HotForex Forex News

18:19 GBP/USD: catching a bid on US data miss despite neutral BoE Carney

Currently, GBP/USD is trading at 1.2456, down -0.09% on the day, having posted a daily high at 1.2483 and low at 1.2401.

GBP/USD has rallied on the back of the dollar losing ground across the board due to the manufacturing data missing while markets get positioned for tomorrow's Fed minutes; thus moves can be somewhat exaggerated than justified. Sterling, on the other hand, has been positively better bid for the best part of 2017, especially vs the euro with the cross now testing the lowest levels for the year at the mid-point of the 0.854 handle from 86.40 territory earlier in the year. Today's UK inflation hearings were not so kind to the pound given Carney explained that there had been no uptick in inflation. 

EUR/GBP: Brexit starting positions? – Rabobank

Will not hesitate to change policy, if deemed appropriate - BOE’s Carney

No uptick in inflation expectations since November - BOE’s Carney

GBP/USD levels

On the wide, 1.2250 level offers a key support that, if broken, opens up territory towards 1.1988/80 and the recent lows. However, ahead of there, for the near term the immediate support is the 1.2347 February low as suggested by analysts at Commerzbank. "Last week's high at 1.2583 guards the top of the channel at 1.2689. Only above 1.2687 would allow for further strength to the 1.2776 December high, explained the analysts. "Between here and 1.2836 lies several Fibonacci retracements and major resistance and we suspect that it will struggle here."


18:00 USD/CHF up 0.71% on the day; dollar bulls back in the game above 1.0044

Currently, USD/CHF is trading at 1.0097, up +0.71% or 71-pips on the day, having posted a daily high at 1.0105 and low at 1.0023.

The American dollar vs. Swiss franc had reverted last month's speculation of a possible deeper or trend correction as the pair has accumulated 80-pips in the last 15 trading days. Furthermore, the US dollar index clocked higher near 101.60 signaling traders the opportunity to add more risk in the short-term.

Why markets should expect a weaker franc?

Boris Dzhingarov at Emerging Europe noted, "Switzerland has one of the highest standards of living in the world and is home to many exporting companies. When the Franc is expensive, it hurts Switzerland because exports are worth 70 per cent of its GDP. Before removing the valuation cap, the Swiss National Bank had increased the supply of Francs to meet the Euro-Franc ratio. Removing the cap ended the need to print more Francs and reduced the money printing that some feared would lead to hyperinflation in Switzerland."

Bond market still not on board with a March rate hike

Historical data available for traders and investors indicates during the last 8-weeks that USD/CHF pair had the best trading day at +0.80% (Jan.6) or 81-pips, and the worst at -1.05% (Jan.5) or (105)-pips. As of writing, the US 10yr treasury yields had a trading range 2.43% to 2.45%, up +0.74% on the day or +0.0179.

Technical levels to watch

In terms of technical levels, upside barriers are aligned at 1.0095 (50-DMA), then at 1.0219 (high Jan.5) and above that at 1.0320 (high Dec.28). While supports are aligned at 1.018 (100-DMA), later at 0.9886 (200-DMA) and finally below that at 0.9734 (low Nov.8).

usdchf

On the long-term view, upside barriers are aligned at 1.0101 (short-term 50.0% Fib) and above that level at 1.0158 (short-term 61.8% Fib). While supports are aligned at 1.0044 (short-term 38.2% Fib), later at 1.0028 (long-term 61.8% Fib) and below that at 0.9974 (short-term 23.6% Fib).

usdchf

EUR/USD: bearish momentum to accelerate below 1.0520


17:51 Australia CB Leading Indicator declined to -0.1% in December from previous 0.5%


17:50 EUR/USD finds support above 1.0520, recovery limited

The euro was bale to hold above last week lows against the US dollar, but it remained under pressure despite the fact that the greenback pulled back in the market. 

EUR/USD bottomed at 1.0525, hitting the lowest level since last Wednesday. Then, after the release of the US PMI manufacturing report, that showed lower-than-expected numbers, it rose to 1.0549 and now is trading at 1.0535/40, 75 pips below yesterday’s closing price. 

The euro remains weak across the board. While most currencies trimmed losses against the US dollar, EUR/USD remains near the lows of the day. The pair is headed toward the lowest daily close since early January. 

Technical levels 

To the upside, resistance levels might be seen at 1.0550 (American session high), 1.0575 (Asian session low), 1.0615 (daily high). On the flip side, support could be located at 1.0520/25 (Feb 15 & 21 low), 1.0500 (psychological) and 1.0480. 

EUR/USD
 


17:39 USD/CAD seen at 1.28 in 12-month Danske Bank

Kristoffer Lomholt, Senior Analyst at Danske Bank, believes the pair could head towards the 1.2800 region within a year’s view.

Key Quotes

“The Canadian economy’s close dependence on the US and oil industries, means the ‘loonie’ has been highly vulnerable to political events in terms of Trump’s presidency and OPEC’s oil supply freeze”.

“Our call for a near-term stronger USD should lift the cross near term but we maintain the view that USD/CAD will end 2017 at a level lower than current as valuation and a normalising growth outlook should work as a gravitating force on the cross”.

“We forecast USD/CAD at 1.32 in 1M (previously 1.33), 1.32 in 3M (unchanged), 1.30 in 6M (unchanged) and 1.28 in 12M (unchanged)”.

 

 


17:32 USD/CAD outlooks stays bullish short term Scotiabank

FX Strategist at Scotiabank Eric Theoret said the pair could re-visit the area above 1.3200 the figure, recent tops, in the near term.

Key Quotes

“CAD is soft, a relative performer in an environment of broad-based USD strength with market participants’ focus squarely centered on expectations for Fed tightening following Harker’s comments and ahead of Wednesday’s release of the Feb 1 meeting minutes”.

“CAD tested a fresh two week low in early European trading, completely ignoring the impressive gains in oil, suggesting a shift in focus toward the outlook for relative central bank policy. The 2Y U.S.-Canada yield spread is pushing toward the upper end of its 36-48bpt range from late November, leaving CAD vulnerable to further downside”.

USDCAD has tested a fresh two week high, breaching its 200 day MA (1.3148) for the first time since early February. USDCAD’s current upswing follows last week’s completion of a bullish hammer candle, with a clear turn above the Jan 31 low. The sequence of higher lows is encouraging, and suggestive of a shift in the balance of risks. We look to near-term gains toward the early February high above 1.32. Support is expected at 1.3080”.

 

 


17:23 Here is the chart nearly everyone is discussing - BBH

Analysts at Brown Brothers Harriman noted the DXY chart and bearish H&S pattern.   

US Dollar flirting with highs near 101.30

Key Quotes:

"The Dollar Index appears to be carving out a potential head and shoulders pattern.  

The left shoulder was shaped by the rally to 102 after the US election.  
It fell a little below 99.50 in early December before launching the year-end rally that took it toward 103.80.  That area was retested in this year before the downtrend in January and forms the head of the pattern.  The Dollar Index bottomed on February 2 near 99.25.  It has rallied this month and reached 101.75 last week to frame the right shoulder.  

The neckline is drawn by connecting the early December and early February lows, as we have done on this chart, created on Bloomberg. The importance of such chart patterns lies in the measuring objective.  

The pattern is a little more than a 400 point pattern, which when flipped over, suggests an objective of around 95.50, which is the around where the Dollar Index consolidated last August and September.  

We are not convinced it is a head and shoulders top.  Often volume numbers are helpful in validating a pattern, but in the foreign exchange market, daily volume is not accessible.  

At a minimum, the pattern requires a break of the 99.25-99.50 area, which also houses the 38.2% retracement objective of the rally since last year's lows in May below 92.00. Other technical indicators, like the RSI and MACDs, are trending up.  

In fact, the Dollar Index gapped higher today.  Yesterday's high was 100.98 and today's low is 101.08.  While it seems true that prices abhor a vacuum as much as nature and the gap below the market may suck prices into it. However, it is not clear the type of gap it is, and the longer it goes without being filled, the more bullish it appears.  

Nevertheless, until the Dollar Index rises above where the shoulders of the pattern are ostensibly found (101.75-102.05), some participants may be wary. 

The first indication of the validity of the bearish read would be a break of last week's low (~100.40-100.45). But, confirmation of the pattern requires a break of the neckline.    

We can envision a fundamental case for this. Even though the odds of the US Senate approving the House plan for a border adjustment have faltered, the failure of Trump to endorse it next week in his speech to a joint session of Congress could see a dollar sell-off.  The border adjustment was supposed to pay for a deep corporate tax cut, and without it, a small tax cut can be expected.   

Also, a softer February jobs report (March 10) could see the odds of a March hike (March 15) diminish.  

On the other hand, the dollar driver does not seem to be emanating from the US, even though the recent string of economic data has surprised on the upside, including CPI.  Rather the pressure seems to be coming from Europe and the political concerns.  These concerns have driven the two-year German yield to new record lows.   

As funds flee France, Italy, and other southern European countries (except Greece), the downward pressure on German yields is widening the spread with the US.  Over the past month, the Germany two-year yield has fallen 17 bp, while the US two-year yield has risen three bp.  Over the past week, the US two-year yield is off 1.5 bp, and Germany is off 5.5 bp.  

In sum, while price action may look like a head and shoulders top in the Dollar Index, prudence and discipline require confirmation.  Other technical indicators are lending credence to the bearish scenario.  The speculative positioning in the futures market (to the extent that it is a useful proxy for the broader universe of trend followers and momentum traders) have pared back long dollar exposure in recent weeks.  The immediate driver appears to be European politics, where uncertainty will continue to hang over the market for some time.  

It is possible that Trump's tax plans and the next batch of  US economic data are somewhat disappointing, but we suspect that 1) many do not expect the border tax to be approved, and the trajectory of Fed policy remains intact. We do not think a March hike is particularly likely, were are being more sympathetic to a May move."


16:59 US stocks hit new record-highs on strong earnings and rising oil prices

After an extended weekend, the US stock markets resumed trading on Tuesday and witnessed a strong opening, with all the three major indices hitting new intraday record high levels. 

Investors cheered better-than-expected earnings report from top US retailers - Home Depot Inc. and Wal-Mart Stores Inc., while rising crude oil prices also contributed towards boosting investors' appetite for riskier assets - like equities. 

At the time of writing this report, the Dow Jones Industrial Average was up over 90-points to 20,715, while the broader S&P 500 Index gained around 10-points to 2,361. Meanwhile, tech-heavy Nasdaq Composite Index added nearly 25-points and rose to 5,862.

On economic data front, a slight disappointment from lower-than-expected flash US PMI prints did little to hinder the prevalent upbeat sentiment. Both the services and the manufacturing gauges held comfortably above 50 mark, but pointed to a slowing pace of growth during February.
 

 


16:55 USD/JPY likely to move between 112.30 and 114.50 UOB

According to FX Strategists at UOB Group, the pair should extend its rangebound theme likely between 112.30 and 114.50 in the next weeks.

Key Quotes

USD just moved above the 113.15/20 resistance and the improved outlook suggests that a move towards 113.55 would not be surprising (next resistance is at 113.80). Support is at 112.85 followed by last Friday’s low near 112.55 which is acting as a very strong intraday support”.

“After closing lower for 3 straight days, USD ended higher yesterday and registered a modest gain. From here, the price action is still viewed as part of a 112.30/114.50 consolidation range and based on the current indicators, this range is expected to be intact for a while yet”.

 

 


16:54 Fed needs to monitor inflation very carefully - FOMC s N.Kashkari

More from Minneapolis Fed Neel Kashkari at the Q&A session:

I have not yet adjusted forecasts due to fiscal policy.

Protecting the Fed's independence is enormously important.

Wages have come up but not at alarming levels.

 


16:46 United States Markit Services PMI registered at 53.9, below expectations (55.8) in February


16:46 United States Markit PMI Composite: 54.3 (February) vs previous 55.8


16:46 United States Markit Manufacturing PMI came in at 54.3 below forecasts (55.3) in February


16:43 USD/CAD inter-markets: extra gains hinge on Fed

USD/CAD has been advancing since Friday, managing to stage quite a strong rebound from last week’s lows in the 1.3000 neighbourhood to today’s current mid-1.3100s.

CAD keeps ignoring crude oil dynamics as of late. Instead, the pair’s price action has been performing in tandem with US-CA yield spread differentials, bringing once again to the fore the divergence in policy between the Federal Reserve and the Bank of Canada.

Yields in the US money markets are up for the second straight session so far, boosted by supportive tone from Chair J.Yellen and FOMC members along with auspicious results from US docket. Furthermore, Philly Fed Patrick Harker has not ruled out a rate hike at the March meeting at his speech earlier in the Asian session.

In the meantime, spot stays well supported around the critical 1.3000 region ahead of YTD lows near 1.2960. On the upside, the 200-day sma in the mid-1.3100s is offering some resistance at the moment, and it remains the last defense before last week’s tops above 1.3200 the figure, the next short-term target.


16:30 EUR/JPY against the ropes near 100-DMA; When would the debt music stop Greece?

Currently, EUR/JPY is trading at 119.81, down  -0.15% or (17)-pips on the day, having posted a daily high at 120.31 and low at 119.63.

The euro vs. Japanese yen has experienced a quiet trading day as the currency cross drifted south (60)-pips from the 120.30 handle, this price action moved the exchange rate closer to its 100-DMA that has the potential to serve as critical support to witness a bounce back to 121.00 or the last stand before a sell-off that could end near 117.70.

Today's economic docket had Purchasing Managers Index or PMI from europe's titans; France and Germany. The readings were mixed as the french PMI clocked 52.3 'a worse than expected' result below 53.5 consensus and 53.6 previous. On the other hand, the german version printed a healthy 57 'a better than expected' result above 56 consensus and 56.4 previous.

Greece greatest billboard hit: 'IMF got the bailout'

As the Editorial Board at NYT reported, "Greece and other European countries can invest in improving crumbling public services and infrastructure. Buses in Athens make do with worn-out tires, often at great risk to public safety, because there is not enough money for spare parts. And hospitals cannot hire doctors or buy medicines and syringes."

How Germany, IMF and company expect to solve one core issue without pulverizing the euro in the process? Evidently, the debt music would keep playing for Greece until sometime 2018 as the extension from creditors added another short-term fix to a corrosive spread disease. Hence, a hammered and molested mid-class, a political inclined tax system and another bailout that only Athens knows where it goes, build a strong case for an inevitable sovereign default that promises to crack the euro and the European Union; altogether.

EUR/JPY analysis: still at risk of a bearish extension

Historical data available for traders and investors indicates during the last 8-weeks that EUR/JPY cross had the best trading day at +0.94% (Jan.18) or 114-pips, and the worst at -1.05% (Feb.6) or (126)-pips. As of writing, the US 10yr treasury yields rose from 2.43% to 2.45%, up +1.78% on the day or +0.0429.

Technical levels to watch

In terms of technical levels, upside barriers are aligned at 121.84 (50-DMA), then at 123.30 (high Jan.27) and above that at 124.08 (high Dec.15). While supports are aligned at 119.18 (100-DMA), later at 117.72 (200-DMA) and below that at 116.20 (low Nov.17). On the other hand, Stochastic Oscillator (5,3,3) seems to make a push lower into the oversold territory. Therefore, there is evidence to expect euro gains in the near term.

eurjpy

On the long-term view, the currency cross continued its healthy and deeper pullback, as of writing, trading (410)-pips below 124.08 short-term top. To the downside, supports are aligned at 118.40 (short-term 61.8% Fib), then at 116.76 (short-term 50% Fib) and below that at 115.00 (short-term 38.2% Fib). On the flipside, upside barriers are aligned at 122.50 (Feb.), later at 123.70 (Jan.) and above that at 124.60 (May).

If prices were to close and open below 119.80-50 region, doors would be opened to experience a sell-off towards 116.76 (short-term 50% Fib).

eurjpy

EUR/JPY slightly bullish above 100-DMA; Greeks never ending bailout drama


16:27 Dodd-Frank has not solved to-big-to-fail issue - FOMC s N.Kashkari

At his speech today, Minneapolis Fed Neel Kashkari (voter, neutral) said:

Dodd-Frank has not soved 'to-big-to-fail' issue.

