EUR/USD and USD/JPY refuse to commit directionally with the onslaught of event risks in the days ahead. We’ve got interesting set-up data today from the U.S. as well with Consumer Confidence and the Chicago PMI on tap.
EUR/USD tested the highs of the range overnight, but flipped back lower as it’s perhaps a tough sell to look for extensions beyond the range with so many event risks in the pipeline. At the same time, one wonders whether either side has much potential beyond the tight range here until the other side of at least the FOMC meeting tomorrow if not Thursday’s ECB.
I’ve been surprised we haven’t seen a more concerted attempt to drive the JPY stronger. The currency seems torn between carry-trade driven weakening from strong risk asset markets and JPY supportive strong bond markets. Again, the 96.70 area is the critical level to watch if a sell-off develops, a rather higher odds proposition as long as world government bonds are on the bid and inflation data continues to point toward disinflation or even deflation risks in the major economies.
AUD/USD failed to follow through lower after a pair of tempting shooting star bearish candlesticks prior to yesterday’s rally – it looks like the key resistance there is the 200-day moving average coming in just under 1.0400. Strong risk appetite and the live cat bounce in gold have aided the pair in its efforts to pull back higher, though the interest rate picture continues to provide very strong fundamental resistance to further AUD strength. If risk appetite falters here, we could see significant AUD downside.
GBP/USD faltered after a look above 1.5500 yesterday as I continue to look for signs that the squeeze there is over. The daily pivot today is right around that 1.5500 level and shorts can use level just above there for tactical shorts on the day. See our new Trade Navigator for all of your key technical levels and risk adjusted positioning indications -- a useful tool.
Looking Ahead
Look for the euro-zone CPI estimate for possible further input into this Thursday’s rate decision and it looks like we’re headed for another record high in the Euro Zone Unemployment Rate as the March level is published today with expectations of an abominable 12.1%.
Watch for Canada’s latest GDP numbers. We’ve had an incredible about-face in crude oil prices over the last week and U.S. equities reaching up to sniff at those all-time highs yesterday. This has sent USD/CAD back to the bottom of the recent range and threatening the critical range support just below 1.0100 -- that’s the key pivot area for the pair -- being the old range high and the area of the previous April low.
1.0100 is a key area for obvious reasons.
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We’ve also got interesting setup data for the rest of the week with the final major manufacturing PMI for the month in the form of the Chicago PMI at 1300. The Dallas Fed survey yesterday saw an enormous miss and dropped to one of the lowest handful of readings in recent years at -15.6 vs. +5.0 expected. The Empire and Philly Fed surveys were disappointments as well, though not outright negative and expectations for tomorrow’s nationwide ISM manufacturing survey are running at just above the 50 level that divides expansion from contraction. Meanwhile U.S. Conference Board Consumer Confidence is up with expectations of a slight improvement after last month’s dip. Elsewhere, we had a big miss in the Michigan preliminary survey for this month while the weekly Bloomberg Consumer comfort surveys are at multi-year highs. Perhaps we get some clarity from today’s reading.
Economic Data Highlights
- New Zealand Mar. Building Permits out at -9.1% MoM vs. +2.0% expected
- UK Apr. GfK Consumer Confidence out at -27 vs. -26 expected and vs. -26 in Mar.
- Japan Apr. Markit/JMMA Manufacturing PMI out at 51.1 vs. 50.4 in Mar.
- Japan Mar. Overall Household Spending out at +5.2% YoY vs. +1.6% expected and +0.8% in Feb.
- Japan Mar. Jobless Rate out at 4.1% vs. 4.2% expected and 4.3% in Feb.
- Japan Mar. Industrial Production out at +0.2% MoM vs. +0.4% expected and +0.6% in Feb.
- Japan Mar. Retail Trade out at -1.4% MoM and -0.3% YoY vs. -0.8%/+0.4% expected, respectively and vs. -2.2% YoY in Feb.
- New Zealand Apr. ANZ Business Confidence out at 32.3 vs. 34.6 in Mar.
- Germany Mar. Retail Sales out at -0.3% MoM and -2.8% YoY vs. -0.3%/-1.2% expected, respectively and vs. -2.6% YoY in Feb.
- Germany May GfK Consumer Confidence out at 6.2 vs. 5.9 expected and 6.0 in Apr.
- Spain Q1 GDP out at -0.5% QoQ and -2.0% YoY as expected and vs. -1.9% YoY in Q4
- UK Mar. Mortgage Approvals (0830)
- Euro Zone Apr. CPI Estimate (0900)
- Euro Zone Mar. Unemployment Rate (0900)
- Canada Feb. Gross Domestic Product (1230)
- US Apr. NAPM Milwaukee (1300)
- US Feb. S&P/CaseShiller Home Price Index (1300)
- US Apr. Chicago PMI (1345)
- US Apr. Consumer Confidence (1400)
- Weekly US Crude Oil and Product Inventories (2030)
- Australia Apr. AiG Performance of Manufacturing Index (2330)
- Australia Apr. RPData-Rismark House Price Index (0000)
- China Apr. Manufacturing PMI (0100)
- Australia Mar. HIA New Home Sales (0100)