An official source in National Iranian Oil Company (NIOC) stated that Iran's oil exports was 2.265 M bpd in Feb 20 till March 20.
The source further added that Iran's condensate exports was 800T bpd in Feb 20 till March 20 and does not have any condensate on ships.
After having managed to close at 1.0800 levels last week, the EUR/USD pair ran through a fresh buying-wave and opened Asia Monday with a 40-pips bullish gap, as the Asian traders sold-off the buck in a reaction to the weekend’s news of the Trumpcare bill failure to seek the House approval.
The healthcare failure raised questions on Trump's ability to deliver on his campaign promises and also on the Republican Party to capacity to govern effectively, thereby rattling investors’ confidence and triggered risk-off moods across the boards, with the greenback diving across the board alongside the treasury yields.
Moreover, reports of German Chancellor Angela Merkel’s party victory in elections in the western state of Saarland, also emerged in favor of the euro, adding to the further upside in the EUR/USD pair.
Looking ahead, we have an eventful, with a bevy of Fed speakers on the cards apart from a host of crucial macro releases from both continents. In the meantime, focus now shifts to the German Ifo Business climate data and FOMC member Evans speech due later today.
EUR/USD Technical Levels
Valeria Bednarik, Chief Analyst at FXStreet noted, “he EUR/USD pair has been contained by a major mid-term resistance, the 1.0820 level which represents the 50% retracement of the post-US election's decline, although pullbacks from the area have been quite shallow, which implies a high risk of a bullish breakout. In the daily chart, the Momentum indicator maintains its bullish slope, now within overbought territory, whilst the RSI indicator consolidates around 62, reflecting the latest range-bound trading.”
“In the same chart, the 20 DMA heads north below the current level after crossing above the 100 DMA, all of which supports additional advances, particularly on an upward extension beyond the 1.0820/30 region. Shorter term, the 4 hours chart shows that the price has settled a few pips above a horizontal 20 SMA, whilst technical indicators lack directional strength, also reflecting the latest lack of directional strength rather than suggesting buying exhaustion.” Valeria added.
UK PM Theresa May will visit Scotland on Monday to make a case for unity before her government triggers Article 50.
May is set to meet Scottish First Minister Nicola Sturgeon, who wants to hold a new referendum on Scottish independence. According to a copy of her speech, May is due to say “As Britain leaves the European Union, and we forge a new role for ourselves in the world, the strength and stability of our Union will become even more important,”.
White House denies report that President Donald Trump handed German Chancellor Angela Merkel a bill for around $374 billion for the money her country "owed" the North Atlantic Treaty Organization (NATO) for defending it.
The above headline that that Trump handed Merkel a bill for NATO services, was earlier reported by the UK Times.
Bloomberg reporting headlines from PBOC Governor Zhou Xiaochuan’s speech, delivered at a gathering of Asian leaders Sunday during a panel talk at the Boao Forum for Asia.
China preparing to further open its financial sector - areas of potential liberalization include banking, insurance, investment banking, securities firms, and payment systems
"China would like to see that when we open wider in the financial sector, whether we can access some things. China is very interested to see that Chinese investors, especially private investors, should get better treatment overseas in other countries."
Treasuries rallied, pushing the yields lower after President Trump withdrew the health care bill on Friday as it failed to gain enough support to pass in Congress.
At the time of writing, the yield on the 10-year Treasury note was down 3.4 basis points at 2.366%. The 2-year yield was down 1.2 basis points at 1.236%.
The 10-year yield trades below 100-DMA level of 2.381%. Meanwhile, the 30-year yield closed below 100-DMA for the first time since October.
The risk aversion seen this Monday morning is likely to keep the treasuries in demand. Moreover, Trump’s failure in pushing the health care bill has forced investors to question his ability to push forward other legislative measures, including tax cuts and regulatory reforms.
China’s National Bureau of Statistics (NBS) published the latest industrial profits data for Jan-Feb, via Reuters.
China's industrial profits rose a combined 31.5% in January and February from the same period a year earlier
A statistics bureau official noted, “The profit increase was mostly due to faster growth in prices of coal, steel and crude oil, He Ping.”
Analysts at ANZ noted that crude oil prices were slightly higher on Friday but recorded its third weekly loss as growing output and inventories continued to weigh on the market.
