HotForex Forex News

18:02 United States EIA Crude Oil Stocks change registered at 0.564M, below expectations (3.475M) in February 17


17:50 USD/JPY: downside momentum amid risk aversion - BTMU

Analysts from The Bank of Tokyo-Mitsubishi UFJ, expect the USD/JPY pair to trade with a downside bias between 111.00 and 114.50 next week, on the back of potential risk aversion amid political uncertainty. 

Key Quotes: 

“The calendar is relatively light for the week ahead and there are no clear-cut obvious events that could prompt market volatility in the week ahead.”

“The FOMC minutes have been classed by the market as more on the dovish side and while we would question how long that conclusion will last, there is certainly scope for it to last over the relatively short period of a week when there are no major data releases or events to alter sentiment. Fed President Kaplan (voter), Bullard (non-voter), Williams (nonvoter) and Mester (non-voter) all speak over the period through to next Thursday but the key US data will probably be the PCE inflation data released on 1st March. The payrolls will not be released as usual on the first Friday due to the shorter February and hence will not be released until 10th March.”

“Event risk appears more skewed toward risk aversion if political risks intensify in Europe again and hence yen strength is our bias for the week ahead, especially when coupled with the current momentum in the wake of the FOMC minutes.”
 

 


17:49 USD/CHF drops to 1.0060, 2-day low

A decline of the US dollar across the board, pushed USD/CHF further to the downside. The pair broke below 1.0090 and accelerated the decline. 

It bottomed at 1.0060, the lowest level since Tuesday’s Asian session. Price holds near the lows with a prevailing bearish momentum as the greenback remains weak in the market. 

An interview on CNBC, with Treasury Secretary, Steven Mnuchin, triggered the decline of the US dollar earlier today. He did not bring any details of the tax reform plan. Regarding the currency market, he said that the appreciation of the US dollar shows confidence on the US economy and did not accuse China of being a currency manipulator. He expects the tax reform to be approved by Congress before the August recess. 

Today’s US data included, initial jobless claims that rose 244K and the Chicago Fed National Activity Index that came in at -0.05; both reports were below expectations and failed to give support to the US dollar. The DXY is trading at 3-day lows around 101.00. 

USD/CHF technical level 

To the downside, support levels might be located at 1.0060 (daily low), 1.0045 (Feb 20 high) and 1.0010/15 (Feb 20 low). On the upside, potential resistance areas might be seen at 1.0075 (Feb 22 low), 1.0115 (daily high) and 1.0140 (Feb 22 high). 

USD/CHF


17:34 United States EIA Natural Gas Storage change came in at -89B below forecasts (-85B) in February 17


17:19 EUR/USD: upside momentum but only modest bullish bias - BTMU

Analysts from The Bank of Tokyo-Mitsubishi UFJ, see a limited bullish outlook for the EUR/USD pair for next week. They expect it to trade between 1.0450 and 1.0800. 

Key Quotes: 

“There are no obvious risk events to focus on in the week ahead and hence our inclination is to give the current momentum greater influence in the bias for the week ahead. We don’t really agree with selling the dollar on the back of the FOMC minutes but the softer dollar momentum might have legs given there is nothing to necessarily alter that for now – certainly not from a global macro perspective. Of course, the obvious risk the other way is that French political risk escalates again and we see that drag the euro lower. Opinion polls will be key in that.”

“The key piece of data is perhaps the flash estimate for CPI and core CPI on 28th February. The data from the euro-zone has clearly improved although the core annual CPI rate remains stuck at 0.9%. Any upside surprise there would reinforce expectations of the ECB tapering QE later this year and would help provide support for the euro. Still, upside momentum is unlikely to be strong given the scale of uncertainty lingering in Europe.”


17:06 USD/CAD neutral/bullish near term Scotiabank

FX Strategists at Scotiabak keep the constructive outlook unchanged on USD/CAD in the near term horizon.

Key Quotes

“The USD was well capped at 1.3210 yesterday, the high seen at the start of the month and the market continues to struggle to make headway through the 40– and 200-day MA signals (1.3166/1.3149 respectively)”.

“Short-term softness should be limited to the low 1.31 area from here, however, with the broader technical picture more USD-positive with funds trading through the ceiling of the Dec/Jan bull wedge consolidation”.

 

 


17:03 US stocks mixed - Nasdaq lower, Dow & S&P 500 hit record highs

Major US equity indices witnessed yet another positive opening on Thursday, with both the Dow Jones Industrial Average (DJIA) and S&P 500 Index hitting fresh all-time intraday record highs. Rallying oil prices, with WTI crude oil gaining over 2.0%, pushed energy stocks and drove the markets higher.

At the time of writing, DJIA added around 40-points, gaining bullish traction for the tenth consecutive day, and rose to 20815, while the broader S&P 500 Index was up nearly 4-points to 2,367. Meanwhile, tech-heavy Nasdaq Composite Index underperformed and drifted into negative territory, losing over 6-points to 5,854.

On the US economic data front, weekly jobless claims rose more-than-expected for the week ended Feb. 17 but the four-week average of claims fell to its lowest level since 1973, clearly pointing to the underlying strength in the labor market.

Meanwhile, the US Treasury Secretary Steven Mnuchin, in an interview to CNBC, reiterated Trump's promise to unveil 'phenomenal' tax reforms and further collaborated to boost the already upbeat investors’ sentiment. 

Market participants, however, might start getting complacent and the ongoing strong bullish rally runs the risk of a sudden reversal unless there are some concrete results from the new administration's fiscal policies.
 

 


16:47 AUD/USD extremely ovebought near 0.7730; key 0.78 level on the table

Currently, AUD/USD is trading at 0.7733, up +0.43% or 33-pips on the day, having posted a daily high at 0.7740 and low at 0.7665.

The Australian dollar vs. American dollar has been pushing higher to break above the round figure 0.77 as yesterday's FOMC minutes couldn't clock any 'sooner rather than later' narrative to favor long-dollar positions. Furthermore, the 'fairly soon' wording left market participants in the air with no clues as what to do or not. Therefore, the most logical step materialized as traders quickly adjusted their positions limiting their exposure to the greenback.

On the other hand, during the Asian session, short-sellers were caught as the AU economic docket released the Private Capital Expenditure that clocked 'a worse than expected' figure at (2.1%) from (1.0%) consensus and (3.3%) previous. Evidently, such negative result prompted a short-term sell-off that yielded almost 50-pips in the process to reward bears. However, the Aussie erased those losses as the pair moved into the European trading session. Hence, the US dollar shined for a limited time and attracted some interest, but the facts are evident to keep denying the 'awful truth' - Trump's Trade might be over at least for the time being.

US: Going for BAT, or not – Deutsche Bank

Historical data available for traders and investors indicates during the last 8-weeks that AUD/USD pair, a commodity-linked currency, had the best trading day at +1.18% (Jan.17) or 89-pips, and the worst at -0.81% (Jan.18) or (61)-pips. Furthermore, the US 10yr treasury yields have traded from 2.41% to 2.38%, down -1.11% on the day at 2.38% or -0.0267.

Technical levels to consider

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

audusd

On the long term view, if 0.7834 (high April 2016) is in fact, a relevant top, then the upside is limited at 0.7809 (short-term 38.2% Fib). Furthermore, RBA's Lowe removed from the table any further 'easing' via rate cuts, however, the interest rate advantage that favors the Aussie should decrease organically as the Federal Reserve continues increasing rates with '3-hikes' in the next 16 months. To the downside, supports are aligned at 0.7433 (short-term 23.6% Fib), later at  0.7182 (reverse long-term 61.8% Fib) and below that back to 0.6826 (low Jan.2016).

audusd

AUD/USD analysis: still too risky to buy above 0.7700


16:46 US Dollar plummets to 101.00, 3-day lows

The US Dollar Index – which tracks the buck vs. its main competitors – has accelerated its downside on Wednesday, currently hovering over the 101.00 neighbourhood.

US Dollar offered on Mnuchin, data

The index faced increasing selling pressure after US Treasury Secretary S.Mnuchin said earlier today that the implementation of new policies will have a limited impact this year, while the absolute level of US debt remains a concern.

Earlier at his interview on CNBC, Mnuchin disappointed market expectations after he failed to unveil further details on the ‘phenomenal’ tax reform promised by President D.Trump last week, although he advocated for this to pass by August.

On the data front, US Initial Claims rose by 244K WoW and the Chicago Fed National Activity Index came at -0.05, both prints missing initial estimates and adding further selling pressure to the buck.

USD has surrendered initial gains and is still suffering the consequences of the FOMC minutes, as expectations of a Fed move at the March meeting continue to diminish, taking a toll on US yields.

US Dollar relevant levels

The index is losing 0.28% at 101.03 and a break below 100.74 (low Feb.20) would open the door to 100.54 (20-day sma) and then 100.40 (low Feb.16). On the flip side, the initial hurdle aligns at 101.72 (high Feb.22) ahead of 101.95 (23.6% Fibo of the November-January up move) and finally 102.96 (low Jan.11


16:27 USD/CAD weakens below 1.3100 handle on USD sell-off and surging oil prices

The USD/CAD pair extended Wednesday's rejection move from 50-day SMA hurdle and slipped below 1.3100 handle.

Currently trading around 1.3090-95 region, the pair snapped four consecutive days of winning streak and has now erased all of its gains recorded in the previous two sessions amid broad based greenback sell-off. Against the backdrop of disappointment from Wednesday's FOMC meeting minutes, comments from the US Treasury Secretary Steve Mnuchin intensified US Dollar selling pressure during early NA session.

In addition to this, higher-than-expected rise in the US initial weekly jobless claims further collaborated to the bearish sentiment surrounding the greenback and accelerated the pair's reversal move from multi-day tops beyond 1.3200 handle touched yesterday. 

Meanwhile, strong positive momentum in oil markets, with WTI crude oil posting gains in excess of 2.% and inching closer to $55.00/barrel mark, boosted demand for the commodity-linked currency - Loonie, and aggravated the selling pressure around the major.

Focus now shifts to the official EIA report on the US crude stockpiles and speech from the Dallas Fed President Robert Kaplan, which should provide some fresh trading impetus for the major during NY session.

Technical levels to watch

Bears would be eyeing for a break below 1.3080 level below which the pair is likely to drift towards 1.3025 horizontal support ahead of 1.30 psychological mark support.

On the upside, any recovery attempts above 1.3125 horizontal level now seems to confront resistance at the very important 200-day SMA near 1.3145-50 region above which the pair is likely to make a fresh attempt to reclaim 1.3200 handle.

 


16:17 Crude above $55.00/bbl not in OPEC s interest - Iran s Zanganeh

Iran's Oil Minister Bijan Zanganeh said on Thursday that crude oil prices above $55.00 per barrel are not in OPEC's interest.

Zanganeh also said that the cartel's determination to diminsh oil production is aimed at managing crude oil markets. 

 


16:02 United States Housing Price Index (MoM): 0.4% (December) vs previous 0.5%


16:01 Mexico 1st half-month Inflation: 0.33% (February) vs previous 1.51%


16:01 Mexico 1st half-month Core Inflation up to 0.46% in February from previous 0.37%


15:53 Gold surges to multi-month peaks amid broad based USD weakness

Gold finally broke through its near-term trading range and jumped to fresh multi-month highs during early NA session.

Currently trading around $1248 level, the precious metal gains fresh traction amid some renewed greenback selling pressure on comments from the US Treasury Secretary Steve Mnuchin, at an interview on CNBC. Mnuchin's concerns about the US debt level, and remarks that new policies would have limited impact in 2017, sparked a fresh wave of slide in the US Treasury bond yields and undermined the US Dollar demand. 

Apart from the broad based US Dollar sell-off, a slight disappointing from initial weekly jobless claims data from the US, and prevalent cautious sentiment surrounding equity markets, also supported demand for traditional safe-haven assets and collaborated to the yellow metal’s up-move to the highest level since Nov. 11.

Against the backdrop of Wednesday’s less hawkish FOMC meeting minutes, speech from the Dallas Fed President Robert Kaplan is unlikely to provide any immediate respite for the greenback, which might continue to boost commodities priced in Dollar, including gold.

Technical levels to watch

Sustained move above $1250 level now seems to pave way for continuation of the near-term upward trajectory towards the very important 200-day SMA hurdle near $1262 region, with some intermediate resistance near $1256-57 area. 

On the flip side, $1245 level now becomes immediate support, while $1240 should now protect any near-term corrective slide. However, a break below $1240 support might negate the near-term bullish bias and drag the commodity back below $1230 level.
 

 


15:33 USD/JPY tumbles to weekly lows after US jobless claims

The USD/JPY pair accelerated the bearish slide and broke through the 113.00 handle, dropping to a multi-day lows during early NA session.

Currently trading around 112.70 region, testing session lows, the pair came under some fresh selling pressure as market participants seemed unimpressed by comments from the US Treasury Secretary Steve Mnuchin, at an interview on CNBC. 

Mnuchin said he wants to see "very significant" tax reform passed before Congress' August recess but failed to provide any specific details of the proposed reforms. He further added that new policies will have limited impact in 2017 and it could take until late 2018 to reach 3% GDP growth.

In addition, data released from the US showed initial jobless claims rose more-than-expected to 244K for the week ended Feb. 17, up from previous week’s 239K and 241K expected, and failed to provid any respite for the US Dollar bulls.

Later during the day, speeches from Atlanta Fed President Dennis Lockhart and Dallas Fed President Robert Kaplan would now be looked upon for some fresh impetus. 

Technical levels to watch

A follow through weakness below 112.60 level (Feb. 17 low) could get extended towards 112.40-35 horizontal support, which if broken is likely to drag the pair below 112.00 handle towards testing its next support near 111.60 level.

On the upside, any recovery attempts back above 113.00 handle now seems to confront immediate strong resistance near 113.45-50 region, which if cleared could lift the pair back towards 113.75-80 resistance area, en-route 114.00 round figure mark.

 


15:31 United States Continuing Jobless Claims registered at 2.06M above expectations (2.051M) in February 10


15:31 United States Initial Jobless Claims came in at 244K, above expectations (241K) in February 17


15:31 United States Chicago Fed National Activity Index down to -0.05 in January from previous 0.14


15:23 Absolute level of US debt is a concern - US Sec. S.Mnuchin

US Treasury Secretary Steve Mnuchin still on the wires:

Absolute level of US debt is a concern.

New policies will have limited impact in 2017.

 


15:18 EUR/USD flirting with highs near 1.0570 following Mnuchin

The now offered bias around the buck is now fuelling the current upside momentum around EUR/USD, testing fresh highs around 1.0570.

EUR/USD bid on USD-weakness

Spot met further buying pressure today after US Treasury Secretary Steve Mnuchin failed to give further details on the ‘phenomenal’ tax reform promised by President D.Trump last week. Mnuchin said the government is committed to a ‘very significant’ tax reform by the Congress recess in August.

On another direction, EUR stayed apathetic after ECB’s J.Weidmann said he did not support QE extension in December, while he stressed that the Bundesbank is not forecasting ECB rate decisions.

Earlier in the session, ECB’s E.Nowotny argued there is no need to change interest rates this year.

Next on tap in the US docket, Initial Claims and the Chicago National Activity Index are due along with the speech by Atlanta Fed D. Lockhart, who will retire on February 28.

EUR/USD levels to watch

At the moment the pair is losing 0.06% at 1.0550 and a breach of 1.0498 (low Feb.22) 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 1.0593 (55-day sma) followed by 1.0682 (high Feb.16) and finally 1.0706 (38.2% Fibo of the November-January drop).


15:06 Scottish government is seriously considering new independence referendum next year

Scottish government is seriously considering new independence referendum next year, commented a government adviser, who also believes there is the momentum to win this time.

Meanwhile, markets seems to have ignored the comments, with the GBP/USD pair held on to its daily gains to session top near 1.2500 psychological mark.


15:03 Fed Policy: Beware the March BMO CM

Michael Gregory, Deputy Chief Economist at BMO Capital Markets, notes that the next FOMC meeting is March 14-15 and currently, the market is pricing in around 40% odds of a move (average of fed funds futures and OIS on Bloomberg).

Key Quotes

“In the semi-annual Monetary Policy Report to the Congress, Yellen didn’t cover any new ground but did emphasize that “waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession.” (Interpretation: Rate hikes are coming.) Yellen added that “incoming data suggest that labor market conditions continue to strengthen and inflation is moving up to 2 percent, consistent with the Committee’s expectations.” (Interpretation: They could be closer than you think.)”