It is very hard to see asset bubbles in advance.

Fed aims to a smaller balance sheet once the economy is strong enough.

Productivity and population growth are needed in order to boost economic growth. The Fed, however, can't influence on productivity growth, let alone on population growth.

Labor market could have more room to run.

Inflation is being monitored very carefully.


16:18 NZD/USD remains well-offered near multi-week lows after GDT price index

The NZD/USD pair remained well-offered near multi-week lows and continues to flirt with 100-day SMA support around the 0.7135-40 band after disappointing New-Zealand milk auction results. 

The results of the latest New-Zealand milk auction held today showed the GDT Price Index dropping 3.2%, as compared to a 1.3% growth recorded in the previous auction, and price of whole milk powder falling by 3.7%. 

The outcome failed to provide any respite to New-Zealand Dollar, while persistent rise in the US Treasury bond yields continues to underpin the greenback and weigh on higher-yielding currencies – like the Kiwi.

The US Dollar price dynamics would continue to be an exclusive driver of the pair’s near-term movement and hence, investors will keenly scrutinize speeches from various Fed officials on Tuesday ahead of the FOMC meeting minutes on Wednesday. 

Technical levels to watch

Bears would be aiming for a decisive weakness below 0.7130 support, which if broken would pave way for a slide below 0.7100 handle and extension of the pair's near-term depreciating move. Alternatively, recovery from current support area might now confront resistance near 0.7165 region above which the pair is likely to aim towards reclaiming 0.7200 handle, en-route 0.7220-25 strong hurdle.

 


16:02 New Zealand GDT Price Index: -3.2% vs previous 1.3%


15:51 USD/JPY inter-markets: intrinsic support retest of 115.00 mark on hawkish Fed

The USD/JPY pair gained a follow through traction on Tuesday and extended its recovery move from Friday's low near 112.60 region. 

The pair's latest leg of up-move from Monday's 113.00 handle was led by hawkish comments from Philadelphia Federal Reserve Bank President Patrick Harker, which reaffirmed market expectations of faster Fed monetary policy tightening cycle. A fresh wave of up-move in the US Treasury bond yields has been supportive of the market expectations and underpinned the greenback demand on Tuesday.

Adding to this, depressed levels in the Volatility Index (VIX), supporting the ongoing record breaking rally in the US equity markets, is further weighing on the Japanese Yen's safe-haven appeal and collaborated to continuation of the pair's recovery move. 

Investors now look forward to today's speeches from various Fed officials and Wednesday's FOMC meeting minutes in order to gauge possibilities and timing of next Fed rate-hike move, which would eventually determine the pair's next leg of directional move. 

With the JGB yields flattening out, hawkish monetary policy outlook would lead to a further rise in the US-Japan yield spread and should continue to assist the pair's ongoing up-move back towards retesting 114.25 immediate resistance and eventually towards 115.00 psychological mark.

 


15:42 Live Speech - Neel Kashkari in Golden Valley

Neel Kashkari, President of the Federal Reserve Bank of Minneapolis shares remarks and takes audience questions with the Financial Planning Association of Minnesota from Golden Valley. Kashkari took office January 1, 2016, as the 13th president and chief executive officer of the Ninth District Federal Reserve Bank, at Minneapolis. In 2017, he serves as a voting member of the Federal Open Market Committee.

About Federal Reserve

The Federal Reserve System is the central bank of the United States. Congress created the Federal Reserve through a law passed in 1913, charging it with a responsibility to foster a sound banking system and a healthy economy. This broad mission remains today for the Federal Reserve Bank of Minneapolis and the 11 other Federal Reserve Banks, each serving a specific region of the country.


15:06 US: Fed speak and PMIs data in the limelight Danske Bank

In the US, service and manufacturing PMIs for February are due to be released in addition to the Fed speak which will garner maximum investor’s attention.

Key Quotes

“Both PMIs are at levels indicating a tailwind for the overall economy and have furthermore been rising steadily since late summer 2016. We expect this to continue and look for an increase in both PMIs in February.”

“The Fed's Harker (voter, hawkish) and Kashkari (voter, dovish) are scheduled to speak tonight. We will look for communication about the expected timing of a US rate hike. We still expect the Fed to deliver the next rate hike in June, but think risks are skewed towards an earlier rate hike.”


15:05 Gold off lows, back around $1,230

The firm tone around the greenback continues to weigh on the demand for the precious metal during the first half of the week.

Gold weaker on rate hike bets

After bottoming out around $1,228 earlier in the session, the ounce troy of the yellow metal has managed to regain the $1,230 area and beyond, although the broader picture still looks bearish.

In fact, Bullion is poised to remain under pressure in light of upcoming Fedspeak, Markit’s flash PMIs and tomorrow’s FOMC minutes.

It is worth mentioning that the demand for the greenback found extra legs in response to overnight comments by Philly Fed P.Harker (he will speak again later in the NA session along with members Kashkari and Williams), who opened further the door for a rate hike by the Federal Reserve at its March meeting.

The US Dollar Index – which tracks the buck vs. its main rivals – continues to consolidate its recent break above the 101.00 handle, posting fresh multi-day tops, all boosted by Harker’s comments.

Gold key levels

As of writing Gold is retreating 0.60% at $1,230.65 and a breakdown of $1,217.30 (low Feb.15) would expose $1,210.67 (100-day sma) and finally $1,185.60 (low Jan.26). On the flip side, the next up barrier is located at $1,241.20 (high Feb.17) followed by $1,243.90 (high Feb.8) and then $1,260.62 (200-day sma).


15:04 GBP/USD trying to defend 1.2400 handle

The GBP/USD pair came under some renewed selling pressure on Tuesday and dropped to 1.2400 handle amid resurgent greenback buying interest. The selling pressure, however, seems to have abated, helping the pair to bounce off lows and defend 1.2400 handle for the time being.

Against the backdrop of broad based US Dollar strength, in wake of Monday's hawkish comments from the Philadelphia Federal Reserve Bank President Patrick Harker, spot accelerated the downslide in absence of any hawkish comments from BOE Governor and MPC members' testimony on inflation and the economic outlook (inflation report hearings) before Parliament's Treasury Committee.

Recent hawkish rhetoric from various FOMC member, including the Fed Chair Janet Yellen during her testimony, seems to have revived hopes for an eventually Fed rate-hike action in March. Market expectation continues to drive the US treasury bond yields higher and seems to have reignited the US Dollar's strong bullish momentum.

Hence, Tuesday’s key focus would remain on speeches from various Fed officials, which would be scrutinized for fresh hints about March rate-hike move and eventually provide some impetus for the pair ahead of the FOMC meeting minutes on Wednesday.

Technical levels to watch

Bulls would be disheartened if the pair failed to defend 1.2400 handle below which a fresh leg of weakness is likely to accelerate the slide towards 1.2365 intermediate support, en-route 1.2300 round figure mark.
 
Meanwhile on the up-side, any recovery now seems to confront resistance near 1.2440-45 area, which if cleared might assist the pair back towards 1.2480-85 resistance. Any subsequent up-move above 1.2480 level might continue to be capped at 1.2500 psychological mark and only a decisive break through this hurdle would negate any near-term bearish bias.

 


14:25 US: Focus on manufacturing PMI and Fed speak TDS

Analysts at TDS note that in the US preliminary Markit manufacturing and services PMI indicators released for February and are expected to rise marginally to 55.3 and 55.8, respectively. 

Key Quotes

“Fed speakers include Kashkari and Harker (voters) who are scheduled to speak on the economic outlook. Williams (non-voter) is also speaking on the economy but is not expected to discuss monetary policy.”

“CAD: Senior Deputy Governor Wilkins will speak on a panel on financial regulation at 11:30am. There is a Q&A session but no press conference scheduled.”

 


14:21 USD/CHF spikes to 1.0100 handle amid notable USD demand

The USD/CHF pair maintained its bid tone for the third consecutive session and inched closer to last week's nearly one-month high level beyond 1.0100 handle. 

Currently trading just below 1.0100 handle, the pair was seen building on to its move back above 100-day SMA amid resurgent US Dollar buying interest in wake of Monday's hawkish comments from the Philadelphia Federal Reserve Bank President Patrick Harker. 

Furthermore, the pair's strong up-move through European trading session, despite of upbeat Swiss trade balance data, further seems to reinforce the underlying recovery trend since the beginning of this month from the very important 200-day SMA support.

The greenback price dynamics would continue to be an exclusive driver of the pair's near-term movement as market participants now look forward to the Fedspeaks and Wednesday's FOMC meeting minutes. Investors will closely scrutinize the minutes in order to gain some fresh insight over the central bank's near-term monetary policy outlook and gauge timing for the next Fed rate-hike move, which would eventually assist them to determine the next leg of directional move for the major.

Technical levels to watch

The ongoing strong bullish momentum now seems to confront resistance near 1.0119 (Feb. 15 high) above which the momentum could get extended towards 1.0170 horizontal resistance, en-route 1.0200 round figure mark. 

Meanwhile on the downside, 1.0065-60 area now seems to act as immediate support, which if broken might drag the pair back towards 100-day SMA support near 1.0020 region. Only a convincing break below 100-day SMA, leading to a subsequent weakness back below parity mark, would negate any near-term bullish bias and turn the pair vulnerable to resume with its prior depreciating move. 

 


14:01 EUR/GBP: Brexit starting positions? Rabobank

Jane Foley, Senior FX Strategist at Rabobank, suggests that relative to the volatility experienced since last summer’s Brexit referendum, EUR/GBP has been remarkably stable thus far in February, moving mostly between a 0.8456 to 0.8645 range. 

Key Quotes

“In the coming months both the EUR and the GBP are at risk of feeling the brunt of a step up in political risk ahead of the French Presidential election and the official start of Brexit.  On the assumption that Le Pen does not win the second round of France’s election, we expect EUR/GBP to be trading closer to the 0.87 area on a 3 mth view with the pound weighed down by Brexit related concerns.”

“This week will see the UK government’s EU withdrawal bill debated in the House of Lords.  Given the strength of support for it in the House of Commons, the unelected Upper House is not expected to oppose the bill.  However, it is possible that amendments to its current form will be called for.  This means that the bill could find itself back in the House of Commons for reconsideration in the coming weeks.  If the bill is not amended it reportedly could be approved by the Lords as soon as March 7 and pass into law soon afterwards.  This would comfortably comply with PM May’s plan of triggering Article 50 of the Lisbon Treaty at the end of next month.”

“While the colourful array of Lords that are likely to speak on Brexit this week is likely to capture the headlines, plenty of work on Brexit is being carried out behind the scenes both in the UK and in the EU.  The European parliament is expect to state its initial negotiation position in the weeks after the UK PM triggers Article 50.  Various committees within the European Parliament have reportedly been asked for input to aid the EU’s chief Brexit negotiator Barnier.”

“We see risk that the clarification from the EU this spring on its negotiating lines will highlight the complexity of the issues facing by the UK over the next few years and we anticipate that the start of the Brexit procedure is likely to bring downside pressure to the pound.”


13:47 USD/JPY clings to strong gains near 113.70 level ahead of Fedspeak

Persistent US Dollar demand lifted the USD/JPY pair beyond mid-113.00s to a three-day high level, coinciding with the 113.75 resistance area. 

The greenback continued to gain traction across the board as markets now seemed convinced that the Fed would eventually move towards raising interest-rates, as early as at its next monetary policy meeting in March. Late Monday comments from the Philadelphia Federal Reserve Bank President Patrick Harker further reinforced market expectations and turned supportive for the strong bid tone surrounding the major.

Moreover, the prevalent buoyant sentiment surrounding European equity markets pointed towards improving investors' risk-appetite and is further weighing on the Japanese Yen's safe-haven appeal, eventually collaborating to the pair's up-move for the second consecutive day.

Fedspeak would remain in focus during NY trading session on Tuesday and would be a key determinant of the pair's move ahead of the much awaited FOMC meeting minutes on Wednesday.

Technical outlook

Omkar Godbole, Analyst cum Editor at FXStreet notes, “the rebound from the descending trend line support on Friday if followed by a daily close above 50-DMA of 114.93 would add credence to the bullish DMI crossover and open doors for a rally to 118.66 (Dec 15 high). The ADX is sloping downwards, suggesting a weak momentum. Thus, there is need to be cautious so long as the spot is below 50-DMA.”

“On the lower side, breach of the session low of 113.11 could yield a pull back to trend line support around 112.34. Note that such a move would lead to another failure on the part of the RSI to break above 50.00 levels.”

 


13:38 EUR: Sell-off continues - BBH

Research Team at BBH notes that the euro has been sold back toward last week's low near $1.0520.  

Key Quotes

“The sell-off has come in two legs.  The first in Asia took the euro through $1.0580.  Then Europe took it down another half cent.  The sell-off came despite a robust flash PMI.  The Eurozone composite jumped to 56.0 from 54.4.  The median guesstimate in the Bloomberg survey was for a little slippage to 54.3.  The details were also favorable.  The manufacturing PMI rose to 55.5 from 55.2.  The median looked for a softer number.  Economists expected an unchanged the service PMI.  Instead, it jumped to 55.6 from 53.7.  New orders reached a six-year high and prices charged rose to the highest level since July 2011.”


13:36 Will not hesitate to change policy, if deemed appropriate - BOEs Carney

Continuing with the February inflation report testimony before the Parliament's Treasury Committee, BOE Governor Mark Carney said that there is some market expectations of monetary policy tightening in the next few years but the central bank will not hesitate to change monetary policy stance, if deemed appropriate.

Meanwhile, the GBP/USD pair maintained its bearish bias and reversed majority of previous session’s recovery gains, albeit has managed to hold its neck above 1.2400 handle. 


13:35 Dont rule out a US-China trade war just yet Danske Bank

Chief Analyst, Allan von Mehren at Danske Bank, notes that Trump has struck a softer tone towards China lately but at the same time his economic team is looking at ways to take measures against China in a less confrontational way.

Key Quotes

“There have been a couple of interesting developments lately in US-China trade relations.

  • First: Donald Trump has chosen a more conciliatory path with China. His telephone call with China’s president Xi Jinping on 9 February was described by the White House as a ‘lengthy’ and ‘extremely cordial’ conversation and Trump agreed to support the One China policy at the request of Xi Jinping. Chinese state media also wrote in a new and more optimistic tone about US-China relations following the call. The change of style by Trump on the China issue is positive with respect to avoiding a conflict between the two nations.
  • Second: however, only four days later The Wall Street Journal reported that the US was eying a new tactic to press China on the trade issue. According to the article, the commerce secretary would designate the practice of currency manipulation as an unfair subsidy when employed by any country, instead of singling out China. US companies would be able to bring anti-subsidy actions themselves to the US Commerce Department against China or other countries.”

“Apparently, the new National Trade Council in the White House headed by China hawk Peter Navarro is drawing up the plan. The plan aims to balance the goal of challenging China on trade and currency while keeping relations with the country on an ‘even keel’.”

“Using this tactic, the US would avoid singling out China, as it would also include other nations. However, it might also mean that the US would add a country such as Germany, which the Trump administration has accused of having a much undervalued currency through its membership of the euro.”

“The change of tactic by the Trump administration would also solve another problem: it is very difficult for the US government to label China a ‘currency manipulator’ according to the three criteria stipulated by the US Treasury Department, as China meets only one of the three.”

Another tack that the US administration is considering taking according to The Wall Street Journal is to produce alternative trade deficit numbers, which would increase the US trade deficit and thus support the case for ‘defensive steps’ on trade.”

“This picture would overstate the US trade deficit and for Trump underline how much the US is losing from trade. It would affect the deficit with Mexico and Canada in particular, with China less affected.”