"Baker Hughes data showed the number of oil rigs operating in the US rose another 21 to 625 last week. This followed on from an EIA report that showed US crude oil production rose for a fifth week to 9.13 mb/d. However, the market is likely to respond well to news that OPEC members are close to extending the production cut agreement. The small compliance committee consisting of five members (as well as Oman) recommended the agreement be extended when the wider group meets in May. Kuwait went even further, suggesting it should be continued until the end of the year. It did report that compliance in February was 106% for OPEC members, while non-OPEC nations were are 64%. That resulted in a overall compliance of 94%."
Beijing Municipal Commission of Housing and Urban Rural Development website lists new rules which say individuals cannot buy new commercial property in Beijing.
Personal loans for buying the commercial property have been suspended as well. However, individuals can still buy second hand properties.
As per the new rules, the new commercial property can be sold only to enterprises, public entities and social organizations.
Iron ore and other base metals could feel the heat of Beijing’s crackdown on property markets.
Gold is shining brightly this Monday morning as the risk-off tone in the markets is forcing investors to pour money into the safe haven yellow metal, which is trading just a shy away from the 200-DMA located at $1259.25.
Safe havens rally
Trump withdrew the health care bill on Friday after it failed to gain enough support to pass in Congress.
Thus, investors are worried whether President Trump will be able to push through with his next set of policies… especially on the fiscal front and that is forcing them to unwind risk positions in favor of the safe haven assets like gold and the treasuries.
Moreover, the falling odds of Trump delivering on tax/fiscal front also means slower-than-expected/no Fed rate hikes, which further strengthens gold’s appeal as a haven asset.
Gold may jump above the 200-DMA level of $1259.25 later today if the risk aversion worsens as suggested by the sell-off in the AUD/JPY pair.
Gold Technical Levels
At the time of writing, the metal was trading at $1256/Oz levels. A break above $1259.25 (200-DMA) would expose $1263.87 (Feb 27 high). A daily close above the same would establish higher lows and higher highs formation and open doors for $1300 (zero figure). On the other hand, a breakdown of support at $1244.83 (session low) could yield a sell-off to $1233.20 (5-DMA) and $1208.08 (Mar 28 low).
NZD/USD is currently trading at 0.7044 with a high of 0.7052 and a low of 0.7018.
A major setback for the Trump trade - ANZ
NZD/USD's initial opening bid has met a road block as markets turn heavily risk off in Tokyo. Markets are fleeing from the dollar on the back of last Friday's vote not to replace the healthcare bill that Trump had tried to get through congress. This is being viewed by the market as a major setback for the ‘Trump trade’.
While the bird is effectively rangebound between 0.7000 and 0.7090, analysts at Westpac's longer term on a 1-3 month outlook, sees potential for higher to the 0.7150-0.7300 area during the month ahead, as USD longs are pared. "Further out, the Fed’s tightening cycle plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar, pushing NZD/USD down towards 0.6900. Weaker dairy prices plus the RBNZ’s emphatic reminders it is on hold for a long time should also weigh. (21 Mar)."
NZD/USD's key first support is at 0.7016 and a break of there targets the 0.6950/60 levels. These are the key supporting areas guarding 0.6880 and March lows. On the flip side, a drive higher targets the double-bottom of potential resistance at 0.7130 on the 4hr chart in mid-Feb and late Fed business. 0.7245 comes as the late Jan/early Feb support and double top resistance Feb 16th and 23rd.
PBOC sets USD/CNY at 6.8701 vs 6.8845
The risk-off tone seen earlier this month looks set to continue and probably worsen this week, given the AUD/JPY pair has dropped to a near three-month low of 84.06 this Monday morning.
Trump fails in his first test
Trump’s failure to get the health care bill passed is forcing investors to question whether the Author of ‘The Art of the Deal’ would be able to deliver on fiscal front.
This is evident from the drop in the US dollar index and the strength in the safe haven Japanese Yen. Aussie dollar which has been a major beneficiary of the Trump-led rally in the commodities is now under pressure as well.
THus, the AUD/JPY cross is widely considered as a barometer of risk sentiment. The pair was last seen trading around 84.05 levels. The losses clearly point to worsening of the risk aversion during the day ahead.
S&P 500 futures are already down close to 0.80%, which is line with the sell-off in the AUD/JPY pair.
AUD/JPY Technical Levels
The daily ADX line has bottomed out and is now sloping higher, which indicates the bears are gaining strength. A break below 84.00 (zero figure) could yield 83.74 (Dec 29 low). A daily close below the same would attract fresh offers and take the pair down to sub-83.00 levels. On the higher side, key resistance levels are 84.96 (5-DMA) and 85.19 (50-DMA). Only a daily close above the 50-DMA would shift risk in favor of a technical correction to 85.85 (Mar 9 low).