“As for timing, the Fed head did proffer the phrase: “At our upcoming meetings, the Committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate.” Notice the word “meetings” not “meeting”, which appeared to put the non-SEP/presser May 2-3 meeting in play, if there was no move in March.”

“In addition to some sturdy economic indicators, the CPI for January was faster than expected, which also stoked rate hike expectations. The headline rate rose to 2.5% y/y from 2.1%, the fastest pace in nearly five years, pumped by gasoline prices. The core CPI nudged up a tenth to 2.3% y/y, which was still in the 2.1%-to-2.3% range, where it’s been for the past 14 months. Core PCE was stuck in the 1.6%-to-1.8% range all last year. We judge that core inflation finally breaking above its recent ranges is a potential trigger for a pre-June rate hike. So too is the jobless rate falling back to, and then breaking below, its cyclical low (4.6% in November, but it has bumped up a tenth in each of the past two reports). It’s also hard to see the Fed standing still if equity market, consumer and business optimism continue to increase meaningfully.”

“However, “global economic and financial developments” could stay the Fed’s policy hand during the spring, if the data are not overly convincing, and global markets become jittery again. The Dutch election is also on March 15, with Geert Wilders and his eurosceptic, anti-immigration Party for Freedom in the lead. He’s calling for a “Patriotic Spring” in Europe, eyeing French and German elections. Next up is the first round of the French presidential election on April 23, with a potential run-off on May 7. Marine Le Pen (head of the eurosceptic, anti-immigration National Front) is currently in the lead, but polls suggest she would lose in a run-off. But “polls” didn’t do a great job in predicting the outcome of the Philippines election, Brexit vote and U.S. election. Keep in mind, “Frexit” is a more serious problem than Brexit, because France is a member of the euro area. On balance, we still judge the ever-cautious FOMC is more likely to move in June, but we have upped our odds of a pre-June hike (call it March 20%, May 25%, June 45%, and post-June 10%).”


14:50 GBP/USD spikes to 1.25 neighborhood after Mnuchin s interview

A fresh wave of greenback selling pressure emerged during early NA session, lifting the GBP/USD major to daily tops closer to 1.2500 psychological mark.

The pair caught fresh bids and extended Wednesday's rebound from the vicinity of 100-day SMA after the US Treasury Secretary Steve Mnuchin, at today's interview on CNBC, failed to provide any details of the proposed tax reforms. Against the backdrop of Wednesday's less hawkish FOMC meeting minutes, continuous uncertainty over Trump's fiscal policies further diminished prospects for any immediate rate-hike move at the Fed's upcoming meeting in March.

With no relevant fundamental triggers from the UK economic docket, the pair's latest leg of up-move could also be attributed to some short-covering. It, however, remains to be seen if the current momentum is able to assit the pair to break through recent trading range or again runs through fresh offers near yesterday's high around 1.2510 area. 

Next on tap would be the release of weekly jobless claims data from the US, which would be looked upon for some immediate respite for the US Dollar bulls and grab some short-term trading opportunities.

Technical outlook

A follow through buying interest above 1.2500-10 area has the potential to continue boosting the pair further towards 1.2545-50 intermediate resistance, en-route 1.2580 level (Feb. 9 high).

On the flip side, reversal from current resistance, and a subsequent drop back below 1.2450 level, seems to drag the pair towards 1.2415-10 region (100-day SMA) below which the pair is likely to turn vulnerable and accelerate the slide towards 1.2385-80 support.

 

 


14:35 US: Jobless claims and Fed speak in focus today - TDS

Research Team at TDS suggests that releases are quiet on top-tier data from the US, with only jobless claims (consensus: 240k) and the Chicago Fed National Activity index to note.

Key Quotes

“Markets will hear from a few more Fed speakers, including Fed President Kaplan (voter) who will address a bankers association in Texas. Fed President Lockhart, set to retire effective Feb 28, will speak on his 10-year tenure at the Fed at an Atlanta Fed banking outlook conference.”

“CAD: The CFIB Business Barometer for February is the lone event on the data calendar. In January the index stood at its second highest level since mid-2015.”

 


14:31 Currencies market muted today BBH

In terms of the price action, analysts at BBH note that today is the second day that the euro has spent below $1.06.  

Key Quotes

“We suspect it may try again in the North American session to regain a foothold.   Yesterday's roughly JPY112.90-JPY113.75 range looks set to hold.   Sterling also is going nowhere quickly and remains in a $1.24-$1.25 range.  The dollar-bloc currencies are also little changed.  The Australian dollar did manage to recover from its poor capex report.  Private capital expenditures fell 2.1% in Q4 16, which is more than four-fold larger than expected.  It may have been tempered by the better than expected plans for going forward and the upward revision (-3.3% rather than 4.0%) in Q3.  Still, the Aussie struggles near $0.7700.”


14:29 ECBs Nowotny: No need to change interest rates this year - RTRS

Responding to a question on how ECB would deal with a rising interest-rates in the US, Ewald Nowotny, President of the Austrian National Bank and European Central Bank Governing Council member, said that there is no need to change interest rates this year as the economic situation in Europe is different. 

Until the end of 2017, I don't see that we have to expect to change but in medium-term Fed policy will have an impact on ECB policy, Nowotny added.


14:24 SEK has appreciated too fast - Riksbank s Jansson

Riksbank's Deputy Governor Per Jansson said on Thrusday the Swedish Krona has strengthened too fast.

SEK is now just below 9.50 vs. the single currency, shedding some ground following earlier 2017 lows in the 9.40 neighbourhood.

 


14:18 Markets reflect confidence in US economy - US Sec. S.Mnuchin

More from US Treasury Secretary Steve Mnuchin at his interview on CNBC:

Mosty focused on middle-class tax cut.

Markets reflect confidence in US economy.

Will probably have low rates for a long period.

Looking forward to meet with Yellen.

No comments on China FX.


14:12 Want to get tax reform done by August recess - US Sec. S.Mnuchin

At today's interview on CNBC, US Treasury Secretary Steve Mnuchin said:

3% GDP growth is ‘very achievable’, it could take until late 2018

Looking closely at border adjustment tax.

Want to get tax reform done by August Congress recess.

 


14:12 EUR/USD: Guided by politics or economics? - Rabobank

Jane Foley, Senior FX Strategist at Rabobank, suggests that the political influence is clearly high on the agenda for the EUR. 

Key Quotes

“Even though most opinion polls have consistently indicated that far-right candidate Le Pen will not win the second round of the French Presidential election in May, investors are proving their scepticsm and have been looking to take insurance.  Le Pen’s threats of ‘Frexit’ and concerns that a currency re-denominated could result in a French bond default have unsurprisingly pressured the French government bond market.  However, yesterday’s announcement from Bayrou that he will not stand separately in the Presidential election and will instead support Macron strengthened the chances that a centrist government will be installed after the spring election.  The news lifted the EUR and proved the unit’s sensitivity to news surrounding the French election.”

“That said much of the movement in assets caused by the approaching French election has been within the confines of the Eurozone.  This is demonstrated by this month’s sharp widening on the Bund-Oat yield spreads.  The fact that the Bund market is perceived as a safe haven will cushion the scope for pressure on the EUR into the election.  Downside potential for the EUR may also be limited by the improvement in Eurozone economic data since the start of the year and by the perception that the EUR could be subject to relief rallies should the opinion polls prove correct and Le Pen fails to win the Presidency.” 

“The combination of hope for a spring rate hike from the Fed and concerns regarding the French presidential election have the potential to drive EUR/USD to the 1.05 in the weeks ahead.  That said, on the view that the Fed may stall and assuming that Le Pen does not make it to the Elysee Palace we expect EUR/USD to return to the 1.07 area on a 3 mth view.”


14:07 US Treasury Sec Mnuchin: We are committed to tax reforms

During an exclusive interview with CNBC, U.S. Treasury Secretary Steve Mnuchin stated that his office is "committed" to tax reforms. "It may take until 2018 to see faster growth", Mnuchin said, while added that he's looking closely at border tax issues.


14:05 USD/JPY inching closer to 113.00 handle ahead of US data

The USD/JPY pair extended previous session's retracement move and is slowing inching back closer to the 113.00 handle.

Currently trading around 113.10-15 region, testing session lows, the pair remained on back foot for the second consecutive day amid mildly cautious sentiment surrounding European equity markets. Moreover, a follow through slide in the US Treasury bond yields undermined the greenback demand and collaborated to the softer tone surrounding the major. 

Despite of Wednesday's minutes from the Fed’s most recent meeting indicated policymakers’'  desire to hike rates “fairly soon”, market participants seemed convinced that uncertainty surrounding the US President Donald Trump’s fiscal policies would force the central bank to rate-hike move. The same is reflected in the CME group's FedWatch Tool, which currently points to 18% probability of such an action at the central bank's upcoming meeting in March.

On the economic data front, the release of weekly jobless claims data from the US might provide some impetus for short-term traders. Meanwhile broader market risk-sentiment and Fed rate-hike expectations would remain key determinants of the pair’s near-term direction.

Technical levels to watch

A follow through selling pressure below 113.00 handle, leading to a subsequent break below 112.90 level (yesterday's low), the pair seems to extend the slide towards 112.40 horizontal support, en-route 112.00 round figure mark. 

On the flip side, 113.45-50 region now becomes immediate resistance and is followed by another hurdle near 113.75-80 region. A decisive move above 113.75-80 region now seems to assist the pair beyond 114.00 handle towards its next strong resistance near 114.25-30 region.

 


13:42 Fed minutes: Most anticipate a hike fairly soon - BBH

With a light diary today, many participants are still talking about the minutes from the FOMC meeting notes analyst at BBH.  

Key Quotes

“A key issue is whether the recent official comments that indicate that March was a live meeting supersede the minutes older minutes.  The minutes said that most anticipate a hike "fairly soon."  This does not mean March.  In the meetings that preceded the two rate hikes in this cycle, there were mentions in the minutes of the next meeting.  There was no such mention this time.  "Fairly soon" seemed to be a way to give guidance to the market and distinguish it from "next meeting" but also from waiting for the end of the year as was the case in 2015 and 2016.”

“The minutes from the FOMC meeting are not simply an objective report of the meeting, but it is a communication tool.  This is something the ECB may not quite get, especially given its difficulty in even calling its record of the meetings “minutes.”  Because it includes voting and non-voting members, we often find that it is noisy, but after the FOMC statement and projections, and comments by the Fed's leadership, the minutes are the third most important tool in our understanding.”

“The other revelation in the minutes was the use, starting next month, of fan lines to illustrate the range of uncertainty around economic projections.  Many have called for something like this.  It will help the investors, many of whom continue to wrestle with the significance of the forecast and confuse them with policy commitments.”

“Consider the shift in expectations.  Using the Bloomberg calculation of the odds embedded in the Fed funds futures for comparison purposes, there is a 34% chance of a Fed hike in March.  A week ago it was 36%.  The odds of a May hike have risen to 61.8% from 58.7%.  The odds of a June move are unchanged at a little above 76% chance.  While obviously a significant minority has not given up on a March hike, it is interesting that others are also seeing the merits of a May hike like us.  Two regional Fed presidents speak today, Lockhart and Kaplan, but their views are known and will unlikely have much market impact.”

“Look for the focus to shift from the Fed back to the President Trump.  In particular, next Tuesday's speech to a joint session of Congress is seen as key.  The Republican tax reform, which had the border adjustment at the center, is unraveling.”


13:39 US: Going for BAT, or not Deutsche Bank

Analysts at Deutsche Bank suggest that USDCAD trades mainly as a function of oil prices and differences in policy expectations between the Federal Reserve and the Bank of Canada but these should begin to diverge if a border-adjustment tax (BAT) is the centerpiece of a comprehensive US tax reform package.

Key Quotes

“While the Fed would look through a temporary BAT-induced inflationary spike, the Bank of Canada could be forced to react by cutting rates twenty-five basis points and possibly employ some sort of forward guidance to flatten the curve and weaken the Canadian dollar.”

“In an extreme case, the BoC could hint at Quantitative Easing. However, the sequencing and timing is highly uncertain—the BoC may wait to see if the dollar strengthens without BoC intervention. To be sure, in the absence of a BAT or a watered down version that made exceptions for key Canadian export industries—namely energy, Canada would likely still benefit from stronger exports on the back of strong US demand. In this scenario, our current base case of BoC rate hike by yearend, followed by further tightening in 2018, albeit at deliberately slower pace than the Fed, would remain intact. However, the downside risks to this base case are mounting as the probability of a BAT rises.”

 


13:38 USD/TRY aims to 3.55 in the near term Danske Bank

Strategist at Danske Bank Vladimir Miklashevsky expects the Turkish currency to gather extra traction within a month’s view.

Key Quotes

“We expect the central bank to keep its key rate unchanged in the near future due to pressure from the government, while continuing to tighten liquidity for local banks providing largely FX repos to stabilise the TRY further”.

“The TRY moved closer to its ‘fair value’ as Turkey’s central bank started tightening liquidity in order to support the TRY and calm down inflation declaring that the central bank could tighten further, if needed, triggering some unwinding of heavily short TRY positions. Local politics weigh less on the currency, as President Recep Tayyip Erdoğan has brought more clarity on the referendum on Turkey’s presidential power. The referendum could be held on 16 April 2017. Renewed fears of an upcoming Fed rate hike in 2017 and concerns about a greater-than-expected slowdown in the economy could push the TRY further away from ‘fair value’.

“We cut our USD/TRY short- and medium-term forecasts to 3.55 in 1M (3.95), 3.70 in 3M (4.15), and 3.85 in 6M (4.25), while keeping the long-run unchanged at 4.50 in 12M”.

 

 


13:34 UK: Politics very much in the air - BBH

Analysts at BBH note that the politics are very much in the air in the UK after the bill to begin negotiating the amputation is making its way through the House of Lords. 

Key Quotes

“It is expected to be formally triggered in the next few weeks, with the Malta summit being a likely venue in early March.  But the issue today is two by-elections.  In particular, a defeat for Labour may embolden another challenge to the party's leadership.  Copeland, in Northern England, could be won by the Tories.  If so, it would be the first time since 1982 that the government took a seat in a by-election from the opposition.  If that were not a sufficient insult, UKIP may take the seat in Stoke-on-Trent.  It was one of the strongest Brexit votes.”


13:31 Mexico: Stronger than expected 4Q2016 and December real GDP figures Goldman Sachs

Alberto Ramos, Analyst at Goldman Sachs, notes that the Mexican real GDP growth accelerated to a better than expected 2.4% yoy in 4Q2016, up from 2.1% yoy 3Q2016.

Key Quotes

“Similarly, on a seasonally adjusted basis, annual real GDP growth accelerated to 2.4% yoy sa during 4Q2016, from 2.0% yoy sa during 3Q2016. The final 4Q annual growth figure was stronger than the 2.2% yoy flash estimate.”

“During the last 10 quarters (3Q2014 through 4Q2016) real GDP growth was remarkably stable: average 2.5% yoy [min 2.1% yoy; max 2.8% yoy].”

“Overall, real GDP grew 2.3% in 2016, downshifting from 2.6% in 2015, driven by the solid 3.4% expansion of the tertiary sector (3.5% in 2015), and the 4.1% expansion of the primary sector. The biggest disappointment in terms of activity came from the secondary sector, which recorded no growth in 2016, following the underwhelming 1.0% expansion in 2015. Within the secondary sector we highlight the growing drag of mining (-6.4% in 2016 vs. -4.6% in 2015) driven by the poor performance of the oil sector. Furthermore, the construction and manufacturing sectors also lost buoyancy in 2016 (growth downshifted from +2.5% and +2.5%, respectively in 2015, to +1.8% and +1.3%, respectively in 2016).”

“Going forward, we expect growth to decelerate and the engines of growth to rebalance—with higher contributions from manufacturing and net exports and less thrust from the services and private and public consumption. The industrial/manufacturing sector should benefit from a more competitive exchange rate, but subdued US external demand and eventual restrictions in accessing the US market will likely prevent a more significant recovery of the secondary sector in the near term.”

