New York Open: Commodity Currencies Outperform Against the USD

is consolidating against most of the G10 currencies and notably weaker against the commodity currencies AUD, NZD, and CAD. Asian equities finished higher and European markets are up across the board at time of writing as risk firms. Overnight comments from the PBoC that China will participate in resolving the EU debt crisis helped to support risk and comes on the heels of China’s PM Wen comments yesterday in which he said that China is read to get “more deeply involved” in solving the debt crisis. US stock futures are currently up nearly +0.55% and UST yields are higher across the curve. The Dollar Index is relatively flat on the session and the base of the cloud now converges with the daily Tenkan line around the 79.00 figure to act as support in the near term. On the data front, the Feb. Empire manufacturing survey rose to 19.53 from the prior 13.48 (cons. 15.00). Due at 0900ET are the Dec. TIC flow data, shortly after at 0915ET Jan. industrial production and capacity utilization are set for release, and the Fed will release minutes from its Jan. 24-25 FOMC meeting this afternoon at 1400ET.

• EUR was unable to sustain earlier gains inspired by China comments that expressed their willingness to support the EU and expectations that Greek opposition leader Samaras will sign the commitment to lenders. 4Q preliminary GDP figures out of Europe were slightly better than expected but showed overall contraction in the EZ of -0.3% q/q (cons. -0.4% prior +0.1%) while German GDP fell -0.2% q/q (cons. -0.3% prior +0.6%). EU finance minister will hold a conference call tonight to replace a meeting that was called off and the Troika begins its third review of Portugal today. EUR/USD remains under pressure amid Greek uncertainty and the pair is back under the 1.31 figure and sees the 55-day SMA currently around 1.3060 as potential support.

• JPY trading mixed after a sharp decline yesterday following additional easing by the BoJ. The yen broke through notable technical levels which suggest further weakness with both CAD/JPY and USD/JPY breaking above the key 200-day SMA while AUD/JPY made new 6-month highs. Economic data out of Japan remains weak with the latest release of machine tool orders falling -6.9% y/y in Jan. Traders remain wary of intervention but the latest policy action by the BoJ has helped to weaken the JPY.

• GBP softer despite the BoE raising its inflation projection in the February Inflation Report. The report indicates that the MPC does not see a strong case for additional QE as the committee expects that stronger oil and commodity prices may keep inflation from falling too sharply. As Governor King said yesterday, the additional QE was done because of downside risks of inflation slowing too far beyond the 2% target. Employment data showed the Jan. claimant count rate steady at 5.0% as expected while jobless claims rose by more than forecast to 6.9K from the prior 1.9k (cons. 3.0k). GBP/USD is currently below the 1.57 figure and testing support around the 100-day SMA. A sustained move below this may see to the 55-day SMA which is currently around the 1.56 figure.

• CAD continues to consolidate around parity with the USD and is firmer today as oil continues to move higher on tensions in Iran and as equities move higher. USD/CAD was rejected from the 21-day SMA on recent attempts and has fallen back below the 200-day SMA which is currently around 0.9975/80. Short term horizontal support remains around 0.9925 and is a key downside pivot.