No-one may notice it, but the RBA decision is today! Keep an eye on the statement.
The dollar and the Yen have been the beneficiaries of the political tensions in the currency markets today, while elsewhere, commodities are higher while equities suffered, particularly in Europe. Conditions will remain very nervous and headlines/soundbites from Russia/Ukraine are going to dominate trade. Australia will get the RBA I/R decision, although it may pass pretty much unnoticed, as no change is expected. There is little economic data out elsewhere, apart from the UK Construction PMI and all eyes will remain on Mr Putin’s games. Be flexible!
EUR/USD: 4 hour
USD/JPY: 4 hour
GBP/USD: 4 hour
USD/CHF: 4 hour
AUD/USD: 4 hour
NZD/USD: 4 Hour
The dollar and the Yen have been the beneficiaries of the political tensions in the currency markets today, while elsewhere, commodities are higher while equities suffered, particularly in Europe. Conditions will remain very nervous and headlines/soundbites from Russia/Ukraine are going to dominate trade. Australia will get the RBA I/R decision, although it may pass pretty much unnoticed, as no change is expected. There is little economic data out elsewhere, apart from the UK Construction PMI and all eyes will remain on Mr Putin’s games. Be flexible!
EUR/USD: 1.3738
The dollar has made some mild gains today, following on from Friday’s losses, but despite what is going on in Russia/Ukraine the Euro has been mostly confined to a 50 point range until a dip late in the session to a low of 1.3725, where it currently sits.
Mario Draghi was speaking today and weighed on the Euro by stating that ‘the longer inflation stays down, the greater the risk it won’t go back to 2%” – implying that growth prospect remain low.
Also helping the dollar was the strong ISM Manufacturing reading of 53.2 (exp 52.0) as did the increase in U.S. personal income and spending in January, despite recent run of very cold weather.
Earlier in the day, the market had bigger fish to fry than the EU manufacturing PMI’s and took no notice at all. They came in a bit mixed, but mostly close to expectations with the overall EU number being slightly better than expected (53.2 agst 53.00), while Germany was also solid (54.8) but Italy and France lagged.
It was all about Russia though where the central bank raised rates to 7% (from 5.5%) in order to fight off the weakness in the Ruble which fell to an all time low against the dollar. If the situation escalates, the Euro could yet be in serious trouble given that Ukrainian foreign debt exposure is about EUR 100 billion, most of which is loaned from European banks.
Technically, although the Euro is a bit weaker, the picture so far remains pretty much unchanged.
Today’s session high has been 1.3792 and looks unlikely to be revisited in the short term. Above here, the strong resistance at 1.3825/30, where the important Fibo (61.8% of 61.8% of 1.4939/1.2042) and descending trend resistance, going back to 2008, remains intact and will not be easily overcome. Depending on what is happening in the Ukraine, – if the ECB refrain from easing rates on Thursday, and then we get another soft reading from the NFP on Friday, – the Euro could put this under severe pressure. Above 1.3830, the next target would be 1.3892 (27 Dec high) and then 1.3950 (50% of 1.6037/1.1876/ Monthly cloud top). If we get above 1.4000, then don’t sand in the way, as I do not see a lot to stop it heading to the Oct 2011 high of 1.4246, which is also 76.4% of 61.8% of 1.4939/1.2042.
On the downside, below the 1.3725 session low would probably want to take a look at 1.3700. Below there would potentially head back to last week’s 1.3643 base and then to 1.3610 (61.8% of 1.3475/1.3824) but this currently looks rather unlikely while the uncertainty continues. If weapons are used, expect it to get there very quickly.
Note that the DXY (Dollar Index), having broken important long term support (see w/e report), has now regained it and currently sits back above 80.00, at 80.08. False break? We shall see. The indicators – both daily and weekly – are non committal.
There is no data out today of any importance and the focus remains firmly on Russia. Stay flexible.
Economic data highlights will include:
EU PPI
Meta Trader – AxiTraderEUR/USD: 4 hour
USD/JPY: 101.40
Aside from the dollar, the Yen was the major beneficiary today as a destination for funds looking for a safe haven from the political tensions, although trade has so far been generally been very orderly, falling about 0.5% against the Euro (currently at session lows of 139.15) and slightly less against the dollar, albeit that the dollar is now at a 1 month low.
While the current situation continues the Yen will remain in demand and technically we could be headed below the session low of 101.20 to 101.00 (weekly kijun), which should be quite strong support. Below there though we could expect a test of the 4 Feb low at 100.75 and possibly 100.00.