“Finally, last but certainly not least, uncertainty with regards to the overall US administration policy mix is likely to have an immediate negative impact on activity by rendering domestic economic agents more defensive: important investment decisions may be postponed, scaled down or even cancelled, particularly in export-oriented sectors given the uncertain terms under which Mexican exporters will have access to the US market, and in the face of an uncertain and risky macro profile, informed consumers may increase precautionary savings by limiting the demand for durable goods.”


13:28 US government debt limit to be in focus again - Fitch Ratings

In its latest "Global Perspectives" commentary, global credit rating agency Fitch Ratings noted that the US government debt limit will soon be in focus again and could possibly lead to another round of needless economic and financial market uncertainty.

A quick resolution would support the notion that President Trump represents a transition to more effective and results-oriented leadership, and a shake-up of "business as usual" in Washington. But more probable is a repeat of previous debt limit confrontations and last-minute agreements, revealing sharp fiscal and other policy differences between Congress and the administration, and underscoring persistent weaknesses in US fiscal governance.

The Bipartisan Budget Act of 2015 suspended the federal government statutory debt limit until March 15, 2017, when it will be reinstated and set at the level of the debt.

 


13:23 Live Stream Interview with US Treasury Secretary Steve Mnuchin on CNBC

News channel CNBC will interview US Treasury Secretary Steve Mnuchin at 1200h GMT on Thursday.

What do markets expect?

Market participants mainly expect Mnuchin to shed more light on the ‘phenomenal’ tax reform announced by President Donald Trump and its probable timing (likely within the next 2-3 weeks), as well as its current progress in Congress.

Other relevant topics investors would like Mnuchin to address today include trade issues (including China, Japan, Mexico, NAFTA), banking regulation, debt ceiling and the likeliness of an issuance of a 50-year/100-year Treasury bond

Who is Steve Mnuchin

After he graduated from Yale University in 1985, Mnuchin worked for investment bank Goldman Sachs for 17 years, eventually becoming its Chief Information Officer. After he left Goldman Sachs in 2002, he worked for and founded several hedge funds. During the financial crisis of 2007–2008, Mnuchin bought failed residential lender IndyMac. He changed the name to OneWest Bank and rebuilt the bank, then sold it to CIT Group in 2015. Mnuchin joined Trump's presidential campaign in 2016, and was named national finance chairman for the campaign. On February 13, 2017, Mnuchin was confirmed by a 53–47 vote in the U.S. Senate

 


13:20 MonPol cannot be the only game in town - ECBs Praet

During his introductory remarks on the macroeconomic situation and monetary policy in the euro area, Peter Praet, Member of the Executive Board of the ECB, said that we must look through volatility in short-term data resulting from transitory factors.

Additional remarks:

   •   In near future, will have to assess how forces drive prices can influence price stability outlook in medium-term
   •   Euro area economy expected to recover further 
   •   This process will not reverse under less supportive monetary policy conditions
   •   Monetary policy cannot be the only game in town


13:15 EUR/USD remains a short-term sell SocGen

Kit Juckes, Research Analyst at Societe Generale, notes that the EUR/USD got a lift from Francois Bayrou’s decision to ally himself with Emmanuel Macron rather than stand in the French presidential contest himself.

Key Quotes

“That’s lifted the Oddschecker odds of a Macron victory back up to 39% this morning, reversing a three-week downtrend. It’s narrowed the OAT/Bund spread by about 5bp too, though that’s down to lower French yields rather than higher German ones. At 27bp, Bunds still provide very limited support for the Euro and relative real yield differentials are only marginally higher this morning. There will be further twists and turns in the election race and EUR/USD remains a short-term sell even if the longerterm outlook is heavily skewed the other way.”


13:12 USD/JPY: Buy the dip mode - Westpac

Robert Rennie, Research Analyst at Westpac, remains in ‘buy the dip mode’ for USD/JPY.

Key Quotes

“Last week we shifted that to 111/113 from 110/112. The US$ feels like it remains in a holding pattern until we see what the “phenomenal” tax package looks like – assuming we get details on Feb 28 – and with price action in USD/JPY still feeling heavy, we remain relaxed about waiting for dips to buy.”

“However, as we head towards the Fed in March we see the USD garnering more support. Bottom line stay long/ add on dips towards 111.”


13:10 Latest Opinionway poll: Macron seen beating Le Pen in run-off

The latest Opinionway poll for the upcoming French Presidential election sees Macron beating Le Pen in the run-off vote by 60% to 40%.

Key poll results:

   •   Le Pen to get 26% in 1st round, Macron 22%, Fillon 21% 
   •   Fillon would beat Le Pen in run-off by 58% vs 42%, if Fillon made it through to the 2nd round


13:09 Fed officials see rate increases fairly soon - SocGen

Kit Juckes, Research Analyst at Societe Generale, notes that the Fed flags interest rate rise ‘fairly soon’ is the FT’s line.

Key Quotes

“Fed Minutes: Officials see rate increases ‘fairly soon’ is the Wall Street Journal’s take. The market’s reaction is to edge the probability of a May hike up a bit and the probability of a March hike down a bit, while ‘Mr Market’ is pretty convinced we’ll have had a rate rise by mid-year. The general sense is that if the fed really wanted to open the door to a March hike, they would have worked harder to get the possibility priced into the front end of the Treasury curve.”


13:06 NZD/USD retains a hint of negativity - Westpac

Imre Speizer, Research Analyst at Westpac, notes that the NZD/USD has settled into a 0.7130- 0.7240 range but retains a hint of negativity.

Key Quotes

“That is mainly a result of the US dollar trying to resume its uptrend. Given the paucity of market-moving NZ news expected during the week ahead, US dollar dynamics will probably dominate the pair.”

“The next major NZ data event is not until mid-March when we get Q4 GDP, and then it’s the RBNZ.”

“Multi-month, we continue to expect a NZD/USD decline to 0.70 or lower, driven by a US dollar resurgence.”


13:02 USD: May Fed rate hike looking more likely now MUFG

The dollar is marginally weaker today in the wake of Francois Bayrou confirming he would not stand in the French presidential election and in response to the FOMC minutes that appeared to reduce the probability of the FOMC hiking rates at the next meeting on 15th March notes Derek Halpenny, European Head of GMR at MUFG.

Key Quotes

“Of course the key question now is what does “fairly soon” mean? – the timeframe “many” FOMC members believe before the next rate increase is warranted.”

“We would argue that “fairly soon” could feasibly mean March, but more probably means May with June too far out for such wording to be appropriate. The March fed funds future contract has barely budged and the implied probability of a March hike remains at about 25% (our calculations). With the next jobs report not until 10th March, a blowout report with a notable jump higher in hourly earnings would probably be required in order for market participants to price in March. We do have both Vice Chair Fischer and Chair Yellen speaking on 3rd March, so an opportunity is there to shape market expectations – but we can’t see at this stage what would incentivise Yellen and Fischer to do that given the jobs report is a week later.”

“But the March Summary of Economic Projections and the press conference could provide an ideal opportunity for Yellen to stress that rate hikes are feasible at meetings when no press conference is scheduled. If the FOMC believes it will become more active in monetary policy and given the increased political uncertainty over the outlook for fiscal policy, the FOMC will likely want to argue the benefits of being able to move at each FOMC meeting going forward.”

“The initial sell-off of the dollar and drop in yields may well reflect the anticipation of a firming of the rhetoric in the minutes in regard to inflation. Given the FOMC statement indicated increased confidence in achieving the inflation target, the minutes weren’t as firm as expected on that front.”

“However, offsetting that and why the dollar sell-off did not have much follow-through and indeed why dollar appreciation may well resume were more hawkish elements like the reference to beginning discussions on the appropriateness of the current size of the Fed’s balance sheet with the implication being that the Fed may stop reinvesting proceeds from maturing holdings and allow the balance sheet to shrink. Secondly, there was also a reference to “several participants” expecting a “more substantial undershoot” of the unemployment rate.”

“Our key message to readers is that the FOMC has managed to keep every meeting live – even March – and while we view March as unlikely, the dollar is likely to remain well underpinned with the minutes continuing to imply that the US yield curve is under-priced for what the FOMC intends to do on monetary policy. While the FOMC formally has a balanced bias to the outlook, a quick read-through of key points in the minutes suggests that the bias is clearly shifting to the upside.”


13:01 Brazil Inflation Index/IGP-M down to 0.08% in February from previous 0.64%


13:01 United Kingdom 10-y Bond Auction declined to 1.18% from previous 1.45%


13:01 United Kingdom CBI Distributive Trades Survey - Realized (MoM) above expectations (0%) in February: Actual (9%)


12:58 AUD: Bullish focus mostly on crosses Westpac

According to Sean Callow, Research Analyst at Westpac, their bullish AUD focus remains mostly on crosses.

Key Quotes

“These include NZD, where the iron ore vs dairy contrast leaves key resistance at AUD/NZD 1.0760 firmly in sight and EUR, where French politics should keep chipping away at any euro rallies and of course the ECB’s QE program is mapped out through yearend. AUD/JPY should have another crack at 88 in coming sessions.”

“AUD/USD meanwhile hasn’t quite completed the round trip from 0.7775 on US election day to 0.7160 late Dec. The final half cent is proving hard work, with the Fed hammering its message that March is a “live” meeting. We retain a neutral bias on the week.”


12:54 GBP/USD mildly positive above 1.2450 level, US data ahead

The GBP/USD pair gained some traction during early European session and broke through Asian trading range, to touch a fresh session peak level of 1.2482. The pair, however, quickly trimmed some of its gains and retreated back to 1.2460-65 band amid subdued trading action on Thursday. 

After yesterday's failed attempt to conquer 1.2500 psychological mark, and subsequent reversal, the pair managed to bounce off 100-day SMA support against the backdrop of less hawkish FOMC meeting minutes, which failed to provide any solid clues over the timing for next Fed rate-hike action. 

Looking at the broader perspective, the pair extended its near-term consolidative move within the 100-pips broader trading range between the 1.25-1.24 level. An empty UK economic docket further collaborated to the pair's struggle for a firm near-term direction and a range bound, directionless price action.

Later during NA session, the US economic docket featuring the release of weekly jobless claims and, speeches from Atlanta Fed President Dennis Lockhart and Dallas Fed President Robert Kaplan, would be looked upon for some short-term trading impetus.

Technical levels to watch

On a sustained move back above 1.2480 level, the pair is likely to aim back towards conquering 1.2500 psychological mark above which a fresh bout of short-covering has the potential to lift it further towards 1.2545-50 intermediate resistance ahead of 1.2580 hurdle (Feb. 9 high).

Meanwhile on the downside, 1.2415-10 region (100-day SMA) might continue to act as immediate support below which the pair seems to accelerate the slide towards 1.2385-80 intermediate support before eventually dropping to test 1.2350-45 support area.

 


12:48 NZD/USD sidelined between 0.7100/0.7260 UOB

FX Strategists at UOB Group sees NZD/USD extending its consolidative theme between 0.7100 and 0.7260 for the next 1-3 weeks.

Key Quotes

“NZD traded mostly sideways yesterday before spiking briefly to hit 0.7199 during NY hours. While the undertone is generally positive, a sustained move above 0.7200 seems unlikely”.

“There is no not much to add; indicators are mostly neutral and the current movement is still viewed as part of a consolidation phase, likely between 0.7100 and 0.7260 (with a slight bias towards the downside)”.

 

 


12:46 BoE has a balanced approach to Brexit risks Westpac

Tim Riddell, Research Analyst at Westpac, notes that this week’s parliamentary grilling of Carney and other MPC members left the market with the impression that the BoE has a balanced approach to Brexit risks, though Chief Economist Haldane continued to voice a negative bias to their forecasts.

Key Quotes

“Debating of Article 50 bill is progressing smoothly for May’s government and should drift from market attention until the 8 March budget.”

“The next two weeks should see a series of hints and leaks of the budget’s content. Although the OBR has warned against a loosening of fiscal policy, the better than anticipated path for this year’s deficit (had been forecast to be close to 2015-16 deficit of over GBP70bn) should allow for positive news.”

“If CBI trends reflect recent lower retail sales, GBP should be capped, but the BoE’s stance and the likelihood of a prudent budget should provide a firm base and see GBP strengthen within its recent ranges (GBP/USD 1.20-1.28, EUR/GBP 0.8850-0.8175).”


12:42 EUR/USD downside picking up pace, around 1.0540

EUR/USD keeps losing momentum on Thursday, giving away its initial gains and retreating to the 1.0540/35 band, or session lows.

EUR/USD down on USD pick up

The selling pressure around the pair has picked up further pace during the European morning, as USD-bulls seem to have left behind the post-FOMC weakness.

USD has been losing momentum since late on Wednesday despite the FOMC reiterated its intentions to tighten monetary conditions ‘fairly soon’, emphasizing once again the healthy US fundamentals. The US Dollar Index has quickly abandoned the area of session tops beyond 102.00 the figure in the wake of the FOMC minutes, although it found decent support near 101.20.

Furthermore, ECB’s P.Praet said conditions in the euro bloc have improved, adding that the region has to minimize the negative effects of Brexit, as the impact on trade and goods will be substantial. Additionally, J.Weidmann advocated for the central bank to start discussing the continuation of the expansive policy.

Earlier in the day, EUR found initial buying interest after French presidential candidate F.Bayou abandoned the race for president, giving candidate E.Macron extra chances to beat far-right candidate M.Le Pen.

Data wise, German Q4 GDP figures have matched estimates (0.4% QoQ, 1.2% Yoy) while Consumer Climate tracked by Gfk dropped to 10.0 for the month of March. Across the pond, the usual weekly report on the US labour market is due seconded by Chicago National Activity Index and the speech by Atlanta Fed D.Lockhart (he will retire end of month).

EUR/USD levels to watch

At the moment the pair is losing 0.06% at 1.0550 and a breach of 1.0498 (low Feb.22) 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 1.0593 (55-day sma) followed by 1.0682 (high Feb.16) and finally 1.0706 (38.2% Fibo of the November-January drop).


12:35 GBP: Post-Brexit devaluation plays its role - MUFG

Derek Halpenny, European Head of GMR at MUFG, notes that the stream of information suggesting the UK economy is proving far more resilient than expected continued yesterday with the modest upward revision to the Q4 real GDP data with the Q/Q rate revised from 0.6% to 0.7%.

Key Quotes

“A big part in that was the sharp revision higher in the net trade component. Exports gained 4.1% while imports fell 0.4% - this mix resulted in net trade adding 1.3ppt to overall real GDP growth, the largest contribution since Q1 2011.”

“We keep hearing about the big negative for the economy to come. Rising inflationary pressures will erode real incomes and weaken consumer spending. However, while that is a near certainty, the extent of the hit is not. It is worth noting that inflation expectations measured by the 5yr/5yr inflation swap rate are now falling and the most recent CPI data came in weaker than expected.”

“With the House of Lords now having passed the Brexit bill, the legislation goes to the “committee stage” where some alterations may still be made and divisions and some conflict are still possible over the “blank cheque” aspect of the deal with many MPs wanting the chance of a vote in time for changes to a deal with the EU to be made. Nonetheless, it is clear we are heading for the triggering of Article 50 by the end of March and with large speculative short positions still in place, we see increasing risks of an unwind given the triggering of Article 50 is very unlikely to have much market impact at this stage. We continue to see EUR/GBP dropping to the 0.8000 level over the coming months.”


12:18 ECB should discuss continuing to signal expansive policy - Bundesbank s Weidmann

Speaking at a press conference, while presenting the German central bank's annual accounts for the financial year 2016, Bundesbank President Jens Weidmann said that the European central bank (ECB) should discuss whether it should continue to signal the possibility of more expansive policy.

Additional Headlines:

   •   Ideas of the right amount of accommodation differ
   •   QE exposes the balance sheet of interest rate risk
   •   Euro-zone is far away from deflation dangers
   •   Price pressures in EZ remain relatively weak
   •   Don't expect big changes in March ECB forecasts
   •   Euro-zone recovery is increasingly secure and will continue


12:11 USD/CAD off highs, still below 1.3150

The Canadian dollar is recovering part of the ground lost vs. its American neighbour on Thursday, now taking USD/CAD to the mid-1.3100s, slightly in the red territory.

USD/CAD deflates from 1.3200

After four consecutive sessions with gains, the pair is now attempting a pullback after another rejection from tops beyond the critical 1.3200 handle on Wednesday.