Trade war still a risk this year

  • Only time can tell what the next episode of the Trump show will bring. However, we are not yet convinced that he has suddenly gone soft on China and put his campaign goals of protecting the US against unfair Chinese trade policies back in the drawer.
  • It’s hard to gauge what the grand plan for Trump is to level the playing field with China. Unpredictability seems to be part of his negotiating style. Suddenly questioning the One China policy on Taiwan after his election may have been part of a strategy to scare China and show what he is capable of if China retaliates in response to US protectionist measures.
  • Watching the Chinese media’s response to his threats, Trump may also have realised that the Chinese will not change any trade practices themselves. His way forward could be to take his own steps to protect US manufacturing from China, while at the same time talking smoothly to the Chinese leadership.
  • If Trump takes ‘defensive’ measures towards China (or other countries), China cannot be expected to sit back and watch without retaliating. However, if it comes to a trade war, it would enable Trump to paint a picture at home that he has been very open and friendly and merely taken fair measures to level the playing field but that China is the one retaliating in an aggressive way.”

13:34 WTI edges higher, $55.00 just around the corner

Crude oil prices have climbed to fresh multi-day tops on Tuesday, lifting the barrel of West Texas Intermediate to the vicinity of the critical $55.00 mark.

WTI stronger on OPEC cuts

Prices for the WTI have picked up extra pace today after news emphasized that the planned OPEC output cuts have tightened oil supply.

WTI is gaining nearly 2% on Tuesday despite the general sentiment continues to favour the buck, taking the US Dollar Index to fresh highs in the mid-101.00s for the time being.

Crude oil remains well underpinned by the speculative positioning at the same time, with net longs advancing to record levels above 500K contracts during the week ended on February 14 according to the latest CFTC report.

Looking ahead, the FOMC minutes and Fedspeak should keep the interest around the Dollar, while the usual weekly reports by the API (tomorrow) and the EIA (Thursday) should drive the sentiment around oil in the very near term at least.

WTI levels to consider

At the moment the barrel of WTI is gaining 1.77% at $54.73 and a surpass of $54.85 (high Feb.21) would open the door to $55.24 (2017 high Jan.3) and finally $56.79 (high Jul.6 2015). On the other hand, the immediate support is located at $53.73 (low Feb.20) followed by $53.27 (20-day sma) and then $52.68 (low Feb.16).


13:27 Greenback has come back the bid - BBH

Analysts at BBH note that some profit-taking in the middle of last week pushed the dollar lower and gave rise in some quarters that the run was over but the greenback has come back the bid and is gaining against all the major currencies today and most of the emerging market currencies.

Key Quotes

“Much of the coverage attributes the gains to comments by the Philadelphia Fed President Harker.  He joined the chorus of officials who have refused to rule out a March hike.  Yet the market is not biting.  The effective Fed funds have been averaging 66 bp.  The March contract implies 69.5 bp, and the April contract implies 71.5 bp.  Our work suggests this is consistent with about a one-in-four chance of a hike.  Bloomberg puts the odds at 36% compared with 34% a week ago.  The implied yield of the March and April contracts have risen by half of a basis point over the past week.”


13:18 No uptick in inflation expectations since November - BOEs Carney

Speaking on the February inflation report during his testimony before the Parliament's Treasury Committee, BOE Governor Mark Carney said the second round of inflation effects on wage behaviour would move us closer to 'limit of toleration for inflation overshoot'.

Additional Headlines:

   •   UK inflation expected to fall back in 2021
   •   No uptick in market inflation expectations since November
   •   Short-run inflation expectations rising, medium-term expectations not rising and is consistent with temporary inflation overshoot


13:11 EUR/CHF seen around 1.0700 near term Danske Bank

Jens Pedersen, Senior Analyst at Danske Bank, believes the cross remains poised to stay around the 1.0700 handle in the near term.

Key Quotes

“Political uncertainty in Europe, coupled with rising geopolitical risks following the election of Donald Trump as the next US president, has supported CHF and put pressure on SNB to act to curb CHF appreciation pressure”.

“Political uncertainty looks to be a key theme for FX markets again this year. EUR/CHF is still trading close to 1.07”.

“We expect it to stay here in the near term as focus turns to European political uncertainty. Longer term, we continue to expect fundamentals to support a higher EUR/CHF and keep our 6M and 12M forecasts unchanged at 1.10 and 1.13, respectively”.

 

 


13:05 GBP/USD further weakness expected UOB

In opinion of FX Strategists at UOB Group, Cable is seen grinding lower in the next weeks.

Key Quotes

GBP rebounded directly without testing the strong 1.2350 support first (low of 1.2408). The recovery appears to have scope to extend further but at this stage, any up-move is unlikely to have enough momentum to challenge the major 1.2530 resistance (minor resistance at 1.2500)”.

“As highlighted yesterday, the immediate downward pressure is expected to increase unless GBP can reclaim the key short-term resistance at 1.2530 (overnight high has been 1.2482). To put it another way, we continue to see early and tentative signs that the recent prolonged consolidation could be resolved with a downside ‘break’. That said, GBP has to move clearly below 1.2350 to indicate that a sustained down move towards 1.2250 has started. Minor support is at 1.2405.

 

 


13:02 Ireland Consumer Price Index (MoM): -0.5% (January) vs previous 0%


13:02 Ireland HICP (YoY) up to 0.2% in January from previous -0.2%


13:02 Ireland Consumer Price Index (YoY) rose from previous 0%to 0.3% in January


13:02 Ireland HICP (MoM) down to -0.5% in January from previous -0.1%


12:56 USD/JPY interim low at 111.59 Commerzbank

Karen Jones, Head of FICC Technical Analysis at Commerzbank, suggested the pair could have carved and interim low at 111.59.

Key Quotes

USD/JPY’s failure at the 55 day ma at 114.98 has been decisive and see the market selloff to its 112.97 uptrend. We view the recent low at 111.59 as an interim low. A close above the 115.62 19th January high is needed to reintroduce scope to key short term resistance offered by the 16 month resistance line at 117.97”.

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

 

 


12:55 OPECs Barkindo: Aim to achieve higher compliance level than Jans 90% - RTRS

OPEC Secretary General Mohammad Barkindo is on the wires now, via Reuters, speaking at International Petroleum (IP) conference hosted by the Energy Institute in London.

Key Headlines:              

Members aiming to achieve higher compliance level than Jan’s 90%

Expect to see further drops in OPEC oil inventories in 2017

Will continue to focus on bringing OECD oil inventories closer to the 5 year industry average

Both crude benchmarks are accelerating to the upside following Barkindo’s comments, and trade at multi-week highs, each +1.60% higher.


12:51 CAD: The little currency has spunk BMO CM

Douglas Porter, Chief Economist at BMO Capital Markets, notes that since the U.S. election, the Canadian dollar has actually managed to strengthen by just over 1%, as it held broadly steady this week at just over 76 cents ($1.31/US$) making it one of the strongest currencies in the world over that stretch, trailing behind only Brazil and Taiwan.

Key Quotes

“Given that the Bank of Canada often cites “competitiveness challenges” when speaking about Canada’s stubbornly disappointing export performance, it’s pretty clear that this is a less-than-welcome development for policymakers. And, in turn, the loonie’s spunk is often cited as the primary factor behind the Bank’s relentlessly dovish message.”

“There are at least three reasons why the currency has held up so well in recent months. First, firmer oil prices. While some have downplayed the link between the currency and crude, and the direct daily correlation has notably weakened recently, oil and other commodities are still a major driver over time for the loonie. WTI stood at just under $45 on election day and has subsequently had a near-20% bump to over $53, largely thanks to the OPEC production deal.”

“Second, the US$ itself has lost steam in recent weeks. In fact, since the start of 2017, the greenback is actually down against every major currency in the world, reversing much of the post-election bump. Yes, it’s even down a tad against the Mexican peso since the start of the year.”

“Third, Canada’s economy has been surprisingly and refreshingly perky in recent weeks. To wit, job growth has just had its best six months in 15 years (up 239,000), housing remains strong, auto sales are coming off a record year, the trade balance has turned from red to black, and even manufacturing sales ended last year on an upbeat note. We are still looking at GDP growth of around 2% for Q4 and for all of this year, but now see some real upside risk to that call. True, it will take more than that to impress the BoC, given that they are at the high end of consensus at 2.1% for this year. But it’s been quite some time since anyone has talked about upside risk for Canadian economic growth.”

“The resilience in the C$ is being reflected in capital flows, which are suddenly very positive for the currency.”

Where do we go from here? Capital flows can turn on dime, but we do know that Canada’s trade and current account are poised to improve further over the next year, provided oil prices hold up. Another plus for the C$, is that U.S. officials are likely going to continue talking down the big dollar. Still, we remain defensive on the loonie’s outlook, for two primary reasons—interest rate differentials, and potential U.S. trade measures. There is still the very real risk that the Fed could tighten more than the two rate hikes currently built in by markets this year, especially after the recent wave of upbeat U.S. growth and inflation data. On the flip side, we believe that market pricing of roughly a one-third chance of a BoC rate hike this year overstates the odds by… oh… about one-third.”

On the trade front, we and almost everyone else were breathing a little easier after the uneventful and upbeat meeting between Prime Minister Trudeau and President Trump this week. On balance, we have nudged up our forecast for the year to a 74-cent average and even that may prove to be too low, but not if the U.S. turns truly protectionist.”


12:48 EUR/USD slammed below mid-1.0500s, Fedspeak in focus

After yesterday's brief pause, the EUR/USD pair resumed with its reversal move from 1.0680 level and tumbled below mid-1.0500s.

Currently trading around 1.0535 region, testing multi-day lows, the pair ran through fresh offers on Tuesday amid resurgent US Dollar buying interest against the backdrop of late Monday hawkish comments from the Philadelphia Federal Reserve Bank President Patrick Harker, who supported interest rate-hike move at the Fed's next monetary policy meeting in March. Harker's comments reinforced market expectations for an eventual Fed rate-hike move, sooner-rather-than-later, and lifted the greenback across the board.

Meanwhile, the release of flash Euro-zone PMI prints were largely ignored by market participants and failed to provide any immediate respite to the shared currency.

Furthermore, possibilities of some stops getting triggered on a sustained break below 1.0575-70 horizontal support could have also collaborated to the pair's downslide during mid-European session.

Investors attention on Tuesday would remain glued to the upcoming Fedspeak, due later during the day, ahead of the FOMC meeting minutes on Wednesday.

Technical levels to watch

A follow through selling pressure below mid-Feb. lows support near 1.0520 region has the potential to drag the pair to sub-1.0500 level ahead of 1.0455 level (Jan. 11 low). On the upside, support break point near 1.0575-70 area now seems to act as immediate resistance and would be followed by resistance near 1.0600 round figure mark. Any further up-move beyond 1.0600 handle might now be capped at 1.0630-35 region (yesterday's high).

 


12:48 BOEs Vlieghe: BOE unlikely to be able to predict another financial crisis or recession

Following are the comments from the BOE board member Vlieghe, during his testimony before the TSC:

The BOE is unlikely to be able to predict another financial crisis or recession

Models just aren't that good

It's wrong to think that an even better model than we have would allow us to forecast recessions or crisis with any certainty   


12:43 BOEs Carney: Some MPC members thought equilibrium jobless rate fcast was too high

The BOE Governor Mark Carney is up on the rostrum now, via Reuters, making comments on the Feb inflation report during his testimony before the Treasury Select Committee (TSC).

Key Points:

For the last few years, some MPC members thought equilibrium jobless rate f’cast was too high

Households tend to look through economic uncertainty unless it leads to tighter financial conditions


12:42 RBA minutes note the level of the cash rate Deutsche Bank

According to Adam Boyton, Chief Economist at Deutsche Bank, the final paragraph of the RBA minutes hold an important 'tweak' in their view, specifically, the inclusion of the phrase "and the level of the cash rate".

Key Quotes

“It reads as follows: "Taking account of all the information available, including the updated forecasts, an assessment of the risks affecting these forecasts and the level of the cash rate, the Board judged that holding the stance of policy unchanged would be consistent with sustainable growth in the economy and achieving the inflation target over time."

“That inclusion of "the level of the cash rate" is noteworthy as it implies the hurdle for easing is quite high given how low rates already are.”

“On risks around the inflation forecasts the minutes note elsewhere that: "members noted that the factors that had weighed on inflationary pressures could be more persistent than had been assumed. On the other hand, wage growth could rise more quickly than forecast if labour market conditions were to improve by more than expected, particularly if employees were to demand wage increases to compensate for the period of low wage growth over recent years. Members also noted that the recent pick-up in global inflationary pressures could flow through to domestic inflation by more than expected."

“In our view there is little risk that global inflation pressures stoke Australian core inflation in 2017 (there is, as we have noted in recent research, little direct correlation between core inflation in Australia and the US). We also suspect that wages growth will pick-up only modestly over coming years, while the strength in the AUD could put more downward pressure on core goods prices.”

“So while we remain comfortable with our expectation that core inflation will remain below the RBA's target band over 2017, and that the pick-up in inflation will be more modest than the mid-point of the RBA's published inflation forecasts would imply (and that the Bank pushed out the return of inflation to an implied mid-point of 2.0% in their most recent SMP); the hurdle for further easing over the near-term is considerable.”

“As a result, risks are rising that our expectation of a rate cut this year will not be realized.”


12:39 GBP/USD tumbles to lows near 1.2420 on BoE

The British Pound is now intensifying its decline following the BoE’s February Inflation Report, dragging GBP/USD to the vicinity of 1.2420.

GBP/USD weaker on BoE

The pair met further selling pressure after BoE’s MPC member A.Haldane said he is comfortable with a neutral stance on the potential course of interest rates, while he reiterated that monetary policy could move in either direction.

Furthermore, MPC member I.McCafferty hinted at the fact that the economy could be closer to full employment than recent figures of wage growth show.

Spot remains under pressure amidst a solid performance of the greenback, which found extra legs following comments by FOMC’s P.Harker, opening the door for a rate hike at the March meeting.

The House of Lords has started on Monday its 2-day debate of Article 50, which is expected to pass without amendments today.

In the US docket, Philly Fed P.Harker (voter, hawkish), Minneapolis Fed N.Kashkari (voter, neutral) and San Francisco Fed J.Williams (2018 voter, neutral) are all due to speak later in the session.

GBP/USD levels to consider

As of writing the pair is losing 0.26% at 1.2428 facing the next support at 1.2379 (low Feb.15) ahead of 1.2344 (low Feb.7) and finally 1.2250 (low Jan.19). On the upside, a break above 1.2515 (20-day sma) would open the door to 1.2550 (high Feb.14) and finally 1.2715 (high Feb.2).


12:37 BOEs Haldane: Havent fundamentally changed view on long-run impact of Brexit

More comments flowing in from the BOE chief economist Haldane, as he continues to testify before the TSC.

Key Points:

We've had unexpected consumer behaviour and a stronger world economy

We think higher prices will throttle some consumer spending as incomes get squeezed

Autumn budget statement will have a material effect on UK economic growth

Still net headwind from budget contraction over coming years despite fiscal loosening in autumn statement

Haven’t fundamentally changed view on long-run impact of Brexit

 


12:37 China: Has the PBOC entered a rate-hiking cycle? - Nomura

Analysts at Nomura note that the People’s Bank of China (PBoC) Monetary Policy Implementation Report emphasised the curbing of financial risks and minimising asset bubbles, which suggests a marginal tightening bias for its “prudent and neutral” policy stance. 

Key Quotes

“The monetary policy regime has shifted to focus on money market interest rates and open market operations (OMOs), so the rise in money market rates following the lunar new year holidays should be viewed as a rate hike, in our view.”

“The rising PPI does not appear to be a major concern for monetary policy.”

“We expect no further OMO rate hikes in the short term.”

Rates strategy: We maintain a 2s5s repo-NDIRS flattener trade with a bias to add pay overlay on dips.”


12:33 GBP: More signs of a very tricky road ahead ING

Research Team at ING suggests that the news over the weekend that the EU Chief Brexit negotiator Michel Barnier favours the sequential divorce first, trade talks after approach (ie, the EU wants to first agree to the cost for Brexit and rights of the EU citizen in the UK) rather than the UK favoured parallel approach suggest that the GBP price action should remain tricky for the most of the year.