The topside has seen a cap today of 101.65, which currently looks fairly solid. A break would possibly take us back to 102.00, and higher, although it would seem to need a smart about turn in risk sentiment to do so, and last week’s high of 102.67 currently looks a long way off.
For the time being use 101/102 as a guide, with direction dependent on the latest news headlines from Russia. Keep an eye on the Nikkei, which yesterday finished down 1.27%, and with the Futures down a further 1.2%.
Meta Trader – AxiTraderUSD/JPY: 4 hour
GBP/USD: 1.6660
Cable had pretty much chopped around within a 50 point range until late in the NY session when the news wires released a headline that Russia had ordered Ukrainian troops to surrender within the next 6 hours (5 am local time) or face military intervention. This was denied, but too late for cable. The US State Dept. stated if Russian threats to use force are true, it would be a dangerous escalation of the situation and kept the bid tone under the dollar.
Cable fell sharply though through the support at around 1.6700, triggering quite a few stops, to a low of 1.6654. The 4 hour charts are pointing lower and below the session low would test 1.6605 (38.2% of 1.6251/1.6821), the 24 Feb low of 1.6582 and then the 50% pivot of the whole rally, at 1.6535.
A return to the topside will now see sellers at 1.6700, and at various levels higher, all the way to 1.6800, but which looks unlikely to be seen for a while.
Be flexible and see what eventuates but in the short term, selling Cable at 1.6700 and above, towards 1.6725 seems to be a plan, with fairly tight stops placed above here, looking for a run back towards 1.6600.
Economic data highlights will include:
UK Construction PMI
Meta Trader – AxiTraderGBP/USD: 4 hour
USD/CHF: 0.8830
The dollar has regained 0.8800 from an earlier low of 0.8781, and is currently at its session high, although the Chf remains in demand as a safe haven, with Eur/Chf having traded down to 1.2103 today before a mild bounce to currently sit at 1.2130.
While the dollar is in demand, the topside targets for the Chf are at the previous support at 0.8850 and then at 0.8865 (23.6% of 0.9156/0.8777) and at 0.8920 (38.2%).
The downside could easily revisit the session lows, although this looks unlikely in the near term as the 4 hour momentum points to a near term dollar recovery. If wrong, a break would see an accelerated decline towards the base of the descending channel which currently lies at 0.8675. The dailies are still pointing in this direction and if we get below the channel base then the next target would be the 61.8% retracement of 0.7710/0.9711 at 0.8570 which lines up with the Aug 2011 low (0.8567).
For today flexibility is required and will depend on the headlines but from a technical point of view, a squeeze towards 0.8850 and maybe higher looks possible.
Meta Trader – AxiTraderUSD/CHF: 4 hour
AUD/USD: 0.8930
Having gapped down to open the week on its lows, the Aud has squeezed higher through the session, in choppy trade to currently sit at the weekend closing levels while waiting for today’s RBA policy announcement. With no change expected, all eyes will be on Glenn Stevens’s statement later today. While a similar stance to the previous statement looks most likely, it is possible that he could take a more dovish view of global growth and talk the Aud lower. If so, then we could revisit the day’s lows quite quickly.
Below 0.8890 would potentially head to 0.8870 (50% pivot of 0.8659/0.9080) and then 0.8835 (rising trend support) and 0.8820 (61.8%). Below 0.8800, which I would not yet expect to see, would head to 0.8760 (76.4%).
Above the session high of 0.8945, a stronger Aud, which the short term indicators suggest is possible, would head towards 0.8955 (100 HMA) and then to 0.8975 (200 HMA). I don’t think at this stage we are ready to head back above 0.9000, but if wrong, further sellers would appear at 0.9020 and 0.9040.
All rather choppy so wait for the RBA and take it from there.
Economic data highlights will include:
Building permits, RBA Meeting/Statement
Meta Trader – AxiTraderAUD/USD: 4 hour
NZD/USD: 0.8370
There is little to add on the Kiwi today, which having opened with a gap lower to 0.8342 has spent the time sine slowly clawing back some of its lost ground and currently sits just below the weekends close.
Support remains at 0.8340 (23.6% of 0.8051/0.8424), 0.8325 (200 HMA), 0.8300 and then 0.8280 (38.2%).
The topside will see good sellers at 0.8385 and then at 0.8400. I doubt we are headed up here today and a session of 0.8325/0.8390 would seem to have it covered. Keep an eye on the RBA statement, which will see the Kiwi dragged around to an extent by the Aud, although as elsewhere the major action will be driven by the events in the Crimea.
In the bigger picture, as we head towards next weeks RBNZ meeting we may continue to gyrate in a 0.8300/0.8425 range.
Meta Trader – AxiTraderNZD/USD: 4 Hour
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