In fact, the buck has failed to surpass the 1.3200 barrier on a more sustainable basis yesterday despite the positive message from the FOMC minutes.

The recent up move around the greenback has been backed by the solid performance from US yields, at the same time sustained by rising expectations of a rate hike by the Federal Reserve (in March?).

Looking ahead, US Initial Claims are due along with the Chicago National Activity Index and the speech by Atlanta Fed D.Lockhart.

USD/CAD significant levels

As of writing the pair is lising 0.17% at 1.3142 facing the next support at 1.3097 (low Feb.21) seconded by 1.3057 (low Feb.17) and then 1.3007 (low Feb.16). On the other hand, a breakout of 1.3211 (high Feb.22) would aim for 1.3215 (high Feb.7) and finally 1.3225 (55-day sma).


11:33 South Africa Producer Price Index (MoM) fell from previous 0.5% to 0.4% in January


11:32 South Africa Producer Price Index (YoY) declined to 5.9% in January from previous 7.1%


11:27 ECB exit strategy & exit costs to get some attention today MUFG

Derek Halpenny, European Head of GMR at MUFG, notes that the Bundesbank President and ECB Council Member Jens Weidmann will today present the Bundesbank’s annual accounts and potential losses for Germany due to the ongoing QE program is likely to get some market attention given Weidmann a year ago acknowledged the potential need to set aside funds to cover considerable potential losses as QE is terminated and rates begin to rise.

Key Quotes

“Given German paper yields the most negative rates in the euro-zone these purchases are guaranteed to lose money if held to maturity. At present those losses are easily covered by the income generated by banks placing funds at -0.4%. However, as market rates rise the income generated on the deposit account will be lost. Given Germany buys the largest quantity of paper under the ECB QE program and at the most negative, the implications are greatest for Germany.”

“This could play into politics this year with QE deeply unpopular in Germany and greater attention to this issue would likely play into underpinning support for populist parties like AfD. While AfD has nothing like the support of the National Front in France or the Freedom Party in the Netherlands, the recent rise of the SPD under Martin Shulz means even further modest gain in support for AfD raises the prospect of the CDU/CSU losing power in the elections later this year.”


11:12 USD/JPY a tad weaker around 113.20, US data eyed

The greenback is trading on a soft note vs. its Japanese counterpart on Thursday, taking USD/JPY to the 113.20 region for the time being.

USD/JPY focus on data, Dollar

The pair is retreating for the second consecutive session so far amidst a weaker buck and poor performance of yields in the US money markets.

The FOMC minutes on Wednesday did not bring in anything new from the Committee, with members in general expecting rates to go up ‘fairly soon’. Despite a rate hike at the March meeting is not ruled out, market participants seem to have scaled back part of its probability of occurrence, dragging with it US yields and the Dollar.

Later in the NA session, US Initial Claims are due along with the Chicago National Activity Index and the speech by Atlanta Fed D.Lockhart.

USD/JPY levels to consider

As of writing the pair is retreating 0.10% at 113.20 facing the initial support at 112.58 (low Feb.17) ahead of 112.03 (low Feb.2) and then 111.57 (low Feb.7). On the upside, a break above 113.78 (high Feb.21) would aim for 114.36 (high Feb.16) and finally 114.97 (high Feb.15).


11:03 Euro-zone economic conditions have improved - ECB s Praet

During his speech on - ‘Creating Stability In An Uncertain World’, Peter Praet, member of the Executive Board of the European Central Bank (ECB), was noted saying that Euro-zone economic conditions have improved.

Additional Headlines:

   •   sees firm and broadening growth
   •   recovery in economy still dependent on supportive monetary policy
   •   European economies are still fundamentally fragile
   •   no room for complacency
   •   we have to minimize the negative effects of Brexit

Meanwhile, the EUR/USD pair traded with mild bearish bias around mid-1.0500s in a directionless trading session on Thursday.


11:02 Italy Retail Sales s.a. (MoM): -0.5% (December) vs -0.7%


11:01 Italy Retail Sales n.s.a (YoY) dipped from previous 0.8%to -0.2% in December


10:50 Gold remains confined in a near-term narrow trading range

Gold extended its consolidative price action within a 6-day old narrow trading band in a directionless trading session on Thursday. 

Currently trading around $1236-37 region, the precious metal got a minor boost on Wednesday from a modest greenback retracement after the Fed minutes failed to hint towards the timing of next interest rate-hike move, albeit did support raising rates sooner rather than later. 

Following the release of the minutes, the US Dollar declined and extended support to dollar-denominated commodities - like gold. The momentum, however, remained subdued in wake of rising stock markets, which tends to dent the yellow metal's safe-haven appeal. 

Looking at the broader picture, the metal has been confined in a narrow trading range and has been struggling for a firm near-term direction. In absence of any fresh fundamental trigger, in terms of major market moving economic releases, the commodity remains at the mercy of broader mark risk-sentiment, and the US Dollar price action.

Technical levels to watch

Immediate support on the downside is pegged near $1230 level below which the metal seems to slide towards $1225 intermediate support before eventually dropping to test 100-day SMA support near $1215 region.

On the upside, sustained strength above $1240 level could lift the commodity back towards multi-month highs resistance near $1245 region, which if cleared seems to pave way for continuation of the up-move, even beyond $1250 hurdle, towards testing the very important 200-day SMA resistance near $1260-62 region.

 


10:43 AUD/USD bullish above 0.7710 UOB

AUD/USD should shift to a bullish bias on a close above 0.7710, according to FX Strategists at UOB Group.

Key Quotes

“While AUD managed to edge above the strong 0.7705 resistance (high of 0.7714), it was unable to hold on to its gain. The undertone has improved further but based on the current momentum, any up-move is expected to struggle near the major 0.7735 resistance. Support is at 0.7680 ahead of the still rather strong level of 0.7640”.

“We indicated yesterday that the odds for a move towards 0.7775/80 would continue to diminish unless AUD can move and stay above 0.7710. AUD briefly touched 0.7714 during NY session but the up-move was clearly lacking in momentum. From here, we would shift to a neutral stance unless there is a daily closing above 0.7710 by end of today’s NY close”.

 

 


10:37 USD/JPY topside capped near 115/00 Commerzbank

In opinion of Karen Jones, Head of FICC Technical Analysis at Commerzbank, USD/JPY upside appears capped around the 115.00 handle.

Key Quotes

“The topside remains capped by the 55 day ma at 114.96. We view the recent low at 111.59 as an interim low. Between these two limits the market is sidelined. A close above the 115.62 19th January high is needed to reintroduce scope to the key short term resistance offered by the 16 month resistance line at 117.93”.

“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”.

 

 


10:32 GBP/USD struggles for direction near 1.2470

The Sterling is extending its consolidative theme on Thursday, taking GBP/USD to the 1.2460/70 band for the time being.

GBP/USD attention to USD, risk trends

The softer tone in the greenback in response to yesterday’s FOMC meeting has sponsored the spike to fresh highs above the 1.2500 handle, although the up move has quickly run out of steam ahead of the 20-day sma around 1.2510.

GBP stays rangebound so far in spite of another revision of Q4 GDP figures have surprised to the upside on Wednesday, showing the economy is now expected to expand 0.7% inter-quarter. However, an unexpected drop in Business Investment (-1.0% QoQ) has offset the positive news, adding some bearishness to the Sterling.

Absent releases in the UK calendar today, the pair’s attention should turn to the broad risk appetite trends and the US docket, where Initial Claims and the Chicago index are due along with the speech by Atlanta Fed D.Lockhart.

GBP/USD levels to consider

As of writing the pair is up 0.08% at 1.2468 and a break above 1.2509 (high Feb.22) would open the door to 1.2550 (high Feb.14) and finally 1.2715 (high Feb.2). On the other hand, the immediate support aligns at 1.2379 (low Feb.15) ahead of 1.2344 (low Feb.7) and finally 1.2250 (low Jan.19).


10:23 Switzerland Industrial Production (QoQ) declined to -1.2% in 4Q from previous 0.4%


10:18 AUD/USD recovers lost ground, eyeing to clear 0.7700 barrier

The AUD/USD pair reversed majority of its early slide to session low and is now looking to regain control over the 0.7700 handle.

The pair on Thursday came under some selling pressure following a larger-than-expected drop in Australian private capital expenditure for the fourth-quarter of 2016. The selling pressure, however, abated near 0.7665 support area against the backdrop of slightly disappointing FOMC meeting minutes released on Wednesday.

According to the minutes from the Fed’s most recent meeting, uncertainty over the US President Donald Trump’s fiscal policies could delay a near-term rate hike action. The minutes also revealed that most Fed officials indicated a desire to hike rates “fairly soon” but failed to lend any support to the US Dollar.

Meanwhile, a mildly bearish trading sentiment around copper prices might weigh on the commodity-linked currencies – like the Aussie, and restrict any sharp up-side in a data light trading session on Thursday.

Technical levels to watch

Sustained move above 0.7700 handle seems to lift the pair towards 0.7720-30 resistance above which the pair is likely to aim towards testing Nov. daily closing highs resistance near 0.7760 region. On the flip side, weakness below 0.7665-60 immediate support now seems to get extended towards 0.7610 horizontal support before the pair eventually drops to its next support near 0.7555-50 region.

 


10:17 Switzerland Industrial Production (YoY): -3.3% (4Q) vs previous 6.6%


09:58 EUR: Political angst likely to drive towards recent range lows - Westpac

Tim Riddell, Research Analyst at Westpac, suggests that the Eurozone data, especially surveys, have actually exceeded consensus and would normally provide a solid base for EUR.

Key Quotes

“However, markets are becoming more concerned over how strongly anti-euro Le Pen may poll into the first round of the presidential elections.”

“Although Le Pen’s polling (around 25%) has been relatively stable in February, the gap over the two main contenders for the run-off (Fillon and Macron) has widened and concern that a far-left contender could usurp the centre is increasing, widening yield spreads and weighing on EUR.”

“Polling for the Netherlands’ anti-EU right wing is drifting but still high. However, the real issue is what coalition forms rather than the risk of Geert Wilders being PM.”

“Solid data should support, but political angst is likely to drive EUR towards recent range (EUR/USD 1.04-1.10) lows until hard data comes back into focus.”


09:54 USD/MXN: Path of least resistance remains higher - Rabobank

Analysts at Rabobank note that Banxico’s Exchange Commission announced a new FX hedging regime on 21st February which led MXN to return briefly to its teenage years as the 20 handle broke but this is more Teenage Kicks than Benjamin Button.

Key Quotes

“Momentum remains to the downside but we see this as providing better levels for longs rather than a complete change in stance. This announcement, coupled with widening interest rate differentials relative to the rest of LatAm provide reasons to be bullish MXN.”

“That said, event risk remains elevated and Trump has the potential to unwind this move in 140 characters or less. As such, we view the recent move as merely offering better levels for USD/MXN longs.”

“It is too early to write off USD/MXN trading back below 20 completely but to our mind, the path of least resistance remains higher for USD/MXN. Indeed, this new program may help to dampen volatility and ease some of the pressure on MXN but it does not change the underlying driver that pushed MXN above 20, namely fears over the potential impact on Mexico of President Trump’s policies.”

“On this front, we still have little clarity in terms of what will actually be announced and what will come to fruition. In itself, this obviously makes it very difficult to assess the impact on Mexico but it is fair to say that any announcement that damages Mexico’s current terms of trade with the US will act as a drag on growth and will weigh on MXN initially. The move below 20.13 has nullified the continuation triangle target of 23.74.”

“Going forward, we think the recent move serves to make USD/MXN longs more attractive. The 100 dma at 20.29 should turn from support to resistance before strong support at 20.8/9 which marks the confluence of the 50 dma and a line of strong resistance dating back to Q4 2016. Above there, the all-time high of 22.0385 comes into play.”


09:48 USDCAD: Expect to see 1.3400- 1.3600 range in the longer term - Westpac

Imre Speizer, Research Analyst at Westpac, notes that the USD/CAD has bounced off the 1.3000 area and shows signs of breaking above 1.3200 during the week ahead.

Key Quotes

“Longer term, we expect to see it in the 1.3400- 1.3600 range, where it spent much time in Nov and Dec.”

“While Canada’s jobs and trade data has shown a solid improvement lately, disappointing retail sales data reminded all of downside risks to growth. Further, neither yield spreads nor crude oil are pointing decisively in favour of a break lower in USD/CAD.”

“The underlying background atmospherics still favour a higher USD/CAD, certainly as long as Trump threatens to dismantle NAFTA and with March FOMC hike odds marching higher.”


09:46 France Business Climate came in at 107, above forecasts (106) in February


09:45 Grexit, Nexit, Frexit: Is a new sovereign debt crisis in the making? - Natixis

In view of the analysts at Natixis, Frexit is clearly the market mover right now but more generally, investors are concerned that the Eurozone could see a resurgence of the sovereign debt crisis.

Key Quotes

“There has been renewed speculation of a debt re-denomination, triggered by a peripheral Member State leaving the Eurozone (namely Greece) or a total implosion from a core Member State leaving, i.e. a Nexit (following the elections in the Netherlands on 15 March) or a Frexit (after the elections in France). Cleary, if France leaves this would sound the death knell for the Eurozone.”

“It is clear that Frexit presents a systemic risk, not so Grexit (not now or ever before for that matter). Even so, there remains that strains over the renewed possibility of Greece’s exclusion could signal a resurgence of the sovereign debt crisis, with in particular risky policies to exit the single currency that are worrying non-resident investors, who owned 60% of France’s debt in September 2016 and are ultimately bankrolling public spending. What is the risk that Greece will find itself back where it was in 2015? Is there a real risk that Greece will default in July when it is due to repay €6bn to its creditors?”

“The Eurogroup meeting on 20 February revealed that, at the very least, Greece and its European creditors did not see eye to eye. The meeting was not attended by the International Monetary Fund, but it is likely that the Fund’s own view on the resolution of the Greek debt crisis had a telling impact indirectly. Positions diverge over the sustainability of the debt with or without a restructuring, over the level of austerity that is necessary and desirable, and over the measures needed to achieve the targets imposed on Greece. Under these conditions, it is difficult to see how the different stakeholders will reach a consensus.”

“While a very rapid resolution of these differences is not the most likely scenario at this stage, the Eurozone’s Finance Ministers did agree that, going forward, the Greek bailout needed to focus rather more on structural reforms and rather less on further austerity measures1. This refocusing of the policy mix still has to be fleshed out, but it could be such as to overcome some of the obstacles standing in the way of closing the second review of the third bailout. Ideally, this needs to occur before mid-July to enable Greece to honour its obligations towards the European Central Bank. At the same time, the political agenda is not very propitious. Between the spring and the autumn, there will be general elections in the Netherlands, in France (which will also hold a presidential election) and Germany. What leeway European creditors have will be somewhat constrained by their own political priorities at domestic level.”

“What type of compromise is reached to unblock the current deadlock will have a significant bearing on Greece’s capacity to honour repayments, on the Greek banking system (as liquidity could be an issue going forward), on the Greek economic recovery (which needs to be consolidated) and, finally, on the country’s political stability (government has a very slim majority). At this juncture, our view is that a step in the right direction was taken at the last Eurogroup meeting but that, however, there are several factors suggesting that the Greek authorities will play the watch in their discussions with the country’s creditors.”

“All in all, we do not see Greece as a factor likely to trigger a surge in risk aversion. To be a touch cynical, Greece (much like Brexit increasingly) has become a feature in what falls to be considered as a “normative” market environment. The bottom line is that creditors and debtors are too interdependent not to reach an agreement in the end and that there were wrongs on both sides. Therefore a compromise will be reached by Greece (which must undertake what are indispensable reforms if it stays in the Eurozone, even more so if it leaves), and its European partners (which must consent to a small loss in return for the repayment of the capital, which would be reset at a more sustainable level) and the IMF. The real risk is over the French presidential election that, along with the Federal Reserve, will be the main market mover in the next three months. Without France, the Eurozone will be no more. What is likely to air in the next few months is not the Myth of Sisyphus, but rather The Good, The Bad and The Ugly....”  


09:42 RUB gains appear limited Danske Bank

Vladimir Miklashevsky, Strategist at Danske Bank, believes RUB could struggle to advance further.