Key Quotes

“This cloud of uncertainty should prevent any fast recovery of the undervalued GBP towards its equilibrium level. In terms of this week, the Brexit saga continues today with the House of Lords starting the debate on the Brexit Bill.”


12:30 USD: FOMC minutes likely to provide another hawkish signal MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the US dollar has strengthened modestly during the Asian resulting in the EUR/USD rate falling back below technical support at around the 1.0600-level.

Key Quotes

“The US dollar has derived some support overnight from further hawkish Fed rhetoric. Philadelphia Fed President Harker, who is voting FOMC member this year, told Market News International that “I would not take March off the table at this point. We’ll have to see how it plays out in the next few weeks”. He is looking for evidence of price pressures ahead of the next FOMC meeting on the 14th & 15th March, not only in the inflation numbers but also in the employment cost index or other measures of wages. He still believes that that three rate hikes is appropriate this year “depending on how things turn out”.”

“In contrast, the market remains unconvinced that the Fed will speed up rate hikes as currently planned in the coming years which is acting as a dampener on US dollar strength in the near-term. The yield on the two-year US Treasury bond has remained stable at around 1.2% over the last couple of months. The market clearly requires further convincing after the Fed took a full year to follow up the first hike.”

“The release tomorrow of the latest FOMC minutes may provide another signal that the Fed is moving closer to rising rates again as soon as in March or May. We expect the minutes from the February FOMC meeting to appear more hawkish than the accompanying statement. The US dollar has rebounded modestly since the February meeting. The accompanying statement signalled that the Fed had become more confident that inflation “will” rise back towards their target. The increased likelihood of the Fed raising rates sooner than expected should encourage the US dollar to strengthen further in the coming months against the other major currencies.”


12:26 BOEs McCafferty: Support the reduction of BOE equilibrium on unemployment

The Bank of England (BOE) policymaker Ian McCafferty also crossed the wires now, throwing fresh light on the UK labour market.

Key Headlines via Reuters:

Supports the reduction of BOE equilibrium on unemployment but is unsure about the size of reduction

Would prefer a reduction to 4.75% rather than 4.5%

Skills shortages & level of vacancies suggest we are closer to full employment than weak wage growth suggests

Some members of MPC thought equilibrium unemployment rate could be below 4.5%, others thought it could be 4.5%-4.75%


12:26 Eurozone growth surges in February, composite PMI highest since 2011 - ING

Bert Colijn, Senior Economist at ING, notes that the Eurozone composite PMI increased from 54.4 to 56 in February, indicating that Eurozone businesses continue to defy political uncertainty as new orders pour in and job growth is at an almost decade high.

Key Quotes

“While investors have started to price in some political risk as Eurozone spreads have recently widened to pre-QE levels, businesses do not indicate similar uncertainty. In fact, strong employment growth, increased inflationary pressures and surging new orders are trumping any geopolitical uncertainty for the moment. Both manufacturing - especially in Germany - and services saw gains, making this a broad-based jump in business activity. With domestic demand strengthening and a weaker euro boosting orders from abroad, the Eurozone economy is seeing robust growth for the moment.”

“This paints a different picture than this month’s consumer confidence indicator, which declined for the first time since August. Worries about the general economic situation and higher inflation rates seem to have made the consumer a little more cautious, but the pace of job creation indicated by this PMI release does show that domestic demand growth is still underpinned by strong employment gains for the moment.”

“Still, concerns about political risks do remain on top of mind for many. Whether it is the upcoming elections or the debt crisis in Greece, there are plenty of uncertainties that could weigh on growth in the coming months. While yesterday’s Eurogroup deal marks some progress in the continuing Greek debt saga, Eurogroup head Jeroen Dijsselbloem did mention that getting a deal is no pressing matter as Greece will not have liquidity issues before summer.”

“Businesses also indicated that price pressures increased further in February. The question is when these increased price pressures will start to translate into stronger core inflation, as there has not been much evidence of that so far. We expect core inflation to remain below 1.5% in 2017, but the discussion about rising inflation and the ECB’s exit out of QE is becoming more prominent. We expect more clues about tapering in 2018 after the Dutch and French elections, so this could once again be a good year for Eurozone economists to not take a summer vacation.”


12:16 BOEs Haldane: Risks to interest rates are two sided and symmetric

The Bank of England (BOE) Chief Economist Andy Haldane is on the wires now, testifying on the February inflation report before the Treasury Select Committee (TSC).

Key Headlines:

There was collective amnesia at central banks in the run up to the last crisis

Scope to improve forecasting is more limited than weather forecasting

Is comfortable with a broadly neutral stance on the likely course of interest rates

Risks to interest rates are two sided and symmetric

We would be concerned if there was a too sharp rise in market interest rates

Too sharp a rise in market rates could tighten credit conditions and hit consumer spending


12:13 IMFs Lipton comments on Trumps policy

Comments from the International Monetary Fund's (IMF) first deputy managing director, David Lipton, are here as under:

On Trump's policy: should stay calm and see what comes

Element of truth in many of us criticisms of other countries that ‘should be addressed’


12:07 Spain 9-Month Letras Auction climbed from previous -0.342% to -0.33%


12:07 Spain 3-Month Letras Auction increased to -0.402% from previous -0.477%


11:54 China to draft rules to rein in asset management risks - BBG

According to people familiar with the matter, China’s financial regulators are working together to draft new rules for the country’s rapidly-expanding asset-management products, Bloomberg reports.

The sources said on conditions of anonymity, “The draft rules would apply to products issued by banks, insurers, brokerages and other financial institutions.”

Meanwhile, China’s asset-management products totaled about 60 trillion yuan ($8.7 trillion) as of June 30, according to a recent estimate by Li Chao, an official at the China Securities Regulatory Commission (CSRC). 


11:39 EUR/USD clings to the neutral stance UOB

In view of FX Strategists at UOB Group, the pair’s outlook stays neutral in the short term.

Key Quotes

“As noted yesterday, the short-term bias is tilted to the downside and a move below the expected 1.0580/1.0750 consolidation range would not be surprising”.

“That said, based on the current momentum, any decline is expected to struggle to move below last week’s low at 1.0520”.

“Only a ‘clear and clean’ break below 1.0520 would indicate that a move towards 1.0400 has started. Resistance is at 1.0640 but the key level to monitor for the next several days is at 1.0670 (stabilization only above this level)”.

 

 


11:36 NZD/USD plummets to 100-DMA support near 0.7135 level

Following overnight consolidative price-action, the NZD/USD pair came under renewed selling pressure on Tuesday and tumbled to 100-day SMA support near 0.7135 region.

Late Monday comments from the Philadelphia Federal Reserve Bank President Patrick Harker drove up the US Treasury bond yields and underpinned resurgent US Dollar demand, eventually weighing on higher-yielding currencies - like the Kiwi.

Meanwhile, investors also seemed to dump the New-Zealand Dollar in anticipation of a weak outcome from the fortnightly dairy auction and hence, the release of GDT Price Index would grab investor's attention on Tuesday.

Also in focus would be a slew of speeches from various Fed officials, which would be looked upon for clues over the timing of next Fed rate-hike action ahead of this week's key event risk, the Fed monetary policy meeting minutes on Wednesday.

Technical levels to watch

A follow through selling pressure below 0.7130 level, leading to a subsequent drop below 0.7120 level, now seems to pave way for a break below 0.7100 handle and continuation of the pair’s near-term downward trajectory.

On the flip side, any recovery attempts might now confront immediate resistance near 0.7165 region above which the pair is likely to aim towards reclaiming 0.7200 handle, en-route 0.7220-25 strong hurdle.

 


11:34 Live M.Carneys speech at the February Inflation Report

The Bank of England will release later today its February Inflation Report, with Governor Mark Carney scheduled to speak before the Treasury Select Committee at 10h GMT along with MPC members Andrew Haldane, Ian McCafferty and Gertjan Vlieghe.

Key notes

UK inflation figures have extended the up trend in January, showing consumer prices tracked by the CPI rising at an annualized 1.8%, up from December’s 1.6% gain.

Market expectations are tilted towards a dovish tone from the BoE today, in line with the recent Inflation Report published a couple of weeks ago. Furthermore, last week’s disappointing results from UK indicators seem to leave to room for surprises today.

It is worth recalling as well that Governor M.Carney said earlier in the month that the inflation overshoot has been ‘entirely’ due to GBP weakness, while it sees the CPI at 2.75% in Q2 2018.


11:32 United Kingdom Public Sector Net Borrowing registered at -9.824B above expectations (-14B) in January


11:32 GBP/USD upside pressure alleviated below 1.2250 Commerzbank

According to Karen Jones, Head of FICC Technical Analysis at Commerzbank, Cable’s downside pressure should be mitigated below 1.2250.

Key Quotes

“The market continues to consolidate around its 55 and 100 day moving averages at 1.2415/07, we maintain a negative bias but patience is needed. A close below here will introduce potential to the 1.2253 the 18th January low. The intraday Elliott counts have finally turned more negative and we look for some weakness this week”.

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

 

 


11:29 WTI tests 4-week tops amid increased investor optimism

Oil futures on NYMEX extend its recent run of gains and now regain $ 54 mark, in a bid to score fresh four-week highs.

The black gold remains strongly bid, despite broad based US dollar strength, as investors continue to remain bullish on the commodity amid high compliance with the OPEC production cut deal reached last year.

Data from the Intercontinental Exchange showed on Monday, speculators raised their bets on a rally in Brent oil prices to a record last week. This report comes after Friday’s CFTC data revealed that the net long US crude futures and options positions in the week to Feb 14 were at a record.

Oil markets now eagerly await the US crude supplies data due to be published the API tomorrow, which will provide fresh insights on the US supply-side scenario.

WTI technical levels        

A break above $ 54.50 (psychological levels) could yield a test of $ 55.24 (Jan 3 high). While a breach of support at $ 53.73 (previous low) would expose the 50-DMA support of $ 53.09.


11:15 EUR: Eurogroup claims progress in Greece bail out talks MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the euro has started the week on a softer footing driven in part by rising political uncertainty in Europe.

Key Quotes

“French government bonds came under further selling pressure yesterday although later recovered some lost ground. A potential alliance of the left parties and a daily OpinionWay poll showing an increase in support for Le Pen by one percentage point to 27% which resulted in her lead widening over Independent Macron and Republican Fillon who both garnered 20% of the votes, have both been cited as triggers for the fresh selling. The negative impact on the euro from the increasing political risk premium in Europe has been relatively limited so far. Our short-term valuation model which incorporates a proxy for the political risk premium is currently estimating that EUR/USD should be trading closer to the 1.0500-level based on key fundamental drivers.”

“The euro did not derive much support from yesterday’s Eurogroup meeting after which European finance ministers claimed to have made progress in talks to provide further financing for Greece. Eurogroup President Dijsselbloem described the meeting as a “very positive and good step”. They agreed that EU and IMF teams would soon return to Greece to hammer out details of an agreement including pension cuts and lowering the threshold at which people start paying income tax.”

“According to reports, the Greek government has agreed in principle to the additional reforms where there had previously been a red line. However, there is still caution that remaining differences can be overcome during the forthcoming mission to Greece. European officials do not appear overly in hurry to reach an agreement with Greece having until July until it could run out of cash. The developments support our expectation that another compromise agreement will eventually be reached to extend financing to Greece, although the close proximity to upcoming elections increases the risk of complications. We continue to see risks to the euro from the ongoing Greek bail out stand off as asymmetric. If a compromise deal is reached it will offer only limited support for the euro, while the failure to reach an agreement would weigh more heavily on the euro.”


11:01 European Monetary Union Markit PMI Composite came in at 56, above expectations (54.3) in February


11:01 European Monetary Union Markit Manufacturing PMI registered at 55.5 above expectations (55) in February


11:01 European Monetary Union Markit Services PMI came in at 55.6, above expectations (53.7) in February


11:00 USD/CAD surges to multi-day tops beyond mid-1.3100s

The USD/CAD pair broke through its near-term trading range and moved back above the very important 200-day SMA to nearly two-week highs. 

Currently trading around 1.3160 region, the pair maintained its bids tone for the third consecutive session despite of an upbeat sentiment surrounding oil markets. In fact, WTI crude oil is trading with gains of around 0.70% but has failed to benefit the commodity-linked currency - Loonie, and hinder the pair's strong bullish momentum. 

Meanwhile, possibilities of some stops getting triggered, on a decisive break through near-term trading range resistance near 1.3120 level, could also be one of the factors collaborating the pair's strong up-surge in the past hour or so.

The US Dollar price dynamics would continue to remain an exclusive driver of the pair's movement on Tuesday ahead of the Fedspeaks on Tuesday and this week's key event risk, FOMC meeting minutes on Wednesday. 

Technical levels to watch

From current levels, momentum above 1.3168 (Feb. 9 high) now seems to lift the pair beyond 1.3185 intermediate resistance,  and 1.3200 handle, towards testing 50-day SMA hurdle near 1.3220 region.

On the downside, retracement back below 200-day SMA support near 1.3140 region now seems to find support near the trading range resistance break-out point, now turned support, near 1.3120-25 region. Any further weakness below this support might now be bought into and hence, is likely to limit and further downslide near 1.3100 round figure mark.

 


10:56 GBP/USD slumps to lows below 100-DMA, UK data, BOE eyed

The minor-recovery seen in GBP/USD lost steam near 1.2460 region, as the bears regained control and knocked-off the rate below the 100-DMA support located at 1.2429.

GBP gains limited? – Danske Bank

The major ran into fresh offers in the European session, largely on the back of fresh buying interest seen around the greenback against its major rivals, whilst markets turn cautious and liquidate GBP long positions heading into the UK Public Sector Net Borrowing data and the much-awaited BOE inflation report hearings.

Besides, focus also remains on the Article 50 marathon debate in the House of Lords, to gauge the sentiment around the pound, as the BOE Governor Mark Carney and his team testify before the Treasury Select Committee (TSC) later in the day.

GBP/USD Levels to consider            

The upside barriers are lined up at 1.2481 (daily high), 1.2500 (round figure) and 1.2570 (Feb 16 high). While supports are aligned at 1.2400/1.2393 (key support/ 50-DMA) and 1.2365 (daily S2) and below that at 1.2344 (Feb 7 low).

 


10:51 EUR/USD probing fresh lows near 1.0560, Fedspeak eyed

The bid tone around the buck is now forcing EUR/USD to test the area of daily lows in the vicinity of 1.0560.

EUR/USD weaker ahead of Fedspeak

The pair met further downside pressure on Tuesday in response to the increasing buying interest surrounding the greenback.

In fact, USD gathered further traction after Philly Fed P.Harker has not ruled out a rate hike by the Federal Reserve as soon as next month. His comments fell in line with the recent testimonies by Chief J.Yellen and other FOMC governors (with the exception of Bullard).

In the data space, auspicious flash PMI readings in Germany for the month of February failed to spark any reaction in the single currency, while upcoming Fedspeak remains poised to grab all the attention. That said, Philly Fed P.Harker (voter, hawkish), Minneapolis Fed N.Kashkari (voter, neutral) and San Francisco Fed J.Williams (2018 voter, neutral) are all due to speak later in the session.

It is worth mentioning that EUR has come under renewed pressure from the speculative community, as net shorts climbed to fresh 3-week highs in the week to February 24, as seen in the latest CFTC report.

EUR/USD levels to watch

At the moment the pair is losing 0.50% at 1.0559 and a breach of 1.0520 (low Feb.15) would target 1.0452 (low Jan.11) en route to 1.0339 (2017 low Jan.3). On the upside, the next resistance lines up at 1.0680 (20-day sma) followed by 1.0682 (high Feb.16) and finally 1.0706 (38.2% Fibo of the November-January drop).


10:38 Riksbanks Ingves: SEK must not strengthen too fast

Sweden central bank, Riksbank, governor Ingves was on the wires last minutes, via Reuters, commenting on the inflation and exchange rate outlook.

