:31 USD/JPY bears remain in control in Tokyo, eyes now on 109.10

USD/JPY is currently trading at 1110.52 with a high of 111.39 and a low of 110.41.

BOJ Summary of Opinions – Appropriate to pursue powerful monetary easing

USD/JPY dropped at the start of this week following the weekend news and headlines around the US House of Representatives unable to agree on an alternative to the Affordable Care Act. The dollar was sold off across the board but most notably vs the yen and euro. 

The dollars initial reaction last week on the news was mixed, perhaps due to the prospect of bringing forward tax reform may have appeased investors.  However, the market's main concern is whether Trump has the ability to get other key parts of his agenda, including tax cuts and a boost in infrastructure spending, through Congress or has the capacity to govern effectively.

A major setback for the Trump trade - ANZ

USD/JPY levels

USD/JPY is now vulnerable to further weakness to 109.10 the 50% retracement and the 108.21 200 day ma according to analysts at Commerzbank." Note the 200 week ma lies at 110.11 and the 55 week ma lies at 108.55.Please also note that the Elliott wave count on the daily chart suggests that this is the end of the down move." However, the analysts explained that rallies will find initial resistance at 113.50/63 on the wide but said that only above 115.62, would they look for a challenge to the key short term resistance offered by the 16-month resistance line at 117.55.
 


03:28 A major setback for the Trump trade - ANZ

Analysts at ANZ explained that the failure of Donald Trump’s replacement healthcare bill to make it through congress will be viewed by the market as a major setback for the ‘Trump trade’ (although market moves late on Friday were a little surprising). 

Key Quotes:

"But perhaps a far more important question is how this failure (and what it means for the passage of other policy proposals) will affect wider economic (business and consumer) sentiment. 

In theory, policy gridlock such as this was meant to be far harder to occur at a time when one party controlled the Presidency and both houses. But it clearly highlights that divides remain, and it means that the policy paralysis that was often evident over recent years (when no party had outright control) could linger. 

Some have even proposed that that paralysis is a reason why businesses have been reluctant to go out and invest given the uncertainty that a lack of fiscal policy direction created. With fiscal policy uncertainty rising again the risk is that business and consumer sentiment reverse recent gains, which would have growth consequences. 

For markets, that doesn’t sound like an ideal situation. Not only would they then be grappling with unwinding some of the euphoria priced in by Trump’s fiscal plans, but also dealing with the possibility of a softening tone in some of the underlying economic data."


03:18 BOJ Summary of Opinions Appropriate to pursue powerful monetary easing

Bank of Japan (BOJ) Summary of Opinions at the policy meeting on March 15 and 16, 2017 released this Monday morning says it is appropriate for the bank to pursue powerful monetary easing under the current guideline for market operations as there is still a long way to go to achieve the 2% inflation target. 

Key points

Upward pressure on the long-term yields will strengthen as the underlying trend in inflation improves. It is necessary to start discussing the procedures for yield curve control in that situation. 

The structural issues regarding employment, taxation and public finance and social security need to be addressed at the earliest possible time.
Rise in uncertainty due to growing tides of protectionism.
 


02:34 AUD/NZD: 1.0825 vulnerable - Westpac

Analysts at Westpac offered their outlook for AUD/NZD and rates.

Key Quotes:

"AUD/NZD 1 day: The correction of the Feb-Mar rally persists, 1.0825 vulnerable, and 1.0760 possible multi-day (50% retracement).

AUD/NZD 1-3 month: Higher to 1.10+. The cross remains well below fair value estimates implied by interest rates, commodity prices and risk sentiment, although is closing the gap (6 Mar).

AU swap yields 1 day: The 3yr and 10yr should open around 2.08% and 2.98%, respectively.

AU swap yields 1-3 month: The 3yr has probably based at 1.60%, the RBA expected to sit tight at a 1.5% cash rate for some time. (7 Nov)

NZ swap yields 1 day: NZ 2yr swap rates should open unchanged at 2.31%, the 10yr down 1bp at 3.44%.