Key Quotes

“Geopolitical risks to the RUB have returned to the fore for the first time in many months given the escalation of fighting in eastern Ukraine. Given the uncertainty on Donald Trump’s fiscal policy plans, there are clear potential upside and downside risks to our forecasts for the pair. An improving Russia-US relationship and eased sanctions would create appetite for the RUB. If the oil deal does not hold, it will weigh on the RUB through falling crude”.

“As the strong global appetite towards the RUB has prevailed since the start of 2017 and markets are positioned RUB long, Minfin’s new FX operation mechanism would slightly brake RUB’s rally on rising crude price”.

 

 


09:39 Fed: Markets are pricing little chance of a March hike - Westpac

According to Sean Callow, Research Analyst at Westpac, we can’t fault the Fed for consistency of message as a range of officials have been on the wires including Mester visiting Asia, reinforcing the outlook that rates are likely to be raised and every meeting is live.

Key Quotes

“We should hear more of this from Kaplan, Williams et al in the week ahead.”

“Yet markets are pricing in only a 36% chance (BBG) or just 18% (CME, probably more accurate) of a March hike. Although our base case is for the next move in June, near term risks should be to price in a higher chance of March, as decent data reinforces Fedspeak.”

“Trump’s speech must surely be more “on message” than usual, supporting the positive growth view. DXY to find buyers on dips towards 100dma at 100.40, with 103 still in sight over the month.”


09:36 EUR/GBP digesting yesterdays sharp recovery move, remains capped below 0.85 mark

The EUR/GBP cross was seen consolidating previous session's sharp recovery move from 2-month low near 0.8400 handle. 

Currently trading around 0.8480 region, off around 15-pips from daily peak, the cross struggled to build on yesterday's gains and remained capped below 0.85 psychological mark amid some renewed selling pressure around the shared currency. Investors remained reluctant from buying the Euro in wake of the ongoing political instability in the region.

Meanwhile, a mildly offered tone around the British Pound, against the backdrop of Wednesday's reversal led by a downward revision of yearly UK GDP growth and disappointing business investment figures, was seen lending some support and limiting any immediate sharp downslide for the EUR/GBP cross.

With a relatively lighter economic docket on Thursday, the cross remains at the mercy of any fresh development / news surrounding the political scenario in the Euro-zone. 

Technical levels to watch

On a sustained move above 0.85 mark, the cross is likely to extend the recovery trend towards 0.8520 intermediate resistance before darting towards 50-day SMA hurdle near 0.8545 region. Alternatively, weakness back below 0.8460-55 immediate horizontal support, leading to a subsequent break below 0.8445 level, would negate Wednesday's recovery and turn the cross vulnerable to head back towards retesting 0.8400 handle.

 

 


09:36 EUR/USD a low in place? UOB

In view of FX Strategists at UOB Group, the pair could have carved an interim low in sub-1.0500 levels.

Key Quotes

“While EUR moved below 1.0520 as expected, the strong rebound from the overnight low of 1.0492 suggests that a temporary low is likely in place. The current price action is viewed as the early stages of a consolidation phase. In other words, sideways trading is expected for today, likely between 1.0515 and 1.0575”.

“EUR hit a lot of 1.0492 yesterday before rebounding quickly. We highlighted the patchy downward momentum and the price action was not surprising. The recovery indicates that the downward pressure has waned somewhat but as long as 1.0620 is intact, there is still room for another leg lower towards 1.0450/55. That said, this is likely only after the completion of the current short-term ‘consolidation/correction’ phase (which could last for a couple of days)”.

 

 


09:35 CHF: Manipulated currency? - Rabobank

Jane Foley, Senior FX Strategist at Rabobank, notes that the SNB is unusual among major central banks insofar as it openly maintains currency intervention as a policy tool.

Key Quotes

“Despite its record January trade surplus, the CHF is on most academic measures extremely overvalued.  Perhaps partly because of pressure created by currency strength, Swiss industry fares well on measures of competitiveness.”

“In September the World Economic Forum named Switzerland as the world’s most competitive country for the eight consecutive year.  Switzerland’s achieved top marks for labour market efficiency, business sophistication, innovation and technological readiness.   Switzerland can also boast a current account surplus that reached 11.5% of GDP in 2015, a budget which is close to balance and low unemployment.”

“In addition there is a good level of liquidity in the CHF.  The strength of these fundamentals explain why the franc is a favoured safe haven currency.  The fact that Switzerland is outside of the EU has lent the CHF further support in periods of heightened uncertainly particularly in the EMU.  We would argue that the SNB’s long history of using policy in an attempt to offset currency inflows is as much a function of perceived risks elsewhere as it is a reflection of its solid fundamentals.”

“The underperformance of French government bonds in recent sessions is indicative of fears that France may not have a moderate President in place after the April/May elections.  The recent outperformance of German bunds is suggestive of flows moving into safe haven assets and is the type of flow which has previously lent the CHF support.”

“The JPY also has a well-established safe haven role.  In contrast to Switzerland, the President Trump has recently pointed the finger at Japan’s Ministry of Finance regarding currency intervention; even though this hasn’t taken place since the tsunami in 2011.  In the current environment, it is very unlikely that Japan will embark on currency intervention.  The SNB, however, maintain the right to do so.  The fact that the CHF is so overvalued and the smaller overall size of its economy have to date allowed the SNB to avoid drawing undue attention to its policy.”  

“There is some evidence that the SNB has been successful in diverting safe haven flow into the JPY.  In the aftermath of the plunge in Chinese stocks in mid-2015, CHF/JPY dropped lower and maintained this trend into the middle of last year.  The geographical proximity of France may make a repeat of this sell-off less likely this spring on any increase in perceived political risk concerning the French election.  However, we would favour selling rallies towards the CHF/JPY115 level assuming the SNB reasserts its interest in maintaining intervention as a currency tool next month.”  


09:31 AUD/USD could slip back to 0.7595/15 Commerzbank

There is scope for the Aussie Dollar to retreat to the 0.7595/15 band vs. the greenback, according to Karen Jones, Head of FICC Technical Analysis at Commerzbank.

Key Quotes

“No change, the daily RSI has diverged and the near term risk has shifted to the downside. The Elliott count on the daily chart is pointing to a .7595/15 retracement ahead of another upside attempt and we remain unable to rule out slippage into this band. Initial support is the 20 day ma at .7649”.

“Last week, the market eroded the 2013-2017 downtrend and cleared the .7645 Fibo resistance and in doing so has introduced scope to the .7778/.7850 2016 highs and the 38.2% retracement. Directly above here lies the 200 month ma at .7930. Very near term we would allow for a dip to .7595/15 ahead of further gains”.

 

 


09:27 AUD: On top down under - Westpac

Sean Callow, Research Analyst at Westpac, notes that the Australian dollar remains easily the strongest G10 currency this year, up 6.7% YTD against the US dollar, with daylight between the Aussie and second-placed NZD, on 4%.

Key Quotes

“While some of this outperformance is simply reversal of the underperformance in late 2016 as the US dollar lost momentum, there remain solid fundamentals supporting the Aussie that are likely to persist for some time.”

“Commodity prices have underpinned the AUD rally over the past year, with Westpac’s Australian export commodity price index up 60% since June 2016 and 86% from the Jan 2016 lows when AUD/USD was slipping under 0.69. Spot iron ore prices this week reached highs since August 2014 around $94/tonne and seem likely to break $100 soon. China may be tapping the monetary brakes after a hectic start to the year but its fiscal spending plans on infrastructure look firmly entrenched. Moreover, China’s new ban on North Korean coal imports as part of UN sanctions has combined with China’s domestic coal supply cuts to reinforce Australia’s status as the top source of coal imports.”

“Looking at AUD’s yield appeal, the RBA’s optimistic outlook is very clear in this month’s various statements and speeches. This will continue to discourage markets from considering another rate cut in light of subtarget inflation and an economy that looks to have been about flat over H2 2016. Some might wonder about foreign demand for AUD bonds given the chart across, showing a slide in foreigners’ share of what turned out to be a record A$11bn issue. But we view this as a function of low hedge fund allocation and the maturity which is preferred by domestic accounts.”

“So we remain upbeat on AUD on a range of crosses near term, extending the Aussie’s strong run so far in 2017. But again, a resilient US dollar should limit AUD/USD to the 0.7750/70 area near term.”


09:24 US Dollar turns positive above 101.30 ahead of data

The greenback – in terms of the US Dollar Index (DXY) – keeps the trade within a tight range on Thursday, currently hovering over the 101.35/40 band.

US Dollar above 101.00 after FOMC

Despite the general positive tone from the FOMC minutes on Wednesday, the index found no excuses to extend the rally further north of recent tops above 101.70/75, giving away gains instead to overnight lows in the vicinity of 101.20 along with a sharp decline in US yields.

In fact, the Committee reiterated the good health of the economy, although uncertainty from ‘Trumponomics’ still persists. Few members still see a rate hike as soon as the next meeting, but the majority expects rate to go up later in the year.

On today’s data front, Initial Claims are due along with the Chicago National Activity Index and the speech by Atlanta Fed D.Lockhart (he will retire on February 28).

US Dollar relevant levels

The index is gaining 0.07% at 101.38 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 102.96 (low Jan.11). On the flip side, a break below 101.16 (low Feb.22) would open the door to 101.08 (low Feb.21) and then 100.55 (20-day sma).


09:06 Forex Today: USD sidelined, Aussie falls on weaker capex data, a quiet calendar ahead

The US Dollar consolidated overnight retracement from 1-week high led by the latest FOMC meeting minutes that revealed a desire to raise interest-rates "fairly soon" but expressed concerns over the US President Donald Trump's proposed fiscal policies. The greenback retracement, however, has been modest amid growing bets for an imminent Fed rate-hike move, as early as at the March meeting.

Meanwhile, the Australian Dollar came under some fresh selling pressure following more-than-expected drop in private capital expenditure, recording a fall of 2.1% for the fourth-quarter of 2016. The reading was worse than market expectations but was still better-than previous quarter's drop of 3.3% (revised from -4.0% reported earlier).

With the exception of weekly jobless claims data from the US, there are no major market moving economic data due for release on Thursday. However, remarks from the US Treasury Secretary Steven Mnuchin and Dallas Fed President Robert Kaplan would be looked upon for some impetus for short-term trading opportunities.

Main topics in Asia

March Fed rate hike is off the table - CME data

CME Group 30-Day Fed Fund futures prices show markets see only a 22 % probability of a rate hike in March.

EUR/USD - What’s behind the sharp rebound from 1.05?

EUR/USD staged a strong recovery on Wednesday from the low of 1.0494 to 1.0557 and currently trades around 1.0550 levels.

AUD/USD bears back in control after poor CAPEX report

AUD/USD has had a hard time on the back of the recent data in the CAPEX and a key component to the RBA's decision-making process in respect to the economy and investment for future growth.

BOJ's Kiuchi says current pace of bond buying is unsustainable

Bank of Japan's (BOJ) Kiuchi said today that the central bank may soon face difficutly in buying bonds if it continues the QE program at the current pace.

Key focus for the day ahead

Fed minutes scatter the birds and dollar rally sucks wind - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, suggests that the recently releases FOMC minutes were a confusing set of minutes that say, on the one hand, many want to raise fairly soon, but on the other, many say there is likely to be ample time to respond if signs of rising inflation pressure emerge.

Italy: To trigger or not to trigger elections – Rabobank

Maartje Wijffelaars, Economist at Rabobank, notes that the Renzi has resigned as party leader, but he is likely to make a comeback in the spring and early elections are in the cards for Italy, although Rabobank believe more likely in the fall than in June.

Why Gold has been going nowhere?

Gold has been restricted largely to a range of $1230-1243 levels over the last one week. Occasional dip below $1230 has proved to be short lived.

Oil: Sharp move, probably on the upside coming? - Natixis

In view of the Micaella Feldstein, Research Analyst at Natixis, the daily volatility has remained very low for Brent since December, which is a forerunner of a sharp move, probably on the upside considering the buy signals on the daily indicators.


09:03 EUR/TRY: Deeper downside correction on the cards - Natixis

Micaella Feldstein, Research Analyst at Natixis, suggests that the erosion of the 3.8430-3.86 area (weekly parabolic) for EUR/TRY pair is bearish as it undermines the weekly upside parallels and suggests a deeper downside correction.

Key Quotes

“Besides, downside parallels have emerged on the daily chart, underlining our bearish view for the coming days.”

“Against this backdrop, we anticipate a decline to 3.7810 (daily Bollinger lower band) ahead of the support at 3.7250 (weekly Bollinger moving average). We’ll be careful as a break of this last threshold would provide fresh bearish momentum to 3.5960 (Fibonacci extension) and 3.54 (9month moving average). The resistances are at 3.8430-3.86, at 3.9210, at 3.9720 and at 4.03.”


09:02 Germany Gfk Consumer Confidence Survey came in at 10, below expectations (10.1) in March


09:01 Germany Gross Domestic Product s.a (QoQ) meets forecasts (0.4%) in 4Q


09:01 Germany Gross Domestic Product n.s.a (YoY) meets forecasts (1.2%) in 4Q


08:58 Commodities: Whats next in store for the market Goldman Sachs

Analysts at Goldman Sachs note that a year has now passed since commodity markets reached historical lows, which erased all of the investment gains of the 2000s, and started a rebound that has resulted in a doubling of many commodity prices to current levels which leaves open the question of what next?

Key Quotes

“Market positioning is now extremely long across the commodity complex, as markets have priced in robust expectations on forward demand and inventory draws that have yet to materialize. At this point, we would argue that commodity markets are likely to remain in a holding pattern as they wait for hard data to confirm the most recent leg up. Markets need to see that the OPEC supply cuts generate real inventory draws and the strong manufacturing survey and Chinese credit data create real activity. In other words, ‘show me the activity’; real demand, real stock draws and empty warehouses.”

“As recent survey data suggests that global GDP growth is tracking at 4.4%, well above our economists estimate of 3.6%, confirmation of such robust activity and inventory draws has the potential to push prices above our expectations. However, we believe these upside price risks are greater in metal markets than oil due to the offsetting supply response from US shale producers that is beginning to gain momentum.”

“Without a follow through into real activity and inventory draws, commodity markets and broader financial markets more generally would be poised for a significant correction given the strong correlation between speculative positioning and the survey data such as the PMIs. However, we are confident that real activity and inventory draws are likely to materialize going into 2Q17 for several reasons: 1) in oil, the US will be the last to draw and global fundamentals suggest a much stronger market than the recent US stock builds would suggest; 2) the linkage between the survey data and real activity is historically very strong; and 3) in China, the virtuous cycle created from rising PPI likely has further to run before tighter Chinese policy potentially intervenes, and the composition of the credit data is more commodity intensive as it is less reliant on mortgages.”

“In oil, while the reduction in supplies out of core OPEC in the Gulf and Russia has exceeded our and consensus expectations, the market is starting to doubt that this will be sufficient to translate into large oil inventory draws by 2Q17. This is mostly due to recent surges in US oil inventories, weak data points in Indian and US motor gasoline demand, and worries over increased US shale output given the optimistic guidance from US E&P companies during this earnings release period.”


08:57 GBP/USD deeper pullback appears unlikely UOB

FX Strategists at UOB Group stay neutral on Cable in the near term, expecting to gravitate between 1.2400 and 1.2580.

Key Quotes

GBP had a rather choppy day yesterday, swinging between 1.2420 and 1.2509. The whippy trading has resulted in a mixed outlook and while a move out the 1.2420/1.2509 range is not ruled out, a move below the major 1.2400 support or the major 1.2530 resistance seems unlikely”.

“GBP took a peek above 1.2500 yesterday but got sold off quickly from a high of 1.2509. While lacking in momentum, the pull-back appears to have scope to move below the bottom of the expected 1.2400/1.2580 consolidation range but a sustained down-move is unlikely (next level at 1.2350 is a major support and is not expected to yield so easily). All in, the outlook is unclear and the recent whippy trading could persist for a while more”.

 

 


08:52 EUR/USD outlook remains negative Commerzbank

Karen Jones, Head of FICC Technical Analysis at Commerzbank, noted EUR/USD stays focused on the 1.0352/40 band for the time being.

Key Quotes

“The market has eroded last weeks low (but not closed below there!)and our focus remains on recent lows at 1.0352/40. The market is seeing a small rebound from 1.0500 and we have merely tightened our stops to protect profit at this point. It will remain directly offered below the 20 day ma at 1.0663 and the 3 month downtrend at 1.0702. Intraday rallies are indicated to hold below 1.0575”.