Key Headlines:

Jan inflation figures ‘largely as expected’

SEK must not strengthen ‘too fast’


10:36 Germany Markit Manufacturing PMI registered at 57 above expectations (56) in February


10:35 Germany Markit PMI Composite above forecasts (54.7) in February: Actual (56.1)


10:35 Germany Markit Services PMI registered at 54.4 above expectations (53.6) in February


10:32 Hong Kong SAR Consumer Price Index rose from previous 1.2%to 1.3% in January


10:31 US Dollar flirting with highs near 101.30

The greenback – tracked by the US Dollar Index – has gathered further upside traction on Tuesday, currently challenging session highs in the 101.30 area.

US Dollar focus on Fedspeak

The renewed buying interest around the buck is pushing the index to fresh tops further north of the 101.00 handle during the first half of the week boosted by expectations of a potential Fed move at the March meeting.

US yields and appetite for the buck have risen during overnight trade after Philly Fed P.Harker (voter, hawkish) said in an interview with Market News International that he favours a rate hike as soon as next month as long as inflation results accompany.

Later in the session, the attention will be on the speeches by Philly Fed P.Harker (voter, hawkish), Minneapolis Fed N.Kashkari (voter, neutral) and San Francisco Fed J.Williams (2018 voter, neutral), ahead of the key FOMC minutes due on Wednesday.

In the data space, Markit’s advanced Manufacturing and Services PMIs are only due for the current month.

US Dollar relevant levels

The index is gaining 0.34% at 101.26 facing the next resistance at 101.75 (high Feb.15) ahead of 101.95 (23.6% Fibo of the November-January up move) and finally 10296 (low Jan.11). On the flip side, a break below 100.99 (high Feb.20) would aim for 100.44 (20-day sma) and then 100.40 (low Feb.16).


10:26 Gold trading weak amid renewed USD strength

Gold traded with mild negative bias on Tuesday and dropped to the lower end of a 4-day old trading range.

Currently trading around $1233 level, hawkish comments from Philadelphia Federal Reserve Bank President Patrick Harker, hinting towards possibility of a Fed rate-hike action in March, was seen weighing on the non-yielding precious metal. 

Moreover, growing prospects of an eventual Fed rate-hike action triggered a fresh wave of up-move in the US Treasury bond yields and underpinned resurgent US Dollar strength, eventually denting demand for dollar-denominated commodities - like gold.

Furthermore, reviving investors' appetite for riskier assets drove flows away from perceived safe-haven assets and also collaborated to the yellow metal's offered tone ahead of a slew of speeches from various FOMC members on Tuesday and the minutes of the latest FOMC meeting on Wednesday.

Technical levels to watch

From current levels, $1230 level is likely to protect immediate downside below which the slide could get extended towards $1225 intermediate support ahead of 100-day SMA support near $1215 region.

On the upside, momentum above $1240 level might continue to confront resistance at multi-month highs near $1245 region, which if cleared decisively is likely to accelerate the up-move beyond $1250 hurdle towards testing the very important 200-day SMA resistance near $1260-62 region.
 

 


10:01 USD: Gradual pace of Feds rate hikes not enough to derail EM FX gains ING

In view of the analysts at ING, the very calm US data calendar this week suggests that Fed communications and hints at the shape of President Trump’s tax reform should be the key drivers of USD crosses.

Key Quotes

“On the former, Fed’s Mester reiterated other Fed member views overnight, stating that she is comfortable with increases in rates over time. However, as a gradual pace of rate hikes is already priced in by the market (with 75% probability of a June rate hike), much clearer hints at an earlier rate hikes  (March or May) is needed for a Fed’s driven USD rally.”

“For now, and coupled with the mix of solid US and EM data, the current environment remains conducive for EM FX. From a short-term perspective, TRY stands out for its high implied yields, sharply declining post domestic crisis volatility and very cheap valuation. USD/TRY to break below the 3.6000 level.”


10:01 France Markit PMI Composite above forecasts (53.7) in February: Actual (56.2)


10:00 France Markit Services PMI above expectations (53.8) in February: Actual (56.7)


10:00 France Markit Manufacturing PMI came in at 52.3, below expectations (53.5) in February


09:57 AUD/USD reverses Mondays up-move, drops back to 0.7660 support

The AUD/USD pair came under renewed selling pressure on Tuesday and dropped back to its immediate important support near the 0.7660 region. 

Late Monday hawkish comments from the Philadelphia Federal Reserve Bank President Patrick Harker, fueling expectations of an eventual Fed rate-hike action, sooner-rather-than-later, lifted the US Treasury bond yields across the board and attracted some fresh selling pressure around the higher-yielding currencies - like the Aussie.

In addition to this, the minutes from RBA's monetary policy meeting in February, which showed the central bank's readiness to hold rates lower for longer to further support growth also weighed on the Australian Dollar and collaborated to the pair's slide on Tuesday, reversing previous session’s recovery move.

Focus now shifts to a slew of important speeches from various Fed officials and hence, the US Dollar price dynamics would remain an exclusive driver of the pair's movement on Tuesday. Meanwhile, the US economic docket, featuring the release of flash US PMI prints, might also provide some impetus for short-term traders.

Technical levels to watch

On a sustained weakness below 0.7660-55 immediate support, the pair is likely to aim towards 0.7610 support area before eventually breaking below 0.7600 handle and head towards its next support near 0.7555-50 region. On the upside, 0.7685-90 region now seems to have emerged as immediate resistance above which the momentum could lift the pair to 0.7720-30 resistance area ahead of Nov. daily closing highs resistance near 0.7760 region.

 


09:54 Sell AUDUSD at around 0.7670 - HSBC

Research Team at HSBC recommends to sell AUD-USD at 0.7670 on a tactical basis, with a target of 0.7475 and a stop at 0.7750 as the currency faces both domestic and external headwinds in the coming weeks.

Key Quotes

“The risk-reward around Australia's wage data is skewed to the downside for the AUD. Wage data is released on 22 February (Wednesday) with the consensus looking for a small uptick in quarterly wage growth to 0.5% from 0.4%. On a year-on-year basis, wages are expected to rise 1.9%, as they did in Q3. In our view the risks to the currency are skewed to the downside around this release. Wage growth has been in a long-term downward trend in Australia since the mid-2000s. The unemployment rate at 5.7% suggests there is still spare capacity in the labour market, and the split of jobs growth is a concern. In the last 12 months, although 100k jobs were added, 160k were parttime jobs with a fall of 56k in full-time employment. This suggests wage pressures will remain subdued.”

“A similar story was seen in New Zealand recently where average hourly earnings fell in Q4 for the first time since 2012, despite a seemingly resilient economy and labour market. On a broader theme, both the US and the UK have much tighter labour markets but have shown no discernable pick up in wage growth. We see little reason for this to be different in Australia, and after a 6% rally in AUD-USD this year, we believe the risk reward is skewed to the downside in the AUD.”

“Externally, we believe the USD is set to regain some traction as focus shifts back toward potential announcements on some of the administration's domestic policy pledges. We believe that the global reflation theme, which has helped buoy the AUD and held back the USD so far in 2017, is set to peter out.”


09:50 JPY: Bullish EM/commodity currencies? Deutsche Bank

According to Taisuke Tanaka, Strategist at Deutsche Bank, EM/commodity currency view different for JPY and USD based investors as the AUD, NZD, BRL and ZAR are all notably strong against the yen.

Key Quotes

“Japanese investors have long had a preference for such high-yielding currencies. However, the allure of such currencies looks quite different viewed from the dollar and yen amid the present high USD/JPY trend.”

“When the dollar is strong during a US monetary tightening cycle, emerging market (EM) currencies tend to weaken as funds outflow to the dollar. A strong dollar also puts downward pressure on dollar-denominated commodity prices. We believe the Trump administration's policies will prompt growth in both the US economy and interest rates, supporting the dollar's rise.”

“This is likely to weigh on EM and commodity nation currencies. However, the situation is different from the huge outflow of funds starting in the early phase of the dollar's upward cycle in 2012-13. The dollar is presently in the second half of its upward cycle, and the fund outflow is slowing momentum. Some commodities are being supported by supply/demand balances.”

“As the yen weakens in the face of the dollar's strength under the Trump rally, we believe some stronger EM and commodity nation currencies will come to look attractive to Japanese investors. Japanese buying could make the comeback in these currencies appear even more robust. However, this is an optimistic view exaggerated by the yen's weakness against the dollar.”

“We feel that most EM or commodity currencies including the BRL do not have sufficient power to recover on their own strength. Dollar-based investors may want to sell on the rebound if long positions in these currencies are crowded under pressure from the strong dollar. We see this as a risk for Japanese investors.”

“Over the medium term, we need to be aware of the risk of a weakening in support from the fundamentals and supply/demand conditions in EM and commodity nations, which are still not entirely firm. That may be caused by selling on the rally. Or, for example, concern over China might also spur broad risk-off sentiment.”

“Over the coming three years, we see that the yen could outperform EM and commodity currencies once the dollar's upward cycle reaches an end. Japanese investors should consider whether to buy at all as well as the timing, level and duration of any such purchases with consideration of both the high yields (income) and forex risk of such currencies.”


09:47 France Consumer Price Index (EU norm) (YoY) meets forecasts (1.6%) in January


09:46 France Inflation ex-tobacco (MoM) down to -0.2% in January from previous 0.3%


09:41 USD longs retreat further - Rabobank

Jane Foley, Senior FX Strategist at Rabobank, lists down the IMM net speculators’ positioning as at 14 February, 2017.

Key Quotes

“EUR shorts increased for the first time since mid-January last week as uncertainties surrounding the French Presidential election injected some caution into the market. That said, shorts are still only 1/3rd of the size registered at the start of last November. European political concerns had taken a step back in early January while stronger than expected German and Eurozone inflation data re-opened the debate about the appropriateness of easy ECB policy settings at the start of the year.”

“Net USD longs dropped to their lowest level since mid-October. Despite a recent pledge by Trump to outline new tax plans and hawkish comments from Fed officials, the USD has had a choppy ride.”

“Yen shorts have now dropped for seven consecutive weeks as post US election carry trades continue to reverse. Concerns regarding a drop in world trade, tensions in the S.China Sea and the potential for tapering pressures at the BoJ are all supportive JPY factors.”

“Bearish bets against the pound have crept higher for the second consecutive week. The spot market had regained some of its composure on the back of PM May’s Brexit speech in mid-January but nervousness could increase as PM May’s March 31 deadline for triggering article 50 nears. Additionally, there are increasing signs that inflation is eating away at demand.”

“CHF shorts last week dropped for a second consecutive week. The levels of shorts, however, is less than a half of 2016 year-end levels reflecting less interest in the carry trade.”

“CAD long positions more than doubled last week. Comments from US Presidential Trump that he will only tweak the NAFTA along its northern border is an encouraging signal. In addition, better jobs and trade data are encouraging. AUD long positions climbed for a fifth consecutive week on the back of higher commodity prices and the recent better trade data.”


09:36 ECB tapering is not simple Deutsche Bank

George Saravelos, Strategist at Deutsche Bank, suggests that one of the pushbacks they get to their weaker euro view is that the ECB will signal tapering this year preventing EUR/USD weakness but they don’t agree with this view.

Key Quotes

“First, tapering is not necessarily bullish for a currency. When the Fed signaled taper in mid-2013 the dollar strengthened a lot against EM but it weakened against both the euro and yen. Aggressive bear steepening and rising fixed income volatility tend to slow down inflows and are not universally beneficial to a currency. Indeed, such a relationship can be seen between bund volatility and European fixed income inflows over time.”

“Second, ECB tightening is not that simple. Not only would it steepen curves but it risks a return of redenomination risk that has been conveniently compressed by the ECB’s fight against deflation. Take the lowflation excuse away and add back the political risk of a potential 2018 Italian election and the removal of the QE backstop looks much less positive. Indeed the correlation between EURUSD and Italian peripheral spreads has already turned negative: wider spreads via less QE are not a euro positive.”

“Finally, EUR/USD is not just about the ECB but also the Fed and the level of US yields. In previous work we have shown that the dollar is most sensitive to shortend yields both in terms of direction and absolute level. With the dollar having transitioned to a high-yielder and even more Fed hikes to come, the greenback should be doing a good job of attracting inflows and deflecting its use as a funding currency to both the euro and the yen. The dollar has had a tough start to start the year but we are not giving up on our bullish view for 2017.”


09:31 USD/CHF supported at 1.0050 post-Swiss data

The USD/CHF pair is seen reversing from session lows and regains poise, following the release of the Swiss data, which showed widening trade surplus.

USD/CHF awaits Fedspeaks

Currently, the USD/CHF pair advances +0.31% to 1.0060, heading for a test of highs previously posted at 1.0062. The major is closely tracking the USD price-action and reverted to daily highs, after the greenback staged a pullback to 101.24, daily tops.

However, the spot is seen struggling to extend the upside as the CHF bulls found support from upbeat Swiss trade data, which showed trade surplus rising to CHF 4.73bln vs CHF 2.69bln previous.

Nothing of note for the major in the European session, and hence, all eyes remain on the Fedspeaks and US PMI reports due later in the NA session.

USD/CHF Technical Levels    

To the upside, the next resistances are seen near 1.0071 (Feb 16 high) and 1.0100 (zero figure) and from there to 1.0120 (Feb 15 high). To the downside, immediate support might be located at 1.0027 (daily low) and below that at 1.0000 (parity) and at 0.9987 (20-DMA).

 


09:30 Stronger JPY against the USD would not solve US trade deficit with Japan - Nomura

Analysts at Nomura note that the recently concluded US-Japan summit at least went off smoothly as the Japanese side had been concerned that the US might make an issue of its trade deficit with Japan and criticize Japan for adopting policies that favored a weaker yen.

Key Quotes

“However, the subject was apparently not raised. That said, we cannot be certain that it will not be raised in future.”

“It has been estimated that the real GDP of the two countries has a significant impact on the US trade deficit with Japan. What is more, a stronger yen against the dollar tends to make the US trade deficit worse. This is contrary to popular belief. While such estimates should be taken with a pinch of salt, it is probably fair to say that a stronger yen against the dollar would be unlikely to lead to a significant improvement in the US trade balance.”

“It appears to us that there is mounting interest in the US about its trade imbalance. While China is likely to be the main target, it should take a little more time to tell whether Japan will also be targeted. If trade relations between the US and Japan deteriorate, it will be interesting to see whether US demands extend beyond the exchange rate to issues such as the need for Japan to stimulate domestic demand and open its markets, and whether Japan switches to different energy suppliers.”


09:26 France: Uncertainty surrounding the presidential election prevails - Rabobank

Michael Every, Head of FMR at Rabobank, suggests that there is a lot of uncertainty surrounding the French presidential election, where an OpinionWay poll showed Front National’s (FN) Marine Le Pen on 27% for the first round vs. rivals independent Emmanuel Macron and Republican Francois Fillon both on 20%.

Key Quotes

“Moreover, although the poll showed Macron would defeat Le Pen by 58% to 42% in the second round, his lead in the second round has halved in less than two weeks: et voilà - a blow-out in German-French bond spreads. As Bloomberg has noted in two back-to-back stories this week, “Le Pen Lures French Farmers Angered by Worst Crisis in Decades” and “Le Pen Gains in French Polls as Security Concerns Win Voters.” With the FN headquarters being raided by police, and scandals also swirling round Fillon, while Macron is untested in a presidential campaign, the second article rightly concludes, “More than ever, this is a presidential election of unknowns,” or, to put it another way, liberté, égalité, volatilité(?)”


09:22 Asia: Inflows break USD correlations BNPP

Mirza Baig, Head of FX & IR Asia Strategy at BNP Paribas, notes that the USD rallies versus Asian FX are muted and sell-downs are proving more powerful.  

Key Quotes

“Portfolio inflows are picking up again, which could continue as long as the global reflation narrative is supported by data.”

“Asian central banks appear reluctant to intervene, possibly due to concerns of being labelled a ‘currency manipulator’.”

“While speculative long USD positions have been unwound, the market is not significantly long Asian currencies, which suggests the pain trade is for further strength in the near term.”


09:19 GBP gains limited? Danske Bank

Senior Analyst at Danske Bank Morten Helt hinted at the possibility that further gains in the Sterling could be limited.

