Asian markets are generally lower after manufacturing data from China, which also drags down Aussie and Kiwi. The preliminary reading of February HSBC China PMI manufacturing index dropped further to 48.3, versus the expectation of 49.4. That's also the lowest reading in seven months. Some economists noted that the details showed across the board weakness as the details showed deterioration in every sub-categories except suppliers' delivery times. Japan trade deficit widened further to JPY -1.82T in January versus expectation of JPY -1.56T. New Zealand PPI dropped -0.7% qoq, -0.4% yoy in Q4, far below consensus. At the time of writing, Nikkei is losing nearly -300 pts or -2% while Hong Kong HSI is losing -250 pts, or -1.1%. In the currency markets, the AUD/USD is heading back to 0.8927 near term support and break would indicate completion of recent rebound. The USD/CAD is also pressing 1.1089 minor resistance which could also signal completion of retreat pull back.
The New Zealand dollar was additional pressured by the negative PPI reading today. The NZD/USD's sharp fall this week suggests that the rebound from 0.8051 has completed at 0.8392 after hitting near term falling trend line resistance. The consolidation pattern from 0.8543 is still in progress and have just started another falling leg. Such consolidation is likely in form of a triangle. Thus, current fall from 0.8392 would likely extend low and a breach of 0.8051 support is anticipated. Though, the break should be brief and we'd expect rise from 0.7718 to resume finally after the current fall through 0.8543 resistance.
NZD/USD Daily Chart" title="NZD/USD Daily Chart" width="474" height="242">
Released overnight, the minutes for the January FOMC minutes showed that policymakers were generally content with the current pace of tapering and only a drastic change of economic conditions would alter the path. The Fed acknowledged that the economic recovery gained moment and evolved in line with the central bank's assessment. The strength in 2H13 was mainly driven by transitory factors which appeared temporarily while the key drivers this year would be the housing market and consumer spending. While attributing the disappointing non-farm payrolls in December to the extreme weather, the Fed reiterated Chairman Yellen's previous comments that the sharp fall in the unemployment over the past months had partly been driven by lower labor force participation. Whether the decline in unemployment was structural or cyclical got some debates during the meeting. After all, the Fed's 6.5% unemployment threshold would be reached soon and policymakers had a vigorous debate over changing the forward guidance so as to assure the public that interest rates would continue to stay low. More in Few Reasons for Fed to Pause Tapering While Forward Guidance Would Change as 6.5% Jobless Rate Reached Soon.
Looking ahead, Eurozone PMIs will be the major focus in European session and improvements are generally expected for French, German and Eurozone PMIs. Attention will be on whether French PMIs would surprise on the upside and climb back above 50 level. Upside surprise in today's data would solidify the case of near term reversal in EUR/GBP and extend the rebound from 0.8157 low. Swiss trade balance and UK CBI trends total orders will also be released. From US, CPI, jobless claims, Philly Fed survey and leading indicators will be featured.