“The market will remain directly offered below short term downtrend at 1.0702. Above here lies 1.0820/26, which represents the 50% retracement and the top of the cloud”.

 

 


08:50 BCB: Easing apace, with door open for acceleration - Rabobank

Mauricio Oreng, Senior Brazil Strategist at Rabobank, notes that the Brazilian Central Bank (BCB) has cut the benchmark Selic rate by 75bps to 12.25% p.a., in line with market expectations (Rabobank included).

Key Quotes

“In the statement, the Copom (policy committee) discusses the conditioners for the length and speed of future rate cuts, as the official IPCA inflation projections keep pointing to mid-target achievement, in scenarios with Selic rate at 9.5% this year and 9.0% next year.”

“The BCB points to interest-rate convergence to its structural level (based on BCB’s estimates), which could even be lower (than in the past) if fiscal reforms are implemented.”

“Importantly, the Copom also leaves door open for faster moves (i.e. 100bps) conditional on the macro scenario, the evolution of risks and the cycle’s extension.”

“We have recently revised down our Selic rate forecast for end-2017 to 9.5% (from 10.0%). We now mark down our estimate for end-2018 to 8.0% (from 9.0%).”

“In our opinion, that will be the “terminal” level for interest rate in this easing cycle (not necessarily the new neutral level, which will depend on future downward revisions in the inflation target). All of this provided that the government is able to fix the budget via reforms.”


08:47 EUR/USD eases from highs, back near 1.0550

The single currency has started the second half of the week on a firmer note, pushing EUR/USD back to the 1.0570 region, albeit deflating afterwards.

EUR/USD focus on data, USD

The renewed offered bias around the greenback has allowed spot to stage quite a significant rebound after briefly testing daily lows in sub-1.0500 levels on Wednesday.

In fact, minutes from the latest FOMC meeting published yesterday failed to sustain further the rally in the buck, prompting the current squeeze higher in the pair to the upper-1.0500s.

FOMC members coincided in the need for more tightening sooner than later, although they now see only modest risks of significant inflation and the likeliness of an unemployment overshoot. Despite a rate hike in March has not been ruled out, USD quickly faded the spike to the 101.70 area and is now looking to consolidate in the 101.30 region when gauged by the US Dollar Index.

In addition, EUR found extra buying interest after French presidential candidate F.Bayou abandoned the race for president, giving candidate E.Macron extra chances to beat far-right candidate M.Le Pen.

Data wise, German Q4 GDP figures and Consumer Climate tracked by Gfk are up next. Across the pond, the usual weekly report on the US labour market is due seconded by Chicago National Activity Index and the speech by Atlanta Fed D.Lockhart (he will retire end of month).

EUR/USD levels to watch

At the moment the pair is losing 0.03% at 1.0553 and a breach of 1.0498 (low Feb.22) 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 1.0593 (55-day sma) followed by 1.0682 (high Feb.16) and finally 1.0706 (38.2% Fibo of the November-January drop).


08:47 FOMC minutes: Trumponomics make the outlook more uncertain Danske Bank

According to the analysts at Danske Bank, as expected, the FOMC minutes released late last night gave little news, as many FOMC members have already expressed their views since the meeting.

Key Quotes

“The FOMC members think the economy continues to improve but that Trumponomics make the outlook more uncertain. Although 'many participants' expect a hike 'fairly soon', only 'a few participants' expect a hike 'at an upcoming meeting'.”

“Yesterday afternoon, French government bonds rallied after the centrist politician Francois Bayrou offered to form an alliance with the presidential candidate Emmanuel Macron.”


08:44 Australia: No Capex joy here - TDS

Analysts at TDS notes that Australia’s Dec qtr real private capital expenditure (capex) fell by a larger-than-expected –2.1%/qtr (TD flat, mkt +0.5%).

Key Quotes

“The capex component that feeds into GDP—plant & equipment investment—rose by +0.4%/qtr, also underwhelming but at least not a fall. In 2016, real capex spending shrunk by 16%, led a 35% slump in mining, while services investment rose by 3%.”

“The planned (raw) spend for 2016/17 at $A112b was higher than expected, but the sticker shock was the soft first raw estimate for 2017/18 at $A80.6b.”

“The updated capex spending estimate for 2016/17 was $A112.2b (raw, -14% adjusted) which was a marginal upgrade compared with the prior report. The first raw estimate for 2017/18 was $A80.5b (after adjustment, –18%).”

“Ahead of inventories, net exports and public spending updates next week, our Dec qtr GDP is tracking at +0.6%/qtr, leaving annual GDP growth at 1.8%/yr. The RBA’s recent projection was 2%/yr, so could be seen as a small downside miss.”

Market update and RBA Implications

  • Australian bonds were already rallying and the curve flattened after a not-hawkish-enough set of FOMC minutes overnight. 3yrs now –2.5bps to 2.01% and 10yrs –4bp to 2.79%. November OIS is flat at 1.505%. The AUD was already heavy into the report, and was swiftly pushed down to $US0.7665 after the weak Dec qtr and 2017/18 first estimate hit the tapes.
  • This week’s RBA Board meeting minutes noted that the economy was coping with shrinking mining investment, and so no doubt the Bank would be disappointed with this weak initial investment estimate for next year.
  • Aside from the RBA claiming that any exchange rate appreciation “complicates” the rebalancing of the economy, we do not expect the Bank to lean against the exchange rate while commodity prices and the terms of trade are so strong.”

08:38 Italy: To trigger or not to trigger elections Rabobank

Maartje Wijffelaars, Economist at Rabobank, notes that the Renzi has resigned as party leader, but he is likely to make a comeback in the spring and early elections are in the cards for Italy, although Rabobank believe more likely in the fall than in June.

Key Quotes

“In effect this looks more like a well-planned move, as his resignation triggers the process of party primaries and ultimately elections in April/ May. Renzi himself has suggested 7 May would be a good date. This goes against the demands of left-wing dissidents, who wanted to hold the primaries in December, as planned. Primaries in Spring come too early for the left-wingers to put forward a credible contester to Renzi, who will re-run. With no credible opponent it is almost certain that Renzi will be the one who leads the PD through the next national elections.”

Elections, and then what?

Assuming early elections, what would be the ramifications for its outcome? Well, nothing to cheer about, we think. Given that major changes to the tweaked Italicum law are unlikely to be implemented before the elections take place, parliament will remain very much fragmented after the next elections. Both within each house of parliament and between both houses of parliament. The latter matters, as both houses have the same amount power.”

“On the bright side, this means that - going by the current polls - an absolute majority for the Five Star Movement (M5S) remains unlikely. The anti-establishment party would need to obtain at least 40% of the votes to acquire the majority premium that will give them 55% of the seats, and recent polls are at less than 30%. But the same holds for any other party. And with the imminent PD split, chances of an M5S election victory are increasing. In a worst case scenario for the country’s political stability, the M5S would win and be able to form a coalition with other Eurosceptic parties like Lega Nord and Fratelli d’Italia. While this is far from our base case scenario, since Beppe Grillo of M5S has ruled out coalitions and the ideological differences between the parties are large, we should not completely neglect the possibility. Together these parties are currently polling at around 45% of seats in the lower house. This could stoke fear that euro membership is at risk. Yet as explained in our piece The Voice of Italy, triggering an euro exit is not that easy for an Italian government.”

“In any case, it is far from certain that whoever wins the elections will be able to form a workable, let alone stable, majority. As such, government efficiency is likely to remain hampered by fragmentation, whilst political uncertainty is likely to remain high. Necessary reforms are unlikely to be completed and implemented and this raises the the likelihood that economic growth will not get the boost necessary to grow itself out of its large public debt stock, which is currently over 130% of GDP.”


08:14 USD/JPY holds above 113.00 handle

The USD/JPY pair traded with mild bearish bias for the second straight session but has managed to hold its neck above 113.00 handle. 

Currently trading around 113.20 region, the pair stalled overnight bounce back from 112.90 level near mid-113.00s region amid prevalent risk-off mood as depicted by negative trading sentiment surrounding Asian equity markets. In addition, a follow through retracement in the US treasury bond yields also undermined the greenback and further collaborated to the offered tone surrounding the major.

The US Dollar surrendered previous session's gains to multi-day peaks after minutes from the FOMC latest monetary policy meeting indicated a desire to raise interest rates “fairly soon” but struggled to do so because of uncertainty over the US President Donald Trump's fiscal policies.

On economic data front, Japanese Services PPI for January matched previous month's reading and came-in at +0.5% y/y. Later during NA session, the usual release of weekly jobless claims data from the US would now be looked upon for some fresh impetus. In the meantime, broader market risk-sentiment and the US Dollar price-dynamics would be key determinants of the pair's movement on Thursday.

Technical levels to watch

On a sustained weakness below 113.00 handle, leading to a subsequent drop below 112.90 level, seems to extend the downslide towards 112.40 horizontal support before the pair eventually drops back to 112.00 handle.

Meanwhile on the upside, momentum above 113.45-50 zone is likely to confront resistance near 113.75-80 region above which the pair is likely to surpass 114.00 handle and head towards testing its next resistance near 114.25-30 region. 

 


08:07 EUR/CHF: Stay short, targeting parity Deutsche Bank

Oliver Harvey, Macro strategist at Deutsche Bank, notes that the Swiss sight deposit data suggested another sharp pick-up in intervention from the SNB last week, with an additional CHF 4.5bn of franc liquidity created after an increase of over 7bn in the previous fortnight.

Key Quotes

“1.06 appears to be the new unofficial floor for the central bank, but we don’t see a defense of this as sustainable.”

“First, the fundamental reasons for franc appreciation remain strong. Latest data show that Switzerland’s broad-based balance has now moved into positive territory on an annualized basis. A lack of domestic outflows remains the source of marginal CHF demand, with Swiss purchases of foreign debt retreating back to zero and equity outflows almost as subdued. Our cross border M&A monitor also shows a big pick-up in cross-border inflows so far this year. There is a limit to how far the SNB can continue to recycle the current account surplus given costs to the banking sector are rising and deflationary pressures easing. Swiss CPI at last turned positive in January.” 

“Second, European political risk may return to haunt the SNB. Peripheral spreads have widened in anticipation of French and Italian elections and the close relationship between these and SNB intervention over the last two years suggest that investors concerned about euro redenomination risk continue to see Swiss assets as a safe-haven. This is also being reflected in the options market, with the three month EUR/CHF risk reversal falling sharply in recent weeks to levels previously associated with periods of major Eurozone stress.” 

“Finally, the trade still seems lightly owned. Despite the move in the risk reversal, speculators remain short according to IMM positioning (albeit shorts were pared significantly last week), probably reflecting CHF’s use as a funding currency for carry trades.”  

“In sum, selling EUR/CHF remains one of our favorite trades, and would also benefit from rising Eurozone political risk premia. Stay short, targeting parity.”


07:44 Fed minutes scatter the birds and dollar rally sucks wind - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, suggests that the recently releases FOMC minutes were a confusing set of minutes that say, on the one hand, many want to raise fairly soon, but on the other, many say there is likely to be ample time to respond if signs of rising inflation pressure emerge.

Key Quotes

“Many want to emphasize a gradual rate tightening outlook, but several, it seems, want the Fed to appear more flexible.  There are some hawks that are ready to hike soon and others that might like to hold back until say June.  There are birds of all kinds of a feather.”

“In general, their views haven’t changed much since December, and at that meeting, the majority wanted to hike thrice this year. This throws up an interesting conundrum for timing when most seem to think the Fed prefers to change policy at the quarterly SEP/press conference meetings.  How do you fit three into four?  I mean, if we spread these three hikes over a year, then you hike at in-between meetings (May/July/Nov?).  Maybe the odds of moving at these lesser dates is higher than normal.”

“What does “fairly soon” mean.  It sounds like March or May…June would seem on the fringe of fairly soon.  If the Fed doesn’t like the in-between dates, then it sounds like March.  But if it’s only three this year, March sounds like a Fed stepping up the pace from last year, and getting a bit ahead of the three a year schedule.  The broader tone of the minutes didn’t really suggest any additional urgency to hike since December; gradual remains the buzz word.”

“The change in government is generating heightened uncertainty.  On balance it seems more likely to boost growth and inflation, but there are also downside risks.  Some don’t want to get too caught up in government policy watching and appear more hawkish, some others would like more clarity before rushing to hike.”

“The balance of risks appears to have shifted somewhat more positive, albeit still wide, but several Fed members see further strength in the USD exchange rate as restraining the growth and inflation outlook.”

“The strength in the USD is mentioned four times in these minutes, illustrating that it was raised more often in this meeting than normal, by several members, as an issue that might moderate the need to hike.”

“Business optimism has been given a big boost by possible tax cuts and stripping back regulation.  But the evidence of immediate impact on business investment is more cautious.  This may indicate much depends on the Government to deliver on its tax policy.”

“The Fed is acutely watching the labor market.  Several members are cognizant that it might already be on the verge of becoming too tight.”

“The USD is weaker in response to the minutes, perhaps because the increased mention of the USD exchange rate risks in the minutes resonates with the market.  The strong USD was a factor that appeared to slow the expansion last year. The USD is historically strong and it has failed to build much moment over the last year even as US rates have risen, suggesting its multi-year rally is sucking wind.”

“The market may also be pushing back the scope and timing for the government to deliver on its tax/regulatory/infrastructure policy and instead is getting mired down in immigration and healthcare policy issues.  Furthermore, the administration appears to want a weaker USD.”


07:38 GBP/USD confined in a narrow range around 1.2450 level

The GBP/USD pair struggled for direction and was confined within a 30-pips narrow trading range during Asian session on Thursday. 

Currently hovering around mid-1.2400s, the pair on Wednesday failed to build on its recent up-move and clear 1.25 psychological barrier. The pair subsequently witnessed a reversal from higher levels against the backdrop of a downward revision of yearly UK GDP growth and disappointing business investment figures. In addition to this, persistent greenback strength also weighed on the major and dragged it to retest 100-day SMA support.

Later during NY session, the pair managed to bounce off lows after the Fed minutes expressed concerns over uncertainty surrounding the US President Donald Trump's pro-growth policies, albeit indicated a desire to raise interest rates "fairly soon". The minutes failed to provide an additional boost to the greenback and helped the pair to defend an important confluence support near 1.2415-10 region, comprising of a short-term ascending trend-line & 100-day SMA.

With a relatively thin economic docket on Thursday, featuring the release of usual weekly jobless claims data from the US, the pair remains at the mercy of the US Dollar price-dynamics. 

Technical levels to watch

On the downside, 100-day SMA near 1.2415-10 region remains immediate support to defend, which if broken could accelerate the slide towards 1.2385-80 horizontal support before the pair eventually breaks through Feb. lows support near 1.2350-45 region and head towards 1.2330-25 support area.

Conversely, momentum above 1.2470 immediate hurdle could get extended back towards 1.2500 mark. A sustained strength above 1.25 important resistance now seems to trigger a short-covering rally towards 1.2545-50 horizontal resistance ahead of 1.2580 level (Feb. 9 high).

 


07:03 Japan Coincident Index declined to 114.8 in December from previous 115.2


07:00 Canada: Retail sales declined 0.5% in December RBC Economics

Nathan Janzen, Senior Economist at RBC Economics, notes that the December decline in Canadian retail sales was the first in five months and was weaker than market expectations for a flat reading.

Key Quotes

“Lower nominal sales were despite a large increase in gasoline prices.  Volume sales declined a larger 1.0% in December to partly retrace gains over the prior five months.”

“Sales at automobile dealers declined 2.5% in December, largely in line with an earlier-reported drop in unit vehicle sales in the month following an outsized sales pace in November (sales of motor vehicle and parts were still up 3.9% from a year ago in December).  Less-expected was the extent of broadly-based weakness elsewhere.  Sales at gasoline stations were the main exception; however, the 6.6% rise in spending at the pump looks to have been largely attributable to an increase in prices.  Excluding the motor vehicle and gasoline station components, sales declined 1.4%, marking the third decline for that component in the last four months.”