Key Quotes

“In the majors, GBP strengthened in an otherwise uneventful day as the House of Lords began debating the UK government’s Brexit bill”.

“According to our short-term financial models, EUR/GBP is significantly oversold and GBP/USD is overbought, suggesting that GBP strengthening potential should be limited short term”.

“We still expect EUR/GBP to trade higher as Brexit moves closer, targeting the cross at 0.87 in 1-3M. However, the Brexit bill might not pass the House of Lords in the first attempt unless the members break with their usual practice of allowing government legislation through unopposed at this stage. Hence, short-term risks to EUR/GBP (two to three days) are probably relatively symmetrical”.

 

 


09:19 Australia: GDP growth will pick up to around 3% later in 2017 - Rabobank

Michael Every, Head of FMR at Rabobank, notes that in Australia, the copy-and-paste RBA February minutes concluded – as usual.

Key Quotes

“That GDP growth will pick up to around 3% later in 2017, and to remain above estimates of potential growth, with resources expected to make a large positive contribution, even if there was uncertainty over the labour market. In truth, however, the minutes could have been summarised by the one passage that “Members noted that developments in China continued to be one of the main sources of uncertainty for the Australian economy.”


09:19 USD/JPY well bid for second straight session

The USD/JPY pair was seen building on Monday's recovery move back above 113.00 handle and jumped to 3-day tops amid renewed greenback strength.

Currently trading around 113.55 region, off few pips from session peak, the greenback regained traction during Asian session on Tuesday in wake of hawkish comments from Philadelphia Federal Reserve Bank President Patrick Harker, who supported interest rate-hike move at the Fed's next monetary policy meeting in March. The comments drove up the US Treasury bond yields and remained supportive for resurgent demand for the US Dollar

Meanwhile, today's disappointing release of all-industry activity index from Japan and improving investors' risk appetite further undermined the Japanese Yen and collaborated to the pair's up-move on Tuesday.

Later during the day, speeches from various Fed officials would be scrutinized for possibilities of a Fed rate-hike action in March before investors' gain fresh insight over the Fed's near-term monetary policy outlook from the minutes of the latest FOMC meeting, due on Wednesday.

Technical levels to watch

A follow through buying interest above 113.70-75 area is likely to lift the pair beyond 114.00 handle towards its next resistance near 114.25-30 region. On the downside, retracement back below 113.25-20 immediate support is likely to drag the pair back towards 112.80 horizontal support before eventually dropping to 112.40 strong support.

 


09:15 EURSEK positioned for measured decline BNPP

Sam Lynton, FX Strategist at BNP Paribas, recommends positioning for a measured grind downwards in EURSEK over the coming months.

Key Quotes

“The positive macroeconomic story remains in place, but the market is short the SEK and not pricing in enough for the Riksbank.”

“We think any SEK gains will only be gradual, due to Riksbank FX sensitivity. We therefore recommend ratio put spreads.”


09:11 UK: PSNB data and BoE testimony in focus today TDS

In view of the analysts at TDS, today we get the UK’s PSNB data for January, the last monthly release ahead of next month’s budget which will be closely watched by investors.

Key Quotes

“But what will likely be more interesting is the BoE testimony to the Treasury Select Committee on the IR, with Carney, Haldane, McCafferty, and Vlieghe all speaking (and Haldane releasing his annual statement). Since the IR was published two weeks ago, we’ve seen downside surprises to wage growth, inflation, and retail sales data, which could build on the IR’s already-dovish tone.”


09:07 UK: Article 50 marathon debate in House of Lords continues today Danske Bank

In the UK, the Article 50 marathon debate in House of Lords continues today and will be in focus for today’s session, according to the analysts at Danske Bank.

Key Quotes

“More than 190 members (record) will be speaking during the two-day debate: 80 yesterday and 110 today. Members of the House of Lords have proposed around 30 amendments to the bill and speeches will be monitored closely for signs of the mood among the members and whether the bill in contrast to our expectation could be delayed.”


09:05 Forex Today: USD rebounds in Asia, PMIs, BOE, Fedspeaks - Key

Resurgent US dollar demand across the board emerged the main theme in Asia this Tuesday, which added to the cautious RBA minutes-led losses in the Aussie. While the safe-haven assets suffered amid a better risk-environment, as markets remain expectant of some hawkish talks from a slew of Fedspeaks lined up for release later today.

The European calendar for today is an action-packed one, with a flurry of flash manufacturing PMI reports from across the Euro area economies, which will be followed by the UK public sector finances data and BOE inflation report hearing.  BOE Mark Carney alongside his team will testify before the Treasury Select Committee later today on Feb inflation report

In the NA session, we have the flash services and manufacturing PMI reports from the US. Besides, Fed officials Harker, Kashkari and Williams will be up on the rostrum later tonight.

Main topics in Asia

Fed’s Harker – Won’t take March hike off the table

Philadelphia Federal Reserve President Patrick Harker reiterated that March should be considered for next rate hike.

RBA minutes: Unchanged policy consistent with sustainable growth and inflation target

The minutes of the February RBA monetary policy meeting, when interest rates were held unchanged at 1.5%, have been released.

PBOC will make changes to targeted RRR rates, effective from 27 Feb - RTRS

Reuters reports headlines from the Chinese central bank (PBOC), noting that the bank will make dynamic changes to the targeted RRR rates, effective from 27 Feb.

BOJ’s Kuroda: Continuing powerful easing is appropriate

BOJ Governor Kuroda is out on the wires now, via Reuters, making a scheduled speech in Parliament.

Key focus for the week ahead                                                  

EUR/USD testing lows near 1.0580, PMIs eyed

The EUR/USD pair is seen meandering near five-day lows below 1.06 handle, and looks vulnerable amid broad based US dollar strength and widening European bond yields in wake of political uncertainty.

A further 10% upside for the USD persists – Deutsche Bank

FX Strategists at Deutsche Bank project a further 10% upside for the USD, citing potential US border tax as one of the catalysts behind the upmove.

GBP/USD around 1.2450 ahead of BoE

The Sterling is following south the rest of the risk-associated peers, taking GBP/USD to the mid-1.2400s ahead of UK data and the BoE’s Inflation Report.


09:04 Eurozone: PMIs to give better idea of how much political uncertainty may be weighing on sentiment - TDS

Research Team at TDS suggests that the EZ PMIs should give us a better idea of how much political uncertainty may be weighing on sentiment as we draw closer to the spring elections in the Netherlands and France.

Key Quotes

“Our models are pointing to the PMIs still holding up well in Feb, but with the normal lags in the data, starting to soften in March. So we look for a bit of upside risk with the PMIs basically unchanged from the month before, compared to the small declines that markets are looking for, but acknowledge the higher than usual level of uncertainty.”


09:02 Switzerland Trade Balance above expectations (3.03M) in January: Actual (4.73M)


09:01 EUR/USD offered below 1.0717 Commerzbank

The pair’s stance stays offered while below 1.0717, suggested Karen Jones, Head of FICC Technical Analysis at Commerzbank.

Key Quotes

“The rebound last week has so far merely delayed our negative bias as no resistance of note has been eroded and it still remains capped by the 20 day ma at 1.0681 and the 3 month downtrend at 1.0717. Our focus remains on recent lows at 1.0352/40. Initial support is last weeks low at 1.0521”.

“The market will remain directly offered below short term downtrend at 1.0717. Above here lies 1.0820/26, which represents the 50% retracement and the top of the cloud”.

 

 


09:01 USD gains are expected to be a concern for US administration - BNPP

According to the analysts at BNP Paribas, the USD has been expensive relative to their FEER long-term fair value framework since early 2015, and their forecasts suggest it will get more expensive as we move through 2017.

Key Quotes

“If our forecasts are borne out, the USD will reach levels which would likely make any US administration uncomfortable, and there is good reason to expect that the trade-focused Trump administration would be particularly unhappy.”

“The bulk of trade, tax, fiscal spending and monetary policy changes from the US we expect this year are likely to be USD positive, but we expect the administration to become increasingly vocal on FX as the USD gains, creating an important headwind to potential gains and adding to pressure on other central banks to adjust monetary policy. In recognition of this feedback mechanism, we have lowered our end-2018 forecast target for USDJPY to 130 from 135. Our China economics team has also flattened its USDCNY forecast profile in recognition of this dynamic. It now expects USDCNY to top out at 7.09 in Q4 2017, down from previously forecasting 7.40.”  


08:55 Eurozone: Focus on PMI figures today Danske Bank

In the euro area, PMI figures from Germany, France and the euro area are due out and will garner maximum investors’ attention suggests analysts at Danske Bank.

Key Quotes

“Overall, we expect PMIs to see a downward correction in line with the fall across other survey indicators (IFO and ZEW expectations). In manufacturing, recent months have shown an increase in output, but the order-inventory balance indicator has weakened and points to a downward correction in manufacturing PMI. In service, we also expect a decline in line with the other survey indicators. Still, even with the expected decline in February, PMIs remain at solid levels.”


08:55 GBP/USD around 1.2450 ahead of BoE

The Sterling is following south the rest of the risk-associated peers, taking GBP/USD to the mid-1.2400s ahead of UK data and the BoE’s Inflation Report.

GBP/USD looks to BoE

Despite the solid pick up in the demand for the greenback, the pair manages well to keep the trade within the familiar range in the mid-1.2400s, posting marginal losses ahead of the opening bell in the Old Continent.

GBP will be in centre stage later in the session, as the Bank of England will publish its February Inflation Report, including testimonies by Governor M.Carney and MPC members A.Haldane, G.Vlieghe and I.McCafferty before the Treasury Select Committee. In addition MPC member A.Haldane will release his Annual Report, while UK’s Public Sector finance figures are also due on the data front.

The House of Lords has started on Monday its 2-day debate of Article 50, which is expected to pass without amendments today.

From the positioning universe, speculative GBP net shorts have resumed the upside during the week ended on February 24, climbing to 4-week tops according to the latest CFTC report.

GBP/USD levels to consider

As of writing the pair is losing 0.05% at 1.2454 facing the next support at 1.2379 (low Feb.15) ahead of 1.2344 (low Feb.7) and finally 1.2250 (low Jan.19). On the upside, a break above 1.2515 (20-day sma) would open the door to 1.2550 (high Feb.14) and finally 1.2715 (high Feb.2).


08:52 RBA Minutes: Upbeat outlook for the global economy remained - TDS

Analysts at TDS note that the RBA Minutes for the February Board meeting shed little new light. 

Key Quotes

“The upbeat outlook for the global economy remained, where “Stronger growth had contributed to higher inflationary pressures, including higher commodity prices, which had implications for the future stance of monetary policy in the advanced economies”. Domestically, “Labour cost pressures were expected to build gradually from their current low levels as spare capacity diminished and the effect of heightened competitive pressures on retail prices eased”. Overall, the RBA is in no mood to cut further.”


08:25 Moodys: Chinas non-financial companies can withstand 10% RMB depreciation

Headlines crossed the wires from the US-based ratings agency on the Chinese firms, citing that most Chinese rated high-yield non-financial companies can withstand 10% RMB depreciation, Livesquawk reports.


08:11 CNH and CNY on a shaky ground post US election - Westpac

Sean Callow, Research Analyst at Westpac, notes that the Chinese yuan has fallen a little over 5% over the past 12 months, second only to the Malaysian ringgit among Asian currencies.

Key Quotes

“However, since the US election, CNY and CNH are about middle of the pack within Asia. USD/Asia surged into year-end, backed by steeply higher US yields as markets priced in wider US budget deficits, higher inflation and faster growth.”

“This year has seen a cooling in such expectations, allowing the yuan to recapture some lost ground, though as the chart shows, it is a modest move in context.”

“It is hard to isolate any impact on the yuan from fears of sharply increased US-China trade tensions. President Trump did not deliver on his promise to label China a currency manipulator on day 1 of his administration and in his first call with President Xi, dropped his previous suggestion that the One China policy was open to negotiation.”

“Yet Trump’s top trade advisor is the author of “Death by China” and it is clear that US trade deficits with Mexico and China are a very high priority for the administration. Protectionist measures will follow, but it is not yet clear in what form.”


08:11 Brent: Year-end target seen at $57/bbl Deutsche Bank

Commodity analysts at Deutsche Bank see little upside for oil in the coming months, its latest research note reveals.

Key Headlines via Reuters:

See little upside for oil, with a year-end target of $57/bbl for Brent

Continue to be concerned about the potential impact of USD strength on the commodity complex


07:55 EUR/USD testing lows near 1.0580, PMIs eyed

The EUR/USD pair is seen meandering near five-day lows below 1.06 handle, and looks vulnerable amid broad based US dollar strength and widening European bond yields in wake of political uncertainty.

EUR/USD offered near 10-DMA at 1.0615

Currently, the spot drops -0.28% to 1.0582, hovering within a striking distance of five-day lows of 1.0577.  The EUR/USD pair remains on the offers as markets reduce their bullish bets on the euro amid political uncertainty in France, with the latest OpinionWay poll showing first-round support for Le Pen rising 1%pt to 27%.

While widening French and German 10-year bond yields continue to undermine the sentiment around the common currency. Furthermore, Greece default worries returned to markets, after the Euro zone finance ministers failed to reach an agreement to rescue the debt-embattled economy, which also adds to the losses in the major.

The main currency pair also suffers on the back of fresh USD buying versus its main competitors, in wake of upcoming Fedspeaks and FOMC minutes, all of which are expected to back the case for further rate rises. In the meantime, focus remains on the Euro area flash manufacturing PMI reports due on the cards in Europe.

EUR/USD Technical Levels

In terms of technicals, the pair finds the immediate resistance 1.615/22/27 (10, 5 & 50-DMA). A break beyond the last, doors will open for a test of 1.0663 (100-DMA) and from there to 1.0676 (20-DMA). On the flip side, the immediate support is placed at 1.0561 (daily S3) below which 1.0520 (Jan 6 low) and 1.0500 (psychological levels) could be tested.

 


07:36 Change in rates is likely to favour the USD - BNPP

Analysts at BNP Paribas suggest that the net change in yield differentials they anticipate will still favour a rise in the USD versus the JPY and EUR this year.

Key Quotes

“However, the changes in ECB and BoJ policy we expect this year should once again remind markets of the limits to policy divergence, a lesson driven home repeatedly in 2015 and 2016. The same global reflationary forces which are supporting Fed policy prospects are also boosting inflation and activity in other G10 economies, and this is leading to increased market expectation that central banks outside the US could start to tighten monetary policy.”

“Moreover, gains in the USD in response to tighter US monetary policy are magnifying reflationary pressures outside the US and prompting the US administration to increase the pressure on foreign central banks to reduce policy accommodation.”


07:26 USD/CAD rises in tandem with DXY

The USD/CAD pair ignores the oil-price strength and rises sharply in the Asian session, lock-stepping in with the US dollar.

USD/CAD targets 50-DMA at 1.3199?

Currently, the USD/CAD pair advances +0.27% to 1.3141, having posted daily tops at 1.3149 last hour. The major is seen consolidating the Asian recovery well beyond 1.31 handle, largely in response to pick-up in US dollar demand across the board.  The USD index rises +0.28% to 101.20, extending gains for the third straight session.

Markets prefer to hold the US currency ahead of the Fedspeaks and FOMC minutes scheduled this week, while greenback also recovers grounds on increased expectations surrounding Trump’s tax policies, especially the border tax.

Focus now remains on the USD dynamics, while sentiment around the black gold will also play a key role amid a lack of significant economic releases slated today from both the North American nations.

USD/CAD Technical Levels   

To the upside, the next resistances are seen near 1.3150 (psychological levels) and 1.3199 (50-DMA) and from there to 1.3215 (Feb 15 high). To the downside, immediate support might be located at 1.3100 (daily low) and below that at 1.3079 (daily S2) and at 1.3057 (Feb 17 low).

 


07:12 RBA: Markets price only a small risk of a cut by June 2017 - Westpac

Sean Callow, Research Analyst at Westpac, notes that the RBA held the cash rate at 1.5% in February and maintained a neutral outlook in its statement which was fully expected.

