Market Brief
Japanese inflation came in soft as expected. The CPI ex-fresh food (monitored by the BoJ) decelerated faster-than-expected to 2.0% on year to February (vs. 2.1% exp. & 2.2% last). The household spending contracted for 11th straight month after the sales tax have been introduced in April 2014. USD/JPY remained well supported above 119.00 in Tokyo, Nikkei stocks wrote-down 0.95%. The month, quarter and fiscal year end should keep the demand in yen tight and prevent the yen from significantly depreciating before April. USD/JPY offers abound pre-120. On the downside, the daily Ichimoku cloud (118.20/75) should deliver support. EUR/JPY reversed gains unexpectedly and opened below the Ichimoku conversion line on EUR-negative sentiment. We remain on the sidelines given the uncertainties on EUR.
EUR/USD failed to clear resistance above 1.1043 yesterday. After hitting 1.1052, the pair rapidly sold-off and stabilized between 1.0850 / 1.0900. Resistance remains solid at 1.1000/43, the option bets turn positive above this level in anticipation of a relief rally following potential bailout agreement between Greece and the EU. Greece is seriously running out of cash and is looking to agree with creditors to avoid default. The pending uncertainties turn the EUR sentiment mild today. The EUR/GBP bounces lower from resistance at 0.73622/935 (50-dma / Fib 38.2% on Dec’14 – Mar’15 sell-off). Option barriers trail below 0.7350 at today’s expiry.
Numerous failures to clear resistance at 1.50 sent the Cable down to 1.4813/67 range in Asia. The latest YouGov/Sun poll shows Conservatives advance to 36% verse Labour at 34%. The BoE now retreats to the sideline to avoid any involvement in political matters. The pre-election jitters anchor the GBP-complex on the downside and should push the GBP/USD toward 1.4635 (Mar 18 low) and lower.
The gold rally remained capped at $1,220 yesterday (Fibonacci 50% on Jan-Mar downside correction) as news on Saudi Arabia/Yemen tensions gained limited traction. Trend and momentum indicators point the upside, suggesting renewed attempt to yesterday highs. The WTI crude is back at 50$. The normalization in gold and oil prices is certainly due to the low risk of contagion, however the risks have not dissipated yet.
As expected, the SARB kept its interest rate unchanged at 5.75%, USD/ZAR reversed gains and stepped back above 12.00. Although the improvement in the inflation is being curbed by the significant ZAR depreciation, we see no immediate impact on SARB’s policy outlook. The cautious Fed fortunately buys some time for the SARB before proceeding with higher rates. The slowdown in South Africa’s manufacturing and mining production, combined to tighter fiscal discipline, justifies a stable rate outlook before the Fed’s first move and thereafter. With softer Fed however, the supply zone at 12.50+ is the next challenge.
Today, traders watch German February Import Price Index m/m & y/y, UK March Nationwide house Prices m/m & y/y, Swedish February Retail Sales m/m & y/y, Norwegian February Credit Indicator Growth y/y, Retail Sales w/auto fuel m/m and March Unemployment Rate, Italian January Industrial Orders and Sales m/m & y/y, US 4Q (Third) GDP Annualized, Personal Consumption, GDP Price Index and Core PCE q/q and University of Michigan’s March Final Sentiment, Current Situation, Expectations and 1yr , 5-10yr Inflation.
| Today's Calendar | Estimates | Previous | Country / GMT |
|---|---|---|---|
| GE Feb Import Price Index MoM | 0.50% | -0.80% | EUR / 07:00 |
| GE Feb Import Price Index YoY | -3.90% | -4.40% | EUR / 07:00 |
| UK Mar Nationwide House PX MoM | 0.20% | -0.10% | GBP / 07:00 |
| UK Mar Nationwide House Px NSA YoY | 5.30% | 5.70% | GBP / 07:00 |
| FR Mar Consumer Confidence | 93 | 92 | EUR / 07:45 |
| SW Feb Retail Sales MoM | 0.30% | 1.20% | SEK / 08:30 |
| SW Feb Retail Sales NSA YoY | 3.60% | 5.10% | SEK / 08:30 |
| NO Feb Credit Indicator Growth YoY | 5.50% | 5.60% | NOK / 09:00 |
| NO Feb Retail Sales W/Auto Fuel MoM | 0.50% | -0.70% | NOK / 09:00 |
| NO Mar Unemployment Rate | 3.00% | 3.00% | NOK / 09:00 |
| IT Jan Industrial Orders MoM | - | 4.50% | EUR / 09:00 |
| IT Jan Industrial Orders NSA YoY | - | 5.80% | EUR / 09:00 |
| IT Jan Industrial Sales MoM | - | 1.40% | EUR / 09:00 |
| IT Jan Industrial Sales WDA YoY | - | 0.90% | EUR / 09:00 |
| IT Jan Retail Sales MoM | 0.10% | -0.20% | EUR / 10:00 |
| IT Jan Retail Sales YoY | -0.30% | 0.10% | EUR / 10:00 |
| US 4Q T GDP Annualized QoQ | 2.40% | 2.20% | USD / 12:30 |
| US 4Q T Personal Consumption | 4.40% | 4.20% | USD / 12:30 |
| US 4Q T GDP Price Index | 0.10% | 0.10% | USD / 12:30 |
| US 4Q T Core PCE QoQ | 1.10% | 1.10% | USD / 12:30 |
| US Mar F U. of Mich. Sentiment | 92 | 91.2 | USD / 14:00 |
| US Mar F U. of Mich. Current Conditions | - | 103 | USD / 14:00 |
| US Mar F U. of Mich. Expectations | - | 83.7 | USD / 14:00 |
| US Mar F U. of Mich. 1 Yr Inflation | - | 3.00% | USD / 14:00 |
| US Mar F U. of Mich. 5-10 Yr Inflation | - | 2.80% | USD / 14:00 |
Currency Tech
EUR/USD
R 2: 1.1280
R 1: 1.1043
CURRENT: 1.0812
S 1: 1.0768
S 2: 1.0613
GBP/USD
R 2: 1.5166
R 1: 1.4994
CURRENT: 1.4812
S 1: 1.4635
S 2: 1.4547
USD/JPY
R 2: 122.03
R 1: 120.50
CURRENT: 119.41
S 1: 118.33
S 2: 117.93
USD/CHF
R 2: 0.9984
R 1: 0.9812
CURRENT: 0.9685
S 1: 0.9491
S 2: 0.9450