NZ swap yields 1-3 month: The RBNZ said it has ended its easing cycle and will remain on hold until 2020. That will anchor the short end, although markets will not abandon their expectations for earlier tightening which means occasional spikes in the 2yr will be likely. The long end will continue to follow mainly US yields, which we expect to rise. That means the curve steepening trend should continue. (17 Feb)"


02:34 Weekend highlights: GOP failings, Merkel victorious, OPEC extending supply cut accord?

After the GOP leaders postponed the vote on healthcare overhaul and delayed it to Friday, all eyes were on the event where the US House of Representatives were finally unable to agree on an alternative to the Affordable Care Act. The weekend headlines have rocked the markets at the open today with the dollar down against most of its rivals. "The healthcare failure called into question not only Trump's ability to get other key parts of his agenda, including tax cuts and a boost in infrastructure spending, through Congress, but the Republican Party's capacity to govern effectively," read an article by By David Lawder and Steve Holland at Reuters. 

Elsewhere, The Organization of the Petroleum Exporting Countries and rival oil-producing nations met this weekend in Kuwait to review progress with their global pact to cut supplies. The ministers from OPEC and non-OPEC oil producing nations have agreed to review whether a global pact to limit supplies should be extended by six months. The original deal was to last six months, with the possibility of a six-month extension but there needs to be conformity with everybody for an extension to be agreed. If there is no extension, long positions could be unwound by a disappointed market pressuring the price of oil lower again. 

On the political front for Europe, the weekend gave the pro-Europeaners a win with German Chancellor Angela Merkel’s party easily victorious in the elections in the western state of Saarland. This is only underscoring the challenge ahead facing Merkel's Social Democratic rivals as they seek to deny her a fourth term in September.

Ahead of the 2017 federal election sin Germany, this was the first test of Merkel's voter support. Her Christian Democratic Union took more than 40 percent to about 30 percent for the Social Democrats, according to projections by broadcasters ARD and ZDF after Sunday’s vote. The Left Party was projected third by winning 12-13 percent, while the anti-immigration Alternative for Germany at about 6 percent.

EUR/USD: early rally through key 1.0830, eyes on 1.0875 and 1.0935


01:47 EUR/USD: early rally through key 1.0830, eyes on 1.0875 and 1.0935

EUR/USD is currently trading at 1.0841 at the time of writing with a high of 1.0844 and a low of 1.0790.

EUR/USD is bid on the back of early doors selling of the US dollar following the weekend's fallout between the Republicans and indeed the inability of the US House of Representatives to agree on an alternative to the Affordable Care Act. The move is somewhat belated given Friday's minor reaction and potentially signifying the dollar's correction is over. However, the technical picture remains bearish and fundamentally if Trump's administration is going to held up by barriers in respect to passing and delivering the fiscal spending markets have been pricing into the dollar.

An additional supporting factor for the euro this week will be how German Chancellor Angela Merkel’s party easily won elections in the western state of Saarland. This victory will be underscoring the challenge facing her Social Democratic rivals as they seek to deny her a fourth term in September.

EUR/USD levels

DXY: technically, downtrend is not over - BBH

EUR/USD has broken another milestone by rallying through the key $1.0820-$1.0830 levels of which analysts at Brown Brothers Harriman note as corresponding to the 50% retracement of the sell-off since the US election. "It is also where the euro peaked in early February. The early December high was near $1.0875, and the 61.8% retracement $1.0935," explained the analysts, adding, "the MACDs and Slow Stochastics are getting stretched. In this situation, be on the lookout for a reversal pattern that would turn the indicators lower. In terms of levels, $1.07 looks significant, and the euro has not traded below it since the Fed hiked, and the populists were denied the reins of power in the Netherlands."


01:16 USD/JPY: key technical downside level broke, next stop 109.90?

USD/JPY is currently trading at 110.97 at the time of writing with a high of 111.39 and a low of 110.82.