Analysts at Nomura offered their projections for today's fix.
"Our model1 projects the fix to be 129 pips lower than the previous fix (6.8716 from 6.8845) and 160 pips lower than the previous official spot USD/CNY close of 6.8876. The basket implied change is 203 pips lower than the previous official spot USD/CNY close (6.8673 from 6.8876)."
US President Trump withdrew his health care bill after it failed to gain enough support to pass in Congress. This is seen as a huge blow to President Trump.
Moreover, the vote was seen as a litmus test of President Trump’s legislative ability. Hence, experts fear the failure to get the health care bill passed could force markets to question the Trump’s ability to deliver on other campaign promises - massive tax cuts and infrastructure spending.
The resulting unwinding of the Trump trade could see US dollar take a beating across the board. As of now, The Dollar Index is down 0.41% at 99.20 levels, while the AUD/USD is trading dead flat around 0.7630.
Aussie to focus on commodities
There is a risk that Aussie may underperform or may even drop against the US dollar as even the commodity prices are likely to feel the heat of the unwinding of the Trump trade.
Comex copper is down almost 1% and that could be the reason for the flat action in the Aussie dollar this Monday morning. With little first tier data due for release today, the focus remains on the commodity prices.
AUD/USD Technical Levels
A break below 0.76 (zero figure) would expose 0.7570 (support offered by the trend line drawn from Dec 29 low and Mar 9 low). A violation there could yield further sell-off to 0.7491 (Mar 9 low). On the higher side, breach of resistance at 0.7639 (Mar 22 low) would expose 0.7663 (Mar 17 low) and 0.77 (zero figure).
USD/JPY is currently trading at 1110.52 with a high of 111.39 and a low of 110.41.
BOJ Summary of Opinions – Appropriate to pursue powerful monetary easing
USD/JPY dropped at the start of this week following the weekend news and headlines around the US House of Representatives unable to agree on an alternative to the Affordable Care Act. The dollar was sold off across the board but most notably vs the yen and euro.
The dollars initial reaction last week on the news was mixed, perhaps due to the prospect of bringing forward tax reform may have appeased investors. However, the market's main concern is whether Trump has the ability to get other key parts of his agenda, including tax cuts and a boost in infrastructure spending, through Congress or has the capacity to govern effectively.
A major setback for the Trump trade - ANZ
USD/JPY is now vulnerable to further weakness to 109.10 the 50% retracement and the 108.21 200 day ma according to analysts at Commerzbank." Note the 200 week ma lies at 110.11 and the 55 week ma lies at 108.55.Please also note that the Elliott wave count on the daily chart suggests that this is the end of the down move." However, the analysts explained that rallies will find initial resistance at 113.50/63 on the wide but said that only above 115.62, would they look for a challenge to the key short term resistance offered by the 16-month resistance line at 117.55.
Analysts at ANZ explained that the failure of Donald Trump’s replacement healthcare bill to make it through congress will be viewed by the market as a major setback for the ‘Trump trade’ (although market moves late on Friday were a little surprising).
"But perhaps a far more important question is how this failure (and what it means for the passage of other policy proposals) will affect wider economic (business and consumer) sentiment.
In theory, policy gridlock such as this was meant to be far harder to occur at a time when one party controlled the Presidency and both houses. But it clearly highlights that divides remain, and it means that the policy paralysis that was often evident over recent years (when no party had outright control) could linger.
Some have even proposed that that paralysis is a reason why businesses have been reluctant to go out and invest given the uncertainty that a lack of fiscal policy direction created. With fiscal policy uncertainty rising again the risk is that business and consumer sentiment reverse recent gains, which would have growth consequences.
For markets, that doesn’t sound like an ideal situation. Not only would they then be grappling with unwinding some of the euphoria priced in by Trump’s fiscal plans, but also dealing with the possibility of a softening tone in some of the underlying economic data."
Bank of Japan (BOJ) Summary of Opinions at the policy meeting on March 15 and 16, 2017 released this Monday morning says it is appropriate for the bank to pursue powerful monetary easing under the current guideline for market operations as there is still a long way to go to achieve the 2% inflation target.
Upward pressure on the long-term yields will strengthen as the underlying trend in inflation improves. It is necessary to start discussing the procedures for yield curve control in that situation.
