London Session/New York Open: Risk off Tone Lifts the USD and JPY

is firmer against all of the G10 currencies except against the Japanese yen as markets trade with a risk off tone. Global growth concerns remain in focus after Euro zone GDP figures confirmed a contraction in Q4 which followed China’s reduced growth forecast. Global equity markets are significantly lower and the Dollar Index has advanced and approaches the daily ichimoku cloud top and base which come in ahead of the 80.00 figure. U.S. Treasury yields are lower across the curve as traders seek safety and the 10-year yields are back below the 2.00% level – currently around 1.966%. There is no economic data of note today.

• EUR is mostly lower as markets are nervous about Greece’s debt swap and after the preliminary 4Q GDP reading showed a contraction of -0.3% q/q as expected. The deadline to participate in the debt swap is set for this Thursday, however there are now rumors that if the PSI participation is not sufficient (below 70%) then the Greek government will postpone the deadline to next Wednesday. Sovereign yield spreads over German bunds are broadly higher and Spain’s 10-year yields are back above 5%. Technically, EUR/USD is trading below the 38.2% Fib retracement of the rally from January lows to February highs and below the trendline identified in yesterday’s update (click here to see TECHNICAL UPDATE: EUR/USD looking vulnerable)

• GBP is weaker following disappointing housing data. Halifax house prices in February unexpectedly fell by -0.3% m/m from the prior +0.6% (cons. +0.3%) and the 3mo/year reading dropped by more than anticipated with a decline of -1.9% from the prior -1.8% (cons. -1.6%). GBP/USD fell short of testing the key 200-day SMA with session highs of nearly 1.5880 and tumbled below the 21-day SMA to current levels of around 1.5765.

• CAD is testing parity against the buck as global growth concerns weigh on the commodity currencies and support the USD. WTI crude is down about -1.27% at time of writing and global equities are trading deep in negative territory which is weighing on the Loonie. CAD/JPY has plunged and is lower by around -1.55% currently after being rejected from long term channel resistance. The February Ivey PMI is due out at 1000ET and expected to drop to 62.0 from the prior 64.1.

• JPY is outperforming and is broadly stronger against all of the G10 currencies as markets turn risk aversion. The yen is benefitting on safe haven flows and as it looked attractive from being oversold technically on a shorter term basis. USD/JPY is testing below the 81 figure and sees the daily Tenkan line come in around 80.85/90 as potential support.