Market wrap: minor dollar weakness - Westpac

USD/JPY is under pressure from the off this week in thin early trade and markets are reacting to the fall-out between the republicans and failure of healthcare reform. The US healthcare bill was scrapped on Friday but there was relatively little immediate reaction in the dollar and US interest rates the time. Analysts at Brown Brothers Harriman explained that they are less sanguine although they recognize that the dollar's resilience ahead of the weekend could be a preliminary sign that recent fall may be nearly over.  On the back of the inability of the US House of Representatives to agree on an alternative to the Affordable Care Act, a key driver for USD/JPY this week will be the US stock market.

DXY: technically, downtrend is not over - BBH

In respect to the S&P 500, last week's pullback stopped just shy of the 38.2% retracement of this year's rally (~2337), as noted by analysts at Brown Brothers Harriman, adding, "the 50% retracement is near 2317. The technical indicators warn of the risk that the correction continues, though a move above 2369 would indicate that phase is over."

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that the upward corrective movement can extend up to 112.00, a major Fibonacci resistance, without actually affecting the dominant bearish trend. "Renewed selling interest below 111.00 should favor a steeper decline towards 109.90, the 50% retracement of late 2016 monthly rally."


00:34 Economic wrap: mixed US data and Fed speak - Westpac

Analysts at Westpac offered an economic wrap.

Key Quotes:

"US: Feb durable goods orders (advance) rose a healthy 1.7% (vs 1.4% expected), thanks to a 4.3% rise in transportation orders, and the previous month was revised up +0.3ppts to 2.3%. The core data was less impressive - core capital goods shipments slipped 0.1% (0.5% expected), with a mild +0.2ppt revision to the previous month a small compensating positive. More encouragingly for Q1 GDP, core shipments rose 1.0% (0.2% expected) so there will be a small uplift to business investment in Q1 GDP expectations. Mar flash PMIs for both manufacturing and services undershot expectations but remained well inside expansionary territory.

FOMC non-voter Bullard sounded particularly dovish (although his profile has shifted to the centre, he has always had a propensity for dovishness), stating that he has "the lowest rate path forecast on FOMC" and responded to a question on hikes by saying that although they could rise again this year, "we do not need to be aggressive on rates". In contrast, dove Dudley, who is a permanent voter, felt the Fedias close to its employment and inflation objectives, and warned of the risks of overheating if unemployment fell further. He said tightening has been “extraordinarily gradual” and felt the economy can absorb further rate hikes."


00:32 Market wrap: minor dollar weakness - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"Global market sentiment: The US healthcare bill was scrapped but caused only a slight decline in the US dollar and US interest rates. US data and Fedspeak were mixed.

Interest rates: US 10yr treasury yields fell from 2.44% to 2.39% after the healthcare bill was scrapped due to insufficient support, but later pared the rally to close at 2.41%. 2yr yields similarly fell from 1.28% to 1.24% and closed at 1.26%. Fed fund futures yields were little changed, pricing around a 60% chance of the next hike occurring in June.

Apart from the healthcare bill cancellation, there was also mixed data for the rates markets to absorb (strong durable goods orders, disappointing manufacturing PMI), as well as Fedspeak  (voter Dudley hawkish, non-voter Bullard dovish).

Currencies: The US dollar index fell to a two-month low before staging a minor rebound to close down only 0.1%. EUR rose from 1.0770 to 1.0818. USD/JPY ranged between 110.60 and 111.50. AUD ranged between 0.7604 and 0.7633. NZD rose from 0.6995 to 0.7043. AUD/NZD fell from 1.0885 to 1.0830."


00:32 DXY: technically, downtrend is not over - BBH

Analysts at Brown Brothers Harriman explained that the Dollar Index's price action has been streaky this year.  

Key Quotes:

"Leave aside the first week of the New Year, when the Dollar Index was practically flat.  It fell for four weeks, then rose for four weeks, and now just completed its third consecutive weekly decline."

"The technical indicators warn that the downdraft is not over.  Key support is seen in the 99.20-99.45 area.  It corresponds to the lows of the past four months."

"It is also where some see a large head and shoulders top pattern, which if convincingly violated could suggest a measuring objective near 94.50.  Before getting there, the Dollar Index rally, since last May's lows, would be half given back near 98.40 and would retrace 61.8% of its gains if it fell to 97.15. Nearby resistance is seen at 100.00." 


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Data source: FX Street
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