Our Take:

  • The pull-back in retail sales volumes in December was broadly expected given an earlier-reported drop in unit vehicle sales from record high levels in November and only partially retraced the cumulative 2.3% gain over the prior five months.  Sale volumes still rose an annualized 4.5% in Q4 as a whole (and were up 3.0% on a year-over-year basis in December) which is broadly consistent with our call that overall consumer spending (including services spending not captured in the retail report) rose at a 2 1/2% rate in the quarter.
  • In terms of overall GDP implications, the monthly pull-back in December retail volumes follows earlier reported gains in wholesale (+0.9%) and manufacturing (+2.3%) sale volumes in the month.  Along with increasing indications that activity in the oil & gas sector is bottoming out (oil & gas drilling rig counts were above year-ago levels in December for the first time since December 2014), data to-date remain in line with our monitoring for a 0.2% gain in GDP in December that would build on the 0.4% rise in November and further recover from the disappointing, and surprising, 0.2% pullback in October.  That remains consistent with our call for a 1.8% GDP gain in Q4 as a whole.”

06:59 BOJs Kiuchi frequently raising yield curve target could boost rate hike bets

Bank of Japan’s (BOJ) Kiuchi, while speaking with media, said frequently raising yield curve target would boost rate hike bets, making it further difficult for the central bank to manage the yield curve.

Kiuchi added, “Increasing bond buying comes at a cost”.

Kiuchi, while talking to Bloomberg earlier today, said the current pace of the bond buying is unsustainable. 


06:45 USD/CAD - Bears attack 200-DMA as oil rallies

The USD / CAD pair is looking to chew through 200-DMA support of 1.3143 this Thursday morning in Asia on the back of the rally in oil prices.

Rejected at 38.2% Fib retracement

The pair was rejected at 1.3209 (38.2% of Dec 28 high - Jan 31 low) yesterday after the US API reported a surprise drawdown in the oil inventories. Furthermore, cautious Fed minutes also took the wind out of the dollar bulls.

The pair continued to lose height in early Asia, falling from 1.3170 to 200-DMA level of 1.3143. It is the 0.8% rally in oil prices that is helping the CAD extend overnight gains.

USD/CAD Technical Levels

The spot was last seen trading around 1.3148. Acceptance below 200-DMA of 1.3413 would signal the rally from 1.30 (Feb 16 low) has ended. The spot could test 1.3117 (23.6% fib), under which a major support is seen at 1.30 (Feb 16 low). On the other hand, a break above 1.3170 (session high) would expose 1.3209 (38.2% fib) and 1.3236 (Dec 5 low).

 


06:44 Australia: Consumers and businesses anxious about what the future holds - NAB

Alan Oster, Group Chief Economist at NAB, notes that the Australians and businesses overwhelmingly think that Australia is a great place to live and have a business but Australian consumers and businesses are anxious about what the future holds.

Key Quotes

“National Australia Bank (NAB) today released a new report which asks consumers and businesses to explore life, work and running a business in Australia – now and in the future.”

“Nine in 10 Australians told us our country’s open spaces, people and lifestyle and access to affordable and quality healthcare are the biggest contributors to liveability and their choice to call Australia home,” NAB Chief Economist Alan Oster said.

“There are some clear differences between states. Consumers in SA/NT are much more positive in relation to travel time, living costs and housing – and in Victoria, a love of sport means entertainment options feature more prominently for liveability than any other state.”

“Businesses too are optimistic, with 8 in 10 (82%) surveyed viewing Australia as a great place to have a business.”

“Australian business people see the economy, our close proximity and strong connections to Asia and the growing population as some of Australia’s key strengths,” Mr Oster said.”

“Making the most of these strengths is vitally important for Australia, to support more growth opportunities for businesses and the millions of Australians they employ.”

“But despite their current optimism, the report found only 1 in 2 people and 60% of businesses think Australia will be a great place to live and have a business in 10 years’ time.”

“There is a clear message of anxiety in the future coming from Australian consumers and businesses,” Mr Oster said.

“Australians identified access to social welfare, living costs, tax levels, jobs and housing affordability as the key factors they expect will deteriorate the most in the next 10 years. Consumers are saying they expect very little progress in the areas already holding Australia back now.

“While a person’s income didn’t affect current perceptions of liveability, there was a large future disconnect between high income earners (earning over $100,000) and those earning under $35,000 a year.”

“Businesses are slightly more optimistic.”

 “Australian businesses expect the things that make our country great now to continue to make us great in the future – this includes our population, proximity to Asia and our innovative and entrepreneurial economy.”

“These insights on how Australians feel about our country may be able to help businesses and governments discover what we’re concerned about, and prompt discussion on how to tackle some of the big issues,” Mr Oster said.


06:35 USD/CAD: Canadian Seagulls calling - Rabobank

Christian Lawrence, Senior Market Strategist at Rabobank, notes that the USD/CAD has traded higher over the past four sessions, moving up off the 1.30 floor and the move higher is in line with their expectation but they need to see a confirmed close north of 1.32 before they can say the recent range has broken.

Key Quotes

“We maintain the view that CAD looks rich and sizeable event risk ahead could see USD/CAD test the 1.36 handle.”

 “We have often cited our view that CAD is pricing in almost nothing from a Trump-factor perspective. If we do see risk emerge from this front then there is likely to be a short term reaction but depending on the announcement it would also have a meaningful long term impact on Canada. Although not our base case, if we were to see a border-adjustment tax implemented south of the border this is one example of a policy that would have a long term impact on USD/CAD.”

“We have noted Trump policies as a risk for CAD both short term and longer term and we think USD/CAD seagulls look attractive for USD buyers.”

“As an example, looking at a 12mth horizon, a USD buyer can create a zero cost structure by purchasing a call at 1.36, selling a call at 1.44 and selling a put at 1.24 (61 pips below the May 2016 low which was the lowest print since July 2015). Spot reference 1.3190.”


06:28 Oil: Sharp move, probably on the upside coming? - Natixis

In view of the Micaella Feldstein, Research Analyst at Natixis, the daily volatility has remained very low for Brent since December, which is a forerunner of a sharp move, probably on the upside considering the buy signals on the daily indicators.

Key Quotes

“The pick up of the weekly indicators also pleads for an extension of the rally in the coming days.”

“Against this backdrop, we’ll keep a lookout at the resistances at 5757.10 (daily Bollinger upper band) whose break would add weight to our bullish view, unleashing strong upside potential to 58.10-58.30 (Fibonacci extensions), to 60.20 (monthly Bollinger upper band) and even to 61.20 (weekly Bollinger upper band).”

“The supports lie at 55.85, at 54.50-54.70, at 53.15 and at 52.20.”


06:22 FOMC Minutes: Rate hike coming fairly soon, in June? - Rabobank

According to Philip Marey, Senior US Strategist at Rabobank, the minutes of the FOMC meeting of January 31 and February 1 support Yellen’s suggestion last week that the upcoming meetings are ‘live’ meetings.

Key Quotes

“Many participants expressed the view that it might be appropriate to raise the federal funds rate again ‘fairly soon’ if incoming information on the labor market and inflation was in line with or stronger than their current expectations or if the risks of overshooting the Committee's maximum-employment and inflation objectives increased. However, the minutes also showed that the Fed is not in a hurry.”

“Many members continued to see ‘only a modest risk’ of a scenario in which the unemployment rate would substantially undershoot its longer-run normal level and inflation pressures would increase significantly. These members expressed the view that inflation was likely to rise toward 2 percent gradually, and that policymakers would likely have ample time to respond if signs of rising inflationary pressures did begin to emerge. What’s more, the minutes also showed that the debate about reducing the Fed’s asset portfolio is yet to start at upcoming meetings. On balance, a bit more dovish than some in the markets had expected if we look at the immediate drop in US treasury yields.”

“Once more the minutes revealed how dependent the Fed has become on President Trump’s economic policies. Participants again emphasized their considerable uncertainty about the prospects for changes in fiscal and other government policies as well as about the timing and magnitude of the net effects of such changes on economic activity. Most participants thought some time would likely be required for the outlook to become clearer.”

“A couple of participants argued that such uncertainty should not deter the Committee from taking further steps in the near term to remove monetary policy accommodation, because fiscal and other policies were only some of the many factors that were likely to influence progress toward the Committee's dualmandate objectives and thus the appropriate course of monetary policy. However, other participants cautioned against adjusting monetary policy in anticipation of policy proposals that might not be enacted or that, if enacted, might turn out to have different consequences for economic activity and inflation than currently anticipated. Coincidentally, starting with the minutes of the next meeting, the Fed will also start to add fan charts to the quarterly economic projections that will (further) illustrate the uncertainty of the FOMC participants.”

… in June? 

“Since the March meeting will come too early to assess the fiscal policy plans of the new administration, and the May meeting does not include a scheduled press conference, we therefore think it is more likely that the FOMC is aiming for June again. If the economic data continue to point at sustained momentum by mid-June and if there are no threats to the US economy from overseas – such as adverse developments in China or Europe − or from Trump’s trade policies, the Fed is likely to hike on June 14. However, we still think that the probability that all these conditions are met is lower than 50%. Note that last year the Fed was ready to go in June as well, but it took only one bad Employment Report in early June to derail that plan. With fiscal policy effects on the economy likely to lag, we expect the negative fallout from US trade policies and global weakness to prevent a June hike. For now, we stick to our December call, although the risks to our forecast are predominantly to the upside.”


06:15 Why Gold has been going nowhere?

Gold has been restricted largely to a range of $1230-1243 levels over the last one week. Occasional dip below $1230 has proved to be short lived.

The sideways churn continues this Thursday morning, with metal trading around $1235/Oz levels.

Downside capped by no tax action, fiscal plan

Over the past two months, the markets have been largely driven by the hopes and promises of the big three - tax cuts, infrastructure spending and deregulation - during Trump Presidency. However, markets’ patience is being tested by the lack of details of the fiscal plan.

Moreover, there is fear that Trump may not be able to meet/surpass market expectation and that could trigger unwinding of the Trump trade. Consequently, the downside in gold is being restricted around $1230 levels. The restrained action in the treasury yields is also helping the yellow metal.

Record rally in stocks, strong USD capping upside

US stocks are on a tear. Dow Jones closed at record highs for the ninth straight day on Wednesday. The risk-on rally is capping the haven demand for the metal. Furthermore, the recovery in the Dollar Index from 99.19 (Feb 2 low) to 101.70 levels is also keeping a tab on the gains in gold prices.

The range may remain intact today as the US economic calendar is light.

Gold Technical Levels

A break above $12441.71 (Feb 8 high) would open doors for $1261 (100-DMA) levels. On the downside, breach of support at $1225 (Feb 21 low) could yield a pull back to $1192 (50-DMA). 

 

 


05:43 AUD/USD - off lows, Fed minutes cap losses

The downside in the AUD/USD pair following the release of the disappointing Australia capex figure has been capped by slightly dovish Fed minutes.

The pair dropped to a low of 0.7665 before recovering to 0.7683 levels.

Fed minutes show concern at greenback strength

Federal Reserve's latest meeting released overnight showed concern that a strong greenback could hurt the US economy. Furthermore, commentary in minutes appeared to downplay any near-term inflation risks.

As usual, the minutes carried the ambiguous language with respect to the timing of the next rate hike. Officials saw the need to raise interest rates "fairly soon" provided labour market data and inflation were in line or stronger than expectations.

Such confusing language against the backdrop of Trump bump has disappointed dollar bulls. Consequently, the AUD/USD pair was able to restrict losses to 0.7665 levels despite weak forward looking capex data.

AUD/USD Technical Levels

A break above 0.7704 (session high) would open doors for 0.7732 (Feb 16 high), above which the spot may target 0.7778 (Nov 8 high). On the other hand, a break below 0.7649 (Feb 21 low) could yield a pullback to 0.76 (zero figure), under which a major support is seen directly at 0.7511 (Jan 27 low).

 


05:16 Latest BVA poll puts Le Pen in lead

The latest BVA poll shows French far right (anti-Euro) leader Marine Le Pen in lead at 27.5% in the first round of presidential election. Macron is seen at 21%, while the conservative candidate Fillon is seen at 19%.


05:08 Asian stocks drop, Nikkei nears 50-DMA support

Asian stocks pulled back from a 19-month high, with Japan’s Nikkei nearing 50-DMA support of 19,228 levels despite Fed minutes indicating cautious approach to policy tightening.

Nikkei hit a low of 19,262 levels and was last seen trading around 19,336; down 0.22% on the day. Stocks in Australia retreated 0.3%. Wall Street continued its record run on Wednesday, with Dow closing 0.2% higher; its ninth straight record daily close.

Overnight strength in the Japanese Yen weighed over the exporter shares in Japan. Moreover, the US dollar was offered across the board as the Fed minutes carried the usual ambiguous language with regards to the timing of the next Fed rate hike.

Moreover, the Fed remains market-dependent and unless markets don’t boost rate hike bets at least above 60%, the Fed would not want to raise rates.

However, what that tells us is that nothing really has changed despite the Trump Bump and rising inflation expectations.

The Dollar index dropped from the high of 101.72 to 101.16 on Wednesday before staging a minor recovery to 101.35 levels in Asia.


04:46 Will WTI Oil see a sustained break above $54/barrel?

WTI oil daily chart shows spikes above $54.00 since mid-December have repeatedly run into offers.

Prices did close above $54.00 on Tuesday, but fell back below the psychological level on Wednesday. At the time of writing, oil was flirting with $54.00 handle.

The American Petroleum Institute (API) data released overnight showed a surprise drawdown of 884K in the US oil inventories as opposed to the expected build of 3.3 million barrels. Oil could see sharp gains above $54 handle if the official government data due for release today confirms the drawdown in the US inventories.

The markets have already priced-in good news from OPEC. Hence, sustained gains above $54 handle would require positive news flow out of the US.


04:17 EUR/USD - Whats behind the sharp rebound from 1.05?

EUR/USD staged a strong recovery on Wednesday from the low of 1.0494 to 1.0557 and currently trades around 1.0550 levels.

Franco-German yield spread narrowed

The 10-year Franco-German yield spread narrowed from 0.814 to 0.743 on Wednesday after Francois Bayou pulled out of the French Presidential race, boosting Macro’s probability of beating anti-Euro Marine Le Pen.

March Fed rate hike is off the table

Another factor that is keeping the bears on the sidelines is the reduced probability of a Fed rate hike in March. The CME fed funds data shows only a 22 % probability of a rate hike in March. Fed minutes released overnight carried the usual ambiguous language.

Both factors ensure the spot stays above 1.0527, which is the 61.8% Fibonacci retracement of 1.0341-1.0829.

Politics could continue to overshadow economics. Thus, Franco-German yield spread remains in the driver’s seat. In the US session, the weekly jobless claims report could influence the dollar side of the story.

EUR/USD Technical Levels

A break above 1.0571 (5-DMA) would expose the 50-DMA hurdle of 1.0595, above which the spot could test 1.0677 (Feb 17 high). On the other hand, a breakdown of support at 1.0521 (Feb 15 low) could yield a drop to 1.05 (zero figure) and 1.0480 (Dec 28 high).           

 


03:58 Australia treasurer Morrison forecasts iron ore prices at $68 per tonne for 2017

Australian Treasurer Scott Morrison was on the wires last hour, via Reuters, noting that he sees iron-ore prices at $ 68 per tonne for 2017, Livesquawk reports.

No further details have been provided on the same.


03:48 German finance ministry: Economy is on a solid growth path

Reuters reported key headlines from the German monthly report published by the finance ministry earlier on the day.

Key Headlines:

German economy is on a solid growth path

Upswing likely to continue in 2017

Private consumption to propel overall German growth

Helped by higher employment, rising wages, low interest rates

State spending also to support German growth due to refugee-related expenditure

German tax revenue up 4 pct y/y in January, higher than full-year projection of 2.9 pct


03:41 Gold seen at $ 1250 in next 12 months Goldman Sachs

Economists at Goldman Sachs came out with their latest gold-price forecasts for next 3, 6 and 12 months.

Key Points:

For 3 and 6 months, looking for USD1200 / ounce

12 months out, USD1250

Economists expect 3 Federal Reserve rate hikes in 2017

Assess the probability of a rate hike by June at 80%

Longer dated real rates in the US are expected to increase slightly, which will put some downward pressure on gold

Expect US equity prices rally to fade by the second half of this year

Increasing geopolitical & political risks (European elections, potential trade restrictions)

US economic-policy uncertainty to stay elevated


03:38 Dollar strength is a good thing in the long run - Mnuchin

US Treasury Secretary Steven Mnuchin, in an exclusive interview with The Wall Street Journal (WSJ), said the strong dollar is a sign of confidence in the US economy and is a ‘good thing’ in the long run.