The structural issues regarding employment, taxation and public finance and social security need to be addressed at the earliest possible time.
Rise in uncertainty due to growing tides of protectionism.
Analysts at Westpac offered their outlook for AUD/NZD and rates.
"AUD/NZD 1 day: The correction of the Feb-Mar rally persists, 1.0825 vulnerable, and 1.0760 possible multi-day (50% retracement).
AUD/NZD 1-3 month: Higher to 1.10+. The cross remains well below fair value estimates implied by interest rates, commodity prices and risk sentiment, although is closing the gap (6 Mar).
AU swap yields 1 day: The 3yr and 10yr should open around 2.08% and 2.98%, respectively.
AU swap yields 1-3 month: The 3yr has probably based at 1.60%, the RBA expected to sit tight at a 1.5% cash rate for some time. (7 Nov)
NZ swap yields 1 day: NZ 2yr swap rates should open unchanged at 2.31%, the 10yr down 1bp at 3.44%.
NZ swap yields 1-3 month: The RBNZ said it has ended its easing cycle and will remain on hold until 2020. That will anchor the short end, although markets will not abandon their expectations for earlier tightening which means occasional spikes in the 2yr will be likely. The long end will continue to follow mainly US yields, which we expect to rise. That means the curve steepening trend should continue. (17 Feb)"
After the GOP leaders postponed the vote on healthcare overhaul and delayed it to Friday, all eyes were on the event where the US House of Representatives were finally unable to agree on an alternative to the Affordable Care Act. The weekend headlines have rocked the markets at the open today with the dollar down against most of its rivals. "The healthcare failure called into question not only Trump's ability to get other key parts of his agenda, including tax cuts and a boost in infrastructure spending, through Congress, but the Republican Party's capacity to govern effectively," read an article by By David Lawder and Steve Holland at Reuters.
Elsewhere, The Organization of the Petroleum Exporting Countries and rival oil-producing nations met this weekend in Kuwait to review progress with their global pact to cut supplies. The ministers from OPEC and non-OPEC oil producing nations have agreed to review whether a global pact to limit supplies should be extended by six months. The original deal was to last six months, with the possibility of a six-month extension but there needs to be conformity with everybody for an extension to be agreed. If there is no extension, long positions could be unwound by a disappointed market pressuring the price of oil lower again.
On the political front for Europe, the weekend gave the pro-Europeaners a win with German Chancellor Angela Merkel’s party easily victorious in the elections in the western state of Saarland. This is only underscoring the challenge ahead facing Merkel's Social Democratic rivals as they seek to deny her a fourth term in September.
Ahead of the 2017 federal election sin Germany, this was the first test of Merkel's voter support. Her Christian Democratic Union took more than 40 percent to about 30 percent for the Social Democrats, according to projections by broadcasters ARD and ZDF after Sunday’s vote. The Left Party was projected third by winning 12-13 percent, while the anti-immigration Alternative for Germany at about 6 percent.
EUR/USD: early rally through key 1.0830, eyes on 1.0875 and 1.0935
EUR/USD is currently trading at 1.0841 at the time of writing with a high of 1.0844 and a low of 1.0790.
EUR/USD is bid on the back of early doors selling of the US dollar following the weekend's fallout between the Republicans and indeed the inability of the US House of Representatives to agree on an alternative to the Affordable Care Act. The move is somewhat belated given Friday's minor reaction and potentially signifying the dollar's correction is over. However, the technical picture remains bearish and fundamentally if Trump's administration is going to held up by barriers in respect to passing and delivering the fiscal spending markets have been pricing into the dollar.
An additional supporting factor for the euro this week will be how German Chancellor Angela Merkel’s party easily won elections in the western state of Saarland. This victory will be underscoring the challenge facing her Social Democratic rivals as they seek to deny her a fourth term in September.
DXY: technically, downtrend is not over - BBH
EUR/USD has broken another milestone by rallying through the key $1.0820-$1.0830 levels of which analysts at Brown Brothers Harriman note as corresponding to the 50% retracement of the sell-off since the US election. "It is also where the euro peaked in early February. The early December high was near $1.0875, and the 61.8% retracement $1.0935," explained the analysts, adding, "the MACDs and Slow Stochastics are getting stretched. In this situation, be on the lookout for a reversal pattern that would turn the indicators lower. In terms of levels, $1.07 looks significant, and the euro has not traded below it since the Fed hiked, and the populists were denied the reins of power in the Netherlands."