Key Quotes

“Perhaps most notable in the statement – later reinforced in the quarterly SoMP – was a more upbeat view of the global economy: “The improvement in the global economy has contributed to higher commodity prices, which are providing a boost to Australia's national income.” GDP growth is expected to rebound after the weak Q3 reading.”

“Westpac expects that the labour market – rather than inflation - will be key to whether there is a rate cut in 2017. Our base case is that the cash rate remains at 1.5% throughout both 2017 and 2018. We see risks to this view skewed more to a rate cut than to a hike, as growth in 2018 could disappoint.”

“Markets price only a small risk (about 10-15%) of a cut by June 2017 and then toy with the idea of a rate rise by year-end (also 10-15% chance).”


07:09 AUDUSD: Limited scope to break significantly above 0.77 - BNPP

Strong risk appetite and global equities’ outperformance continue to support commodity bloc FX and following a sharp rise in iron ore prices, AUDUSD has risen to its highest level since the US election notes research team at BNP Paribas.

Key Quotes

“However, with the market long the AUD (at +32, the highest score since 2012), we see limited scope for AUDUSD to break significantly above 0.77. Our commodity strategy team expects oil prices to retreat in the coming weeks given questions about the sustainability of output cuts.”


06:45 Commodities: Positive start of the week - ANZ

Analysts at ANZ note that commodities started the week on a positive note as with US exchanges closed, political developments in Europe drove sentiment in commodity markets.

Key Quotes

“Crude oil prices nudged higher as investors continued the tug of war between supply around the world. With the US market closed for President’s Day, liquidity was significantly lower than normal in the oil market. Despite prices stuck in a tight trading range, CFTC data showed investors raised their net long positions in WTI and Brent to a record high level.”

“A solid session in Asia flowed into trading in Europe, with most base metals ending the day higher. Lead and zinc lead the gains, with rising concerns over concentrate supplies. Vedanta CEO Tom Albanese said smelters are struggling to find source material after last year’s mine closures. Copper prices were also higher, supported by the ongoing stalemates at both Escondida and Grasberg.”

“Iron ore prices rose strongly as further steel capacity reductions saw steel prices surge higher. Bloomberg reported that China’s Hebei had ordered steel mill in Tianjin to cut production ahead of the national annual parliament meeting to improve air quality. This follows on from news late last week that China will continue to encourage steel producers to sign long term contracts with raw material suppliers to help eliminate outdated capacity.”

“Gold prices reversed last Friday’s losses amid low liquidity. Without any major economic releases or signals from the currency markets, gold is likely to trade sideways. However, all eyes will be on the release of minutes from the Fed’s last meeting for any evidence that Trump’s policies are having an impact on their rate policy.”

“With US markets closed, Agriculture prices were unchanged.”


06:40 AUD likely to print fresh highs against the Chinese yuan since 2014 - Westpac

Sean Callow, Research Analyst at Westpac, suggests that AUD seems likely to print fresh highs against the Chinese yuan since 2014 in coming weeks.

Key Quotes

“The Aussie should continue to enjoy support from resilient commodity prices and an optimistic RBA outlook, even as domestic data prints mixed.”

“But the biggest swings in AUD/China in recent months have been during sharp sentiment changes on the US dollar. AUD will remain a much higher beta USD play than the yuan, as seen by AUD underperformance in Nov-Dec 2016 and then outperformance in the early weeks of 2017 as the US dollar fell across the board.”

“We expect both AUD and the yuan to depreciate against USD multi-month, implying AUD/China decline towards 5.15/5.20. But near term, AUD/CNY should probe the 5.30-5.35 area, with the Aussie helped by elevated risk sentiment over both the US and China.”

“It is quite typical for bullish expectations for China’s infrastructure spending to produce AUD/China gains, just as periods of pessimism over China see the Aussie punished.”


06:38 A further 10% upside for the USD persists Deutsche Bank

FX Strategists at Deutsche Bank project a further 10% upside for the USD, citing potential US border tax as one of the catalysts behind the upmove.

 


06:33 Japan All Industry Activity Index (MoM) below forecasts (-0.2%) in December: Actual (-0.3%)


06:28 Japans Aso: Japan understands that there is no unified FX policy in the US yet

Japanese finance minister Taro Aso is also on the wires now, via Reuters, speaking alongside BOJ Governor Kuroda in Parliament.

Key Headline:

Understand that there is no unified FX policy in the US yet


06:26 France: Le Pen continues to stretch her lead in the presidential race - ANZ

Overnight polls showed that National Front leader Le Pen continues to stretch her lead over main rivals in the French presidential race notes research team at ANZ.

Key Quotes

“A daily poll by OpinionWay showed first-round support for Le Pen rising 1%pt to 27%, above her nearest rivals Macron and Fillon at 20% each. Admittedly, in the second round, polls have Macron defeating Le Pen with 58% of the vote, although his lead has halved in the past two weeks.”

“European bond spreads are widening which represents a tightening in financial conditions at a time the ECB is low on fire-power. Irrespective of the actual outcome, it is notable that 42% of the French electorate is currently supporting parties with a Euro-sceptic platform.”


06:23 BOJs Kuroda: Continuing powerful easing is appropriate

BOJ Governor Kuroda is out on the wires now, via Reuters, making a scheduled speech in Parliament.

Key Headlines:

Easing is for achieving inflation target, not aimed at FX

BOJ is still far from inflation target

Continuing powerful easing is appropriate

Too early to raise target rates

Cannot assume that the BOJ will raise rates because rates are rising overseas


06:19 US dollar index firmer, eyes on 50-DMA

The US dollar index (DXY), which measures greenback’s value against a basket of six major currencies, staged a solid pullback from the overnight retreat, and now clinches fresh highs beyond 101 handle.

Renewed buying interest seen behind the greenback across the board in the Asian hours can be mainly attributed to the rebound in the US treasury yields, as investors gear up for a series of speeches from the Fed policymakers up on the sleeves today and in the week ahead.

While FOMC Feb meeting minutes due Wednesday is also highly anticipated for fresh hints on the Fed rate hike outlook, especially after Yellen’s hawkish testimony.

At the time of writing, the USD index advances +0.30% to trade near 4-day tops of 101.24, while the 2-year treasury yields, which mimics the interest rates expectations, rallies +1.40% to 1.215%

DXY Technical levels 

Resistance levels are seen at 101.36 (50-DMA), 101.50 (psychological levels) and 101.71 (Jan 16 & 19 high). On the opposite direction, support might be located at 100.50/55 (Feb 10 & 13 low), 100.00 (psychological/ Feb 9 low) and 99.45 (Feb 3 low). 


05:53 USD/JPY: Subject to upside risk on US reflation reality check ING

The research team at ING offers their outlook for trading USD/JPY this week.

Key Quotes:

The latest whipsaw in USD/JPY mirrored the path of long-doted US yields and sow a brief move above 115. Fundamentals suggest the next big move is higher but markets happy to wait before buying into Trump tax reforms.”

“Second-tier data in Japan (trade balance, PMI and retail sales) unlikely to have much of a market impact. Focus for the BoJ is keeping a lid on 10-year JGB yields (below 0.1%); expect to see an increased amount of buying again as was the case at the last operation (Y320 bn).”


05:25 PBOC will make changes to targeted RRR rates, effective from 27 Feb - RTRS

Reuters reports headlines from the Chinese central bank (PBOC), noting that the bank will make dynamic changes to the targeted RRR rates, effective from 27 Feb.

Key Points:

Referring to the Bank extending its programme to allow financial institutions that support rural finance and small enterprises to apply for a lower required level of cash reserves

PBOC says adjustments to RRR targeted rates will be made both up and down

Most banks meeting the targeted RRR requirements will continue to enjoy a preferential RRR rate


05:20 AUD/USD under pressure below 5-DMA, RBA minutes weigh

The AUD/USD pair remains confined within a 10-pips narrow range, as market continue to assess the RBA minutes released earlier on the day, which offered a mixed outlook of the Australian economy.

The RBA minutes revealed that the central bank maintained that unchanged policy consistent with sustainable growth and inflation target, while keeping the same stance on the exchange rate level.

However, the minutes showed that the spare capacity is likely to persist in the labor market, which hinted towards a slack in the labour markets, weighing down on the AUD somewhat.

With minutes now out of the way, the major is likely to get influenced by the risk trends and USD dynamics ahead of the US PMI reports, while the Australian datasets due on the cards tomorrow will be eagerly awaited.

AUD/USD Levels to watch   

At 0.7670, the pair finds the immediate resistance at 0.7694 (previous high) above which gains could be extended to the next hurdle located 0.7732 (multi-week high) and 0.7750 (psychological levels). On the flip side, the immediate support located at 0.7652 (20-DMA). Selling pressure is likely to intensify below the last, dragging the Aussie to 0.7600 (round figure) and below that 0.7537 (200-DMA).

 


05:14 Brent oil rises for second day, trades above $56/barrel

Brent oil rose for the second day with prices trading above $56/barrel despite concerns the increased US oil supplies would negate the impact of OPEC oil cuts.

The data from the InterContinental Exchange showed on Monday that speculators raised their bets on a rally in Brent oil prices to a record last week.

However, there are growing fears that the OPEC –led production cuts would not be sufficient to boost prices in the long run given the rise in the US supplies. The Baker Hughes data released on Friday showed the number of active oil rigs rose for a fifth week in a row, rising by 6 to 597 for the week ending February 17.

The US government inventory data will be released on Thursday, a day later than normal due to holiday on Monday.  


05:03 PBOC Q4 monetary policy report emphasizes stable and neutral stance - GS

Analysts at Goldman Sachs (GS) offer their insights on the PBOC’s Q4 monetary policy report released over the weekend.

Key Quotes:

“PBOC Q4 monetary policy report emphasizes “stable and neutral” stance, underscoring hawkish policy shift”

“The report also sheds a bit more light on the asset size of bank’s off-balance sheet wealth management product exposures.”


04:55 Offshore Yuan implied deposit rate clocks 6-1/2 week high

The overnight implied deposit rate for offshore Yuan rose to its highest level since January 6.


04:54 Gold slips in Asia amid risk-on, Fedspeaks in focus

Gold prices on Comex are seen making minor-recovery attempts from session troughs, although keep losses amid persisting risk-on market profile.

Gold trades below 5-DMA at $1237.67

Currently, gold trades -0.32% lower at $ 1135.25, having found solid support near hourly 200-SMA placed at $ 1234.20.  Gold rallied to $ 1240 levels a day before, as the greenback suffered losses across the board amid a lack of clarity on Trump's tax policy.

However, the yellow metal failed to sustain the upside and drop sharply in Asia, as the US dollar staged a solid comeback on the back of higher treasury yields amid returning risk appetite. Also, increased nervousness ahead of a raft of Fedspeaks this week weigh down on gold.

Further, in an evidence of deteriorating investors’ confidence in gold, the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, reported an outflow of 2.4 tonnes on Friday, the first in nearly four weeks.

All eyes now remain on the Fedspeaks and FOMC minutes due later this week for fresh direction on the non-interest bearing yellow metal.

Comex Gold Technical Levels                                  

The metal has an immediate resistance at 1240 (round figure) and 1260.75 (200-DMA). Meanwhile, the support stands at 1226.82 (20-DMA) below which doors could open for 1202.10 (100-DMA).


04:44 NZD/USD hit four-day low

The NZD / USD pair extended early losses to hit a four-day low of 0.7155 levels as sentiment around milk powder prices weakened ahead of today’s Global Dairy Trade (GDT) auction.

Milk futures weaken

Whole milk powder futures contracts for March, April and May dropped almost 5% over the last few days. Markets are expecting a 3% decline in the whole milk powder prices.

The dairy-correlated ‘Kiwi’ Dollar is likely to weaken if the milk powder prices drop more than expected.

NZD/USD Technical Levels

The spot was last seen trading around 0.7158 levels. A breakdown of the support at 0.7134 (Feb 14 low) would expose 0.71 (zero levels), under which the losses could be extended to 0.7043 (Dec 1 low). On the other hand, a break above 0.7170 (previous day’s low) would expose 0.72 (zero figure) and 0.7242 (Feb 16 high).


04:34 China MOFCOM: Consumption growth to remain robust in 2017

Reuters reports headlines from the Chinese Commerce Ministry (MOFCOM) on foreign investments and consumption growth.

Key Points:

Consumption growth outperforms goods consumption

 Consumption growth to remain robust in 2017

Claims that foreign investment is leaving China are incorrect

Foreign trade environment to remain complex in 2017


04:29 GBP/USD flirts with lows near 1.2450, BOE eyed

The GBP/USD pair fails once again to sustain near 1.2480 region in the Asian session, now breaking lower from an upside consolidative phase amid resurgent greenback demand across the board.

BOE inflation report hearings in focus

The major is seen meandering near session lows struck at the mid-point of 1.24 handle, as the demand for the pound takes a hit amid higher treasury yields, which diminish the attractiveness of the GBP as an alternative higher yielding currency.

Further, renewed broad based US dollar strength, in response to strengthening treasury yields also weigh on the major. While markets remain nervous heading into the main risk event for the spot today, the BOE inflation report hearings. BOE Mark Carney will testify before the Treasury Select Committee later today on Feb inflation report.

GBP/USD Levels to consider            

The upside barriers are lined up at 1.2481 (daily high), 1.2500 (round figure) and 1.2570 (Feb 16 high). While supports are aligned at 1.2400/1.2393 (key support/ 50-DMA) and 1.2365 (daily S2) and below that at 1.2344 (Feb 7 low).

 


04:21 Japanese 30-yr yield stays at one-year high

The yield on 30-year Japanese government bonds holds at one-year high on view that the Bank of Japan (BOJ) would tolerate the rising yields at the long-end of the curve.

The benchmark 10-yr yield is trading marginally positive around 0.095%.

Despite the rise in the super long JGB, the Yen is having a tough time strengthening against the US dollar.


04:11 Yield curve proves hard to steer for nervous BOJ - Nikkei

The Nikkei published an article overnight on BOJ’s efforts to control JGB yields, highlighting the following:

The sharp moves in the 10-year Japanese government bond yield in early February (3rd), when the BOJ did not step in to buy as yields rose ... and then the Bank scrambled into the market, appearing to have lost control of what they were trying to control.

Market doubt on what it is the BOJ is trying to do, worth a read even though the piece does not break new ground.

Full article here


04:05 EUR/JPY - rejected at 5-DMA, holds above 120.00

EUR/JPY is working hard to avoid a dip below 120.00 levels after having faced rejection earlier today at the 5-DMA level of 120.32.

EUR is at the mercy of Greece & political uncertainty

Greek issue could take an ugly turn as the agreement to unlock bailout payments got delayed. Moreover, creditors demand Athens institutes tax and labour reforms before accessing funds.

Meanwhile, heightened political uncertainty in France and Germany is also weighing over the common currency. Surprisingly, the bid tone around the Yen has failed to strengthen. However, there is growing chatter in the markets that EUR/JPY could retake the roll of global risk barometer in the days ahead.

EUR/JPY Technical Levels

The cross was seen trading around 120.15. A break below 119.92 (session low) could yield a sell-off to 119.64 (previous session’s low), under which the losses could be extended to 119.20 (50-DMA). On the other hand, a break above 120.33 (5-DMA) would expose 121.00 (zero figure) and 121.33 (Feb 10 high).

 

 


04:00 USD/JPY extends the bullish break to 10-DMA

The US dollar picks-up significant strength versus its main rivals over the last hours, allowing an extension of the rally in USD/JPY near the mid-point of 113 handle, where 10-DMA intersects.

Ex-IMF’s Jen: Yen to hit bottom at 120 before rallying - BBG

The spot is last seen exchanging hands around 113.50, hovering close to session tops reached at 113.56 some minutes ago. The major extends its rebound into a second day today, mainly driven by a better risk environment amid higher Japanese equities and treasury yields, which lifted the bids around the greenback.