“For longer-term purposes, an appreciation of the dollar is a good thing, and I would expect longer-term, as you have seen over periods of time, the dollar does appreciate”, said Mnuchin.

He added, “In the short-term, there are certain aspects of a strong dollar that are not as positive”.

Trump administration has expressed concerns regarding the strong dollar and has called EUR “grossly undervalued”.


03:18 BOJ s Kiuchi says current pace of bond buying is unsustainable

Bank of Japan's (BOJ) Kiuchi said today that the central bank may soon face difficutly in buying bonds if it continues the QE program at the current pace. 

Key quotes

The biggest risk to Japan is uncertainty surrounding its export environment

It would be very problematic to riase yield curve target in near future with inflation still low

Frequently changing yield curve target could erode market trust in BOJ's target and destablize market

There is risk yield currve control could lead to acceleration of BOJ' bond buying pace

Need to ensure real long-term rates remain low and stable

Must make 2% inflation a medium-to long-term target

 


03:16 PBOC sets Yuan reference rate at 6.8695

The People's Bank of China (PBOC) set the Yuan midpoint/daily reference rate at 6.8695 compared to Wednesday's fix of 6.8830.


03:08 AUD/NZD - correction gathers pace on the dismal Australia capex report

The technical correction in the AUD/NZD gathered pace following the release of a dismal forward looking Australia private capital expenditure number.

The currency pair dropped from 1.0713 to 1.0662 levels as the 10-year Aussie bond yield extended losses to 2.80%.

Sharp retreat from the high of 1.0748 on Wednesday suggested the bullish move from the January 31 low of 1.0326 could have run out of steam. Thus, the cross already traded on the back foot at around 1.0713 levels before the dismal Aussie capex report hit the wires.

At the time of writing, the pair was trading around 1.0670 levels. This is the first time since February 8 that the pair is trading below the 10-DMA level.

AUD/NZD Technical Levels

Breach of strong support at 1.0634 (Feb 16 low) could yield a sell-off to 1.0572 (Jan 11 high) under which the losses could be extended to 1.0537 (50% fib of 1.0326-1.0748). On the other hand, a break above 1.0692 (5-DMA) would shift risk in favor of a re-test of 1.0722, where a violation would expose yesterday’s high of 1.0748.

 


02:58 Projections for USD/CNY: 6.8685 - Nomura

Analysts at Nomura offered their projections for the USD/CNY fix today as being 6.8685.

Key Quotes:

"Our model1 projects the fix to be 145 pips lower than the previous fix (6.8685 from 6.8830) and 95 pips lower than the previous official spot USD/CNY close of 6.8780. 

The basket implied change is 115 pips lower than the previous official spot USD/CNY close (6.8665 from 6.8780)."


02:48 AUD/USD bears back in control after poor CAPEX report

AUD/USD has had a hard time on the back of the recent data in the CAPEX and a key component to the RBA's decision-making process in respect to the economy and investment for future growth. The data arrived as Q4 Private Capital Expenditure's headline -2.1% q/q vs. the expected -0.5%. so this was a big miss. More on the details here: Australian capex Q4: Downbeat in both headline and 2017/18 estimate

Despite the disappointment in the FOCM minutes, the Aussie is now struggling to maintain its better bid tone for the month and bears are chipping away at the key support area of the 0.77 handle beating down the doors of both the 20 and 50 sma on the hourly time frame. 

AUD/USD levels

/analysis/aud-usd-analysis-still-too-risky-to-buy-above-07700-201702221945Valeria Bednarik, chief analyst at FXStreet explained that at this point, the pair needs to advance beyond 0.7731, this month high, with a broadly weaker dollar to be able to extend its gains intraday, up to 0.7815.

See here for more levels from recent intermarket report:

AUD/USD Intermarket: Aussie lagging Gold but weighed by industrials

 


02:47 AUD/JPY offered tone strengthens on weak 2017/18 Capex plans

AUD/JPY dropped to a session low of 86.93 after the Aussie first estimate for 2017/18 capex missed estimate.

Australia Q4 capex dropped 2.1% y/y, the data showed. Markets were expecting a drop of 0.5%. Meanwhile, private capital expenditure for 2017/18 is estimated at AUD 80.6 billion. This is well below the forecast of AUD 84.8 billion.

Aussie yields extend losses

The 10-year Australian government bond yield extended losses to 2.80% on the downbeat capex figures. The yield is down four basis points on the day. Meanwhile, its US counterpart is flat lined around 2.41%.

The weaker headline and forward looking capex figure saw the AUD/JPY pair tumble from 87.18 to 86.93. The cross was last seen trading around 87.00 levels.

Technical Levels

Breach of immediate resistance at 87.20 (1-hour 200-MA) would open doors for 87.53 (Dec 15 high), above which 88.17 (Feb 16 high) could be put to test. On the lower side, breach of support at 86.98 (1-hour 100-MA) could yield a sell-off to 86.67 (hourly chart support). A violation there would expose 86.30 (Feb 17 low).


02:37 Australian capex Q4: Downbeat in both headline and 2017/18 estimate

Australian capex (private capital expenditure) for Q4 has disappointed market participants, following a capex headline of -2.1% q/q vs -0.5% expected and -4% last. Equipment, plant and machinery was +0.4% vs -1.9% last, buildings capex came at -4.1% vs -5.7% last. Meanwhile, the first estimate for 2017/18 capex was AUD80.6bln vs 84.8 exp, while the fifth estimate for 2016/17 stood at AUD112.2bn.

DECEMBER KEY POINTS

ACTUAL EXPENDITURE (VOLUME TERMS)

The trend volume estimate for total new capital expenditure fell 3.1% in the December quarter 2016 and the seasonally adjusted estimate fell 2.1%.

The trend volume estimate for buildings and structures fell 4.7% in the December quarter 2016 and the seasonally adjusted estimate fell 4.1%.

The trend volume estimate for equipment, plant and machinery fell 0.4% in the December quarter 2016 while the seasonally adjusted estimate rose 0.4%.

EXPECTED EXPENDITURE (CURRENT PRICE TERMS)

This issue includes the fifth estimate (Estimate 5) for 2016-17 and the first estimate (Estimate 1) for 2017-18.

Estimate 5 for 2016-17 is $112,155m. This is 9.0% lower than Estimate 5 for 2015-16. Estimate 5 is 4.6% higher than Estimate 4 for 2016-17.

Estimate 1 for 2017-18 is $80,625m. This is 3.9% lower than Estimate 1 for 2016-17.
 


02:34 Australia Private Capital Expenditure below expectations (-1%) in 4Q: Actual (-2.1%)


02:24 USD/JPY: risks mounting to the downside, watch 112.90

Currently, USD/JPY is trading at 113.36, up 0.25% on the day, having posted a daily high at 113.48 and low at 113.02.

March Fed rate hike is off the table - CME data

USD/JPY has started off in Tokyo rather flat despite the action overnight on Wal Street and stocks continuing to print record highs overnight. The FOMC minutes dampened the mood while at the same time the French elections on their way are starting to cause a stir among investors and creating some risk-off play with headlines creeping through and price action reversing on more positive scenarios other than Le Pen for Globalisation and the status quo of which markets are favouring for the meantime. 

Data wise, Japan Services PPI for January arrived at +0.5% y/y vrs expected +0.5%. A measure of inflation for business to business services while International securities flows data for the week ended 17 February came out at the same time with Japanese buying Y 48.2bn of foreign bonds - that is the smallest net weekly purchase since January 2015.

USD/JPY levels

The FXStreet OB/OS Index is reflecting neutral hourly conditions, while the FXStreet Trend Index is strongly bullish.  Valeria Bednarik, chief analysts at FXStreet explained that the risk remains towards the downside. "Intraday advances remained contained by a bearish 200 SMA, currently around 113.70, whilst the price pressures its 100 SMA, and technical indicators turned lower around their mid-lines," adding, "Another attempt below 112.90 will probably open doors for additional declines towards the 112.00/20 region this Thursday."
 


02:23 March Fed rate hike is off the table - CME data

CME Group 30-Day Fed Fund futures prices show markets see only a 22 % probability of a rate hike in March.

Historically the rate hikes have happened only when the probability stood at least above 60%. This way there is no element of shock/surprise and financial market instability.

Fed’s Mester, while speaking to Bloomberg on Wednesday, did state the central bank does not want to do anything that would surprise markets.

Minutes of the February 1 meeting released overnight showed officials could raise short-term interest rates “fairly soon” in light of an improving economy and the possibility that the Trump administration’s proposed economic policies could push inflation up faster than anticipated.

Markets expect a rate hike in June

The June rate hike probability stands at 46%. There is consensus in the market that the next rate hike would happen in June followed by another move in December.


02:03 AUD/USD Intermarket: Aussie lagging Gold but weighed by industrials

Currently, AUD/USD is trading at 0.7696, down -0.15% on the day, having posted a daily high at 0.7712 and low at 0.7695.

FOMC Minutes: Policymakers thought a rate hike "might be"appropriate "fairly soon"

AUD/USD was bid on the back of the FOMC minutes overnight that disappointed the greenback bulls given the vagueness around timings of a rate hike and conditions required for the next one to take place. Those speculating for a March hike have been let down by the previous rhetoric from Yellen that now seems overly optimistic in to respect the state of the US economy vis-à-vis a March hike. 

US dollar index erases gains after Fed’s minutes

However, the Aussie is someway behind the kiwi's rally today in percentage terms and indeed Gold was better bid making just over a $9.00 rally on the back of the Fed's minutes. However, Iron ore prices took a breather, down 0.6%.

Gold vs. US dollar; Comatose vs. 3rd '50-DMA' rejection

"The rally to the highest level since 2014 has occurred at the same time as stocks have been rising, which has caused some producers to question the sustainability of the rise," explained analysts at ANZ. "Fortescue’s Nev Power noted that “we’re seeing stocks increase and prices increase at the same time, which is very unusual”." elsewhere, base metals prices were also mixed. "Copper eased back, despite ongoing concern around the strike at BHP’s Escondida mine in Chile," explained the analysts at ANZ. Meanwhile, analysts at Westpac note that a successful retest of the 0.7730 level would then target 0.7780 (Nov high). "CAPEX today will be closely watched."

AUD/USD 1-3 month: 

The same analysts at Westpac are looking for the price to head lower to 0.7400. "The US dollar’s impressive post-election rally may have paused, but still has potential to rise further during the months ahead. The Fed’s assertive tightening bias plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar. Against that coal and iron ore are likely to sustain a good portion of their dramatic rises, and economic data for Q4 and Q1 should improve, but these forces are subservient to the US dollar’s trend. Australia’s AAA rating will remain an issue into the May budget. (23 Dec)."

AUD/USD levels 

Analysts at Commerzbank noted that last week, the market eroded the 2013-2017 downtrend and cleared the 0.7645 Fibo resistance and in doing so they say has introduced scope to the 0.7778/.7850 2016 highs and the 38.2% retracement. "Directly above here lies the 200-month ma at 0.7930. Very near term we would allow for a dip to 0.7595/15 ahead of further gains.

Gold levels

The analysts at Commerzbank explained that currently, they are neutral to positive above the 55 day ma at 1185 but are alert to the idea of profit taking at the long term moving averages. 

"Only a failure at the 1981 mid -January low will de-stabilise the chart and introduce scope for a retest of the 1123 mid-December low, but we look for longer term trend lines circa 1112 to hold the downside. This support is reinforced by the 78.6% retracement of the move from 2015 to 2016, this is located at 1116/17," explained the analysts, adding,The 200 day ma lies at 1263.08 and this guards the 1306.31 (the 5-year downtrend). Only a close above here would restore upside pressure."


01:52 Japan Foreign bond investment up to 48.2B in February 17 from previous -297.4B


01:51 Japan Foreign investment in Japan stocks fell from previous 175.6B to -127.9B in February 17


01:51 Japan Corporate Service Price (YoY) rose from previous 0.4%to 0.5% in December


01:39 USD/CAD: 1.3200 is the key for the bulls - ANZ

Analysts at Rabobank noted that USD/CAD has traded higher over the past four sessions, moving up off the 1.30 floor.

Key Quotes:

"The move higher is in line with our expectation but we need to see a confirmed close north of 1.32 before we can say the recent range has broken.

We maintain the view that CAD looks rich and sizeable event risk ahead could see USD/CAD test the 1.36 handle.

We have noted Trump policies as a risk for CAD both short term and longer term and we think USD/CAD seagulls look attractive for USD buyers."


01:34 risk-off tone on French elections was the theme overnight - ANZ

Analysts at ANZ explained that markets were trading in a risk-off tone through the London session as concerns over the French election continued to build. 

Key Quotes:

"However, an announcement that Francois Bayrou will not stand in the French election but rather join forces with Macron caused a pop in risk sentiment. EUR had dipped below 1.05 before popping to 1.0540 on the French news."

"OATS bull flattened with the front-end down about 4bps and the long-end down 8bps. US treasuries erased early gains with 10 year yields climbing from a low of 2.39% to a high of 2.44%, before edging down to 2.42% after the release of the Fed minutes."

"Gold fell from a high of USD1241 to USD1233, before recovering post the Fed minutes to USD1238/oz. Elsewhere, solid US data had little impact on markets."


01:20 NZD/USD: eyes on the 0.72 handle after disappointing FOMc minutes

Currently, NZD/USD is trading at 0.7183, down -0.16% on the day, having posted a daily high at 0.7200 and low at 0.7183.

Economic Wrap: FOMC minutes were not signalling March - Westpac

NZD/USD has been on the bid since the FOMC minutes disappointed the dollar bulls failing to deliver anything concrete in terms of timings of a rate hike and much of the rhetoric familiar to those sceptics that doubt the Fed are in a position to hike as soon as March let alone June. Indeed, US data has been mixed and the Fed needs to see more consistency in the economic recovery that the bulls believe is occurring. The price subsequently rallied through 50 and 20 hourly moving averages but fell just shy of the 0.72 handle Analysts at Westpac are expecting the price to remain neutral in the day ahead and within a narrow range between 0.7130 and 0.7240.

US dollar index erases gains after Fed’s minutes

NZD/USD 1-3 month:  

The same analysts expect the Fed’s tightening cycle plus US fiscal expansion to 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," added the analysts. 

NZD/USD levels

The FXStreet OB/OS Index is reflecting neutral hourly conditions, while the FXStreet Trend Index is slightly bullish. NZD/USD has the 0.7200 level as a resistance ahead of 0.7240 guarding 0.7280 and the aforementioned Feb highs.to the downside, 0.7140 ahead of 0.7120 guards 0.7040 and January 2017 double top. 


00:20 WTI: API s surprise draw in headline for crude stock and soft greenback

With the dollar on the back foot and the recent surprise draw in headline for crude stock in the Private inventory data has given the black gold a boost and WTI rallied from a stagnant consolidation to fresh hourly highs. 

US dollar index erases gains after Fed’s minutes

The American Petroleum Institute late Wednesday reported a 884,000 barrel draw in U.S. crude supplies for the week ended Feb. 17 vrs a consensus gain of 3.4 million barrels - that is a big miss. There was also a decline of 893,000 barrels of gasoline and a 4.3 million barrel decline in distillates vrs the expected declines in gasoline stockpiles of 1.2 million barrels and in distillates of 400,000 barrels. We now await the Energy Information Administration report on Thursday. WTI has been on the backfoot for the best part of this week, supported at and around $52.80 and the 200 smoothed hourly sma at $52.99 currently. This is all in a correction of the upside from $50.86 recent lows after the break of $53.80. This lead to highs of $54.24.

 


00:03 Markets were looking for a firmer signal from Fed - ANZ

Analysts at ANZ noted that the possibility that the Fed may deliver another rate hike as soon as March has only occurred to the market fairly recently.

Key Quotes:

"The idea has gained traction recently, and today’s release of the minutes of the 1 February meeting showed that many members may agree, noting that “it might be appropriate to raise the federal funds rate again fairly soon if incoming information on the labour market and inflation was in line with or stronger than their current expectations”.

But markets were clearly looking for a firmer signal, as the USD sold off and bonds rallied post the release.

The next payrolls report will clearly be key, but we also have a stream of speeches from Fed speakers between now and the 16 March decision which will be important for shaping expectations."


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