USD/JPY is currently trading at 110.97 at the time of writing with a high of 111.39 and a low of 110.82.
Market wrap: minor dollar weakness - Westpac
USD/JPY is under pressure from the off this week in thin early trade and markets are reacting to the fall-out between the republicans and failure of healthcare reform. The US healthcare bill was scrapped on Friday but there was relatively little immediate reaction in the dollar and US interest rates the time. Analysts at Brown Brothers Harriman explained that they are less sanguine although they recognize that the dollar's resilience ahead of the weekend could be a preliminary sign that recent fall may be nearly over. On the back of the inability of the US House of Representatives to agree on an alternative to the Affordable Care Act, a key driver for USD/JPY this week will be the US stock market.
DXY: technically, downtrend is not over - BBH
In respect to the S&P 500, last week's pullback stopped just shy of the 38.2% retracement of this year's rally (~2337), as noted by analysts at Brown Brothers Harriman, adding, "the 50% retracement is near 2317. The technical indicators warn of the risk that the correction continues, though a move above 2369 would indicate that phase is over."
Valeria Bednarik, chief analyst at FXStreet explained that the upward corrective movement can extend up to 112.00, a major Fibonacci resistance, without actually affecting the dominant bearish trend. "Renewed selling interest below 111.00 should favor a steeper decline towards 109.90, the 50% retracement of late 2016 monthly rally."
Analysts at Westpac offered an economic wrap.
"US: Feb durable goods orders (advance) rose a healthy 1.7% (vs 1.4% expected), thanks to a 4.3% rise in transportation orders, and the previous month was revised up +0.3ppts to 2.3%. The core data was less impressive - core capital goods shipments slipped 0.1% (0.5% expected), with a mild +0.2ppt revision to the previous month a small compensating positive. More encouragingly for Q1 GDP, core shipments rose 1.0% (0.2% expected) so there will be a small uplift to business investment in Q1 GDP expectations. Mar flash PMIs for both manufacturing and services undershot expectations but remained well inside expansionary territory.
FOMC non-voter Bullard sounded particularly dovish (although his profile has shifted to the centre, he has always had a propensity for dovishness), stating that he has "the lowest rate path forecast on FOMC" and responded to a question on hikes by saying that although they could rise again this year, "we do not need to be aggressive on rates". In contrast, dove Dudley, who is a permanent voter, felt the Fedias close to its employment and inflation objectives, and warned of the risks of overheating if unemployment fell further. He said tightening has been “extraordinarily gradual” and felt the economy can absorb further rate hikes."
Analysts at Westpac offered a market wrap.
"Global market sentiment: The US healthcare bill was scrapped but caused only a slight decline in the US dollar and US interest rates. US data and Fedspeak were mixed.
Interest rates: US 10yr treasury yields fell from 2.44% to 2.39% after the healthcare bill was scrapped due to insufficient support, but later pared the rally to close at 2.41%. 2yr yields similarly fell from 1.28% to 1.24% and closed at 1.26%. Fed fund futures yields were little changed, pricing around a 60% chance of the next hike occurring in June.
Apart from the healthcare bill cancellation, there was also mixed data for the rates markets to absorb (strong durable goods orders, disappointing manufacturing PMI), as well as Fedspeak (voter Dudley hawkish, non-voter Bullard dovish).
Currencies: The US dollar index fell to a two-month low before staging a minor rebound to close down only 0.1%. EUR rose from 1.0770 to 1.0818. USD/JPY ranged between 110.60 and 111.50. AUD ranged between 0.7604 and 0.7633. NZD rose from 0.6995 to 0.7043. AUD/NZD fell from 1.0885 to 1.0830."
Analysts at Brown Brothers Harriman explained that the Dollar Index's price action has been streaky this year.
"Leave aside the first week of the New Year, when the Dollar Index was practically flat. It fell for four weeks, then rose for four weeks, and now just completed its third consecutive weekly decline."
"The technical indicators warn that the downdraft is not over. Key support is seen in the 99.20-99.45 area. It corresponds to the lows of the past four months."
"It is also where some see a large head and shoulders top pattern, which if convincingly violated could suggest a measuring objective near 94.50. Before getting there, the Dollar Index rally, since last May's lows, would be half given back near 98.40 and would retrace 61.8% of its gains if it fell to 97.15. Nearby resistance is seen at 100.00."
Data source: FX Street
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