Meanwhile, markets paid little heed to better-than expected Japanese manufacturing PMI index published by Nikkei, which arrived at 53.5 versus 52.7. Attention turns towards the US docket, with the flash manufacturing and services PMI reports on the cards. Besides, Fed official Harker’s speech will also hog the limelight.

USD/JPY Technical levels to watch 

The major finds immediate resistance at 113.84 (daily R3). A break above the last, the major could test 114 (round figure) and 114.36 (Feb 16 high) beyond the last. While to the downside, the immediate support is seen at 112.75 (Feb 20 low) next at 112.58 (Feb 17 low) and below that at 112.03 (Feb 2 low).

 


03:43 Ex-IMFs Jen: Yen to hit bottom at 120 before rallying - BBG

In an interview with Bloomberg, former International Monetary Fund (IMF) economist Stephen Jen expressed its take on the BOJ monetary policy program and yen outlook in the coming six months.

Key Points:

The currency will rebound to 100 by early 2018 as the Bank of Japan’s policies of controlling yields and adding stimulus through bond purchases reach a limit

“The BOJ is closer to the limits of their unconventional monetary policy than any other central bank” 

Once all its options are exhausted, the yen will return to its fair value of around 90 per dollar

“Capital flows will be so intense, if the BOJ insisted on keeping the nominal rate anchored, the impact on dollar-yen would lead to other distortions and policy reactions from other countries”

“The zero percent interest-rate target will be used and adjusted in the same way that the Fed is adjusting the fed funds rate and the European Central Bank will taper”

In the next six months, “it’s more about the Fed than Japan or the BOJ” 


03:36 Aussie PM Turnbull backs IMF call for infrastructure spending

Fiscalism is in the air and the era of unprecedented central bank domination may be coming to an end.

As per Bloomberg report, “The IMF and Reserve Bank of Australia have urged the government to build roads, railways and ports that will boost productivity, increase hiring and stimulate the economy.”

PM Turnbull agreed with the International Monetary Fund’s call for more spending on infrastructure, although it would be a tight rope walk given the major ratings agencies are closely tracking the government’s budget deficit.


03:17 PBOC set Yuan midpoint at 6.8790

The People's Bank of China (PBOC) set the Yuan midpoint/daily reference rate at 6.8790 compared to Monday's fix of 6.8743. 


03:07 EUR/USD dips below 50-DMA, clocks four-day low

EUR/USD dipped below 50-DMA to clock a four-day low of 1.0585 as markets continue to offer the common currency in response to Greek crisis and heightened political uncertainty in France.

Greece needs to implement reforms

Euro zone finance ministers poured cold water on Monday on a quick agreement that would unlock further aid payments to Greece. However, both parties did agree to continue discussions in the coming days. 

Creditors are demanding that Greece institute tax, pension and labour reforms before they will sign off on an agreement.

France-German yield spread continues to widen

Meanwhile, the French Presidential election is now a four-way race up for grabs. In response to the heightened political uncertainty, the France-German 10-year yield spread widened to 78 basis points on Monday.

Politics could continue to dominate economics today.  Still, the preliminary PMI readings due for release across the Eurozone are worth a watch, especially for clues regarding build up of inflationary pressures.

EUR/USD Technical Levels

The spot was last seen trading around 1.0590. A lift above 50-DMA of 1.06 could yield a re-test of 1.0623 (10-DMA), above which a major hurdle is noted at 1.0677 (Feb 17 high). On the downside, breakdown of support at 1.0561 (Feb 14 low) would open doors for a sell-off to 1.0521 (Feb low) and to 1.05 (zero figure) levels. 

 


02:53 AUD/JPY printing fresh session highs post RBA minutes

Currently, AUD/JPY is trading at 87.02, up 0.08% on the day, having posted a daily high at 87.19 and low at 86.90.

AUD/JPY has been better bid in Tokyo, moving up from the 87.00 level, taking a pause and a fade at 87.15 down to 87.06 ahead pf the RBA minutes. On the release of the minutes, the Aussie has picked up some demand and the cross has recovered back to print fresh highs for the session, albeit turning lower again on the 10-minute sticks post the event. 
The RBA February meeting minutes stated that there was a better global activity, but China remains the main source of uncertainty for the Australian economy. \

More here from the minutes: RBA minutes: Unchanged policy consistent with sustainable growth and inflation target

AUD/JPY levels

AUD/JPY has made a double top with the correction post the event. However, the ascending 20 sma on the hourly time frame has been supportive of the price from 86.70 crossing up through the flattening 50 sma on the same time frame. On the wide, 88.15 is the recent highs for the tear through 87.50 while to the downside, 85.80/90 are key targets as previous resistance earlier in the month.

 


02:42 AUD/USD remains flat lined following RBA minutes release

The bid tone around the Aussie dollar failed to gather pace, leaving the AUD/USD pair flat lined around 0.7680 even though RBA minutes showed policymakers see resource exports to boost GDP.

Slack in the labor market - RBA

The muted reaction may be due to RBA’s cautious comments on the labor market. The central bank said the spare capacity is likely to persist in the labor market and consumption growth could be limited by subdued income levels.

The minutes reiterated that an appreciating exchange rate would complicate this adjustment. Overall, the minutes painted a mixed picture, thus leaving the Aussie largely unimpressed. The Aussie 10-yr bond yield is flat lined around 2.815% as well.

AUD/USD Technical Levels

The daily chart shows a rising wedge pattern. A break below 0.7637 (Feb 15 low) would open doors for 0.76 (zero figure), under which the losses could be extended to 0.7507 (200-DMA). On the higher side, resistance at 0.7696 (Feb 2 high), if breached, would expose 0.7732 (Feb 16 high) and 0.7744 (wedge resistance).

 


02:36 Japan Nikkei Manufacturing PMI registered at 53.5 above expectations (52.1) in February


02:34 RBA minutes: Unchanged policy consistent with sustainable growth and inflation target

The minutes of the February RBA moneary policy meeting, when interest rates were held unchanged at 1.5%, have been released.

As the RBA minutes notes: "In considering the stance of monetary policy, members viewed the near-term prospects for global growth as being more positive, although recognised the risks from policy uncertainty in the medium term."

On the AUD, the RBA said: " The depreciation of the exchange rate since 2013 had also assisted the economy in its transition following the mining investment boom. An appreciating exchange rate would complicate this adjustment."

The RBA adds: "Taking account of all the information available, including the updated forecasts, an assessment of the risks affecting these forecasts and the level of the cash rate, the Board judged that holding the stance of policy unchanged would be consistent with sustainable growth in the economy and achieving the inflation target over time."

Considerations for Monetary Policy

In considering the stance of monetary policy, members viewed the near-term prospects for global growth as being more positive, although recognised the risks from policy uncertainty in the medium term. Stronger growth had contributed to higher inflationary pressures, including higher commodity prices, which had implications for the future stance of monetary policy in the advanced economies in coming years. Long-term bond yields had moved higher in many advanced economies.

Domestically, the economy was continuing its transition following the end of the mining investment boom. The fall in GDP in the September quarter had reflected some temporary factors. Looking forward, resource exports were expected to make a significant contribution to growth over the forecast period and the drag on growth from falling mining investment was expected to wane. The depreciation of the exchange rate since 2013 had also assisted the economy in its transition following the mining investment boom. An appreciating exchange rate would complicate this adjustment. Consumption growth was expected to be stronger than the subdued outcomes in the middle of 2016, supported by low interest rates. However, the increase in consumption growth was expected to be limited given the forecast for subdued growth in household incomes. Non-mining business investment was also expected to gain some momentum. The outlook continued to be supported by the low level of interest rates.

Labour market outcomes had been mixed and, as a result, there was uncertainty about the momentum in the labour market. The unemployment rate had increased slightly at the end of 2016, but full-time employment growth had increased, having fallen throughout most of the year. The unemployment rate was forecast to edge lower, which implied that spare capacity would persist in the labour market for some time.

Conditions in housing markets varied considerably across the country. Housing prices and rents had been falling in Perth and there were signs that the significant increase in the supply of apartments had begun to affect prices and rents in Brisbane. In contrast, activity in the established housing market had picked up in Sydney and Melbourne in the second half of 2016, and investor credit growth had increased. Supervisory measures had strengthened lending standards and some lenders were taking a more cautious attitude to lending in certain segments.

Inflation outcomes for the December quarter were much as had been expected and there had been very little change to the forecast for inflation. Labour cost pressures were expected to build gradually from their current low levels as spare capacity in the labour market diminished and the effect of heightened competitive pressures on retail prices eased. Medium-term inflation expectations had remained well anchored and inflation was expected to increase gradually.

Taking account of all the information available, including the updated forecasts, an assessment of the risks affecting these forecasts and the level of the cash rate, the Board judged that holding the stance of policy unchanged would be consistent with sustainable growth in the economy and achieving the inflation target over time.

 


02:30 USD/CNY fix projected at 6.8771 - Nomura

Analysts at Nomura offered their projection for today's USD/CNY fix as 6.8771.

Key Quotes:

"Our model1 projects the fix to be 28 pips higher than the previous fix (6.8771 from 6.8743) and 11 pips lower than the previous official spot USD/CNY close of 6.8782.

The basket implied change is 13 pips lower than the previous official spot USD/CNY close (6.8769 from 6.8782)."


02:24 USD/JPY: scoring fresh highs to 113.41 with equities bid in Tokyo

Currently, USD/JPY is trading at 113.34, up 0.19% on the day, having posted a daily high at 113.41 and low at 113.09.

USD/JPY has sprung into life in Asia, making tracks from out of the consolidation period between a couple of pips below the 113 handle and 113.16  the Us session high. The price has since climbed to aforementioned highs breaking the 4hr 20 sma at 113.24. This move comes as Asian equities have opened mostly higher while Wall Street was closed overnight. Markets are now bracing themselves for the RBA minutes. 

In respect to market positioning and latest CFTC report, analysts at Rabobank noted that yen shorts have now dropped for seven consecutive weeks as postUS election carry trades continue to reverse. Concerns regarding a drop in world trade, tensions in the S.China Sea and the potential for tapering pressures at the BoJ are all supportive JPY factors."

USD/JPY levels

On the wide levels, the USD/JPY remains between key breakout levels as 115.62, 19th January high, and 111.50 and the 200 day smoothed sma. The 16-month resistance line is at 117.99 while the base of the cloud is located at 109.92.  "Only below 111.59 would introduce scope to the base of the cloud, which lies at 109.92 and, if seen, we look for this to hold (this is also the 50% retracement of the move up from November)," explained analysts at Commerzbank, adding, "However this is not our favoured view - we also note that the recent move lower continues to indicate that this is the end of the corrective move."


02:17 Feds Harker Wont take March hike off the table

Philadelphia Federal Reserve President Patrick Harker reiterated that March should be considered for next rate hike.

Harker has repeatedly said in the recent past that he is in support of three rate hikes this year and wants to make sure the central bank does not fall behind the curve.


02:11 Saudi Arabia boosted oil output & exports to record high in 2016

As per Bloomberg report, Saudi Arabia boosted oil output and exports in 2016 to the highest monthly averages on record.

Exports jumped to 7.65 million barrels a day (mbpd) from 7.39 million barrels a day. Production rose to 10.46 mbpd from 10.19 mbpd.


01:53 Commodities on a positive note - ANZ

Analysts at ANZ noted that commodities started the week on a positive note.

​​Key Quotes:

"With US exchanges closed, political developments in Europe drove sentiment in commodity markets.

Crude oil prices nudged higher as investors continued the tug of war between supply around the world. With the US market closed for President’s Day, liquidity was significantly lower than normal in the oil market. Despite prices stuck in a tight trading range, CFTC data showed investors raised their net long positions in WTI and Brent to a record high level. 

A solid session in Asia flowed into trading in Europe, with most base metals ending the day higher. Lead and zinc lead the gains, with rising concerns over concentrate supplies. Vedanta CEO Tom Albanese said smelters are struggling to find source material after last year’s mine closures. Copper prices were also higher, supported by the ongoing stalemates at both Escondida and Grasberg.

Iron ore prices rose strongly as further steel capacity reductions saw steel prices surge higher. Bloomberg reported that China’s Hebei had ordered steel mill in Tianjin to cut production ahead of the national annual parliament meeting to improve air quality. This follows on from news late last week that China will continue to encourage steel producers to sign long-term contracts with raw material suppliers to help eliminate outdated capacity.

Gold prices reversed last Friday’s losses amid low liquidity. Without any major economic releases or signals from the currency markets, gold is likely to trade sideways. However, all eyes will be on the release of minutes from the Fed’s last meeting for any evidence that Trump’s policies are having an impact on their rate policy. With US markets closed, Agriculture prices were unchanged."


01:34 USD/JPY RSI indicates a weakening pattern

The 1-minute USD/JPY RSI is laboriously trying to reverse the bullish condition falling below the minimum level of the recent nine minutes. USD/JPY quotes at

01:27 When are the RBA minutes and how could they affect AUD/USD?

Feb RBA Minutes Overview

The Feb RBA minutes is due later today at 12.30GMT. The consensus is that the minutes will mirror the RBA's recent bullish rhetoric of the economy but are released, which should mirror recent upbeat commentary. 

How could the RBA Minutes affect AUD/USD?

The Australian dollar has been on the rampage this year so far while markets look for yield, disappointed at Trump's delay in implementing pro-business reforms leading to an unwind of the late 2016 long dollar reflation trade. The RBA has been less of a driver so far this year as maintaining the status quo while coal and iron ore have been an underlying supportive factor to the Aussie as well. The economic data for Q4 and Q1 should improve, according to analysts at Westpac and further bullish rhetoric in the minutes could provide demand for the Aussie opening a case for territory back onto the 0.77 handle. However, with the SOMP around the corner, movements and momentum in either direction maybe limited. The biggest risk would be jawboning of the currency's strength and any surprise bearish or dovish comments that could lead to a relatively strong sell-off in the Aussie, brekaing the 4hr 50 sma at 0.7670 and eyeing the 0.7600 psychological level and January highs/resistance of 0.7608.

Key Notes

AUD/USD supported by 4hr 50 sma and awaits Central Bank minutes

Analysts at ANZ explained that they expect there will be little to un-nerve financial markets in this morning’s release of the minutes from the RBA’s February board meeting. "The tone of the post-meeting statement was broadly unchanged and the minutes have been superseded by the SoMP. Since then the bounce in January business conditions and confidence, combined with the robust global backdrop, support a solid economic outlook. As always, commentary around the housing market in the minutes will be important, particularly ahead of Governor Lowe’s parliamentary testimony on Friday and the intensifying debate around housing affordability."

About the RBA Minutes

The minutes of the Reserve Bank of Australia meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee. Generally speaking, if the RBA is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the AUD.


00:36 NZD/USD: bearish bias, awaiting dairy auction as next catalyst

Currently, NZD/USD is trading at 0.7187, down -0.02% on the day, having posted a daily high at 0.7192 and low at 0.7184.

NZ: Economy still has solid credentials - ANZ

NZD/USD has been consolidated overnight in quiet holiday markets, supported by the hourly 20 sma and resisted by the 50 sma on the same time frame. The focus will be with the daily auction later that is priced by futures to result in a 3% decline in WMP prices after Fonterra that had recently upgraded its milk collection forecast for 2016/17. For today, the focus will be with the RBA minutes for February hat could offer a bullish scenario for the antipodeans if they are to continue the upbeat theme from the RB's rhetoric that we have seen of late.  Meanwhile, analysts at Westpac noted that Momentum remains negative for the bird and they are targeting 0.7130 during the days ahead.

NZD/USD 1-3 month:  

The Fed’s tightening cycle plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar, pushing NZD/USD down to 0.7000 or lower. Granted, the NZ economy is strong and dairy prices have risen, but these forces are subservient to the US dollar’s trend. (21 Feb).

Meanwhile, the price is capped by the 20-d sma at 0.7237 with the 50-d sma located at 0.7131 below. The descending resistance line is located at the psychological 0.7000 level that meets the 200-d smoothed ma potentially offering a strong support line. 0.7380 on the wide guarding space on the 0.74 handle and 0.74846th Sep 2016 highs. 

 

 


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