Morning View:
Just a quick one this morning with all eyes on the mid-week FOMC meeting.
Durable goods orders out of the US dominated Friday night’s trading with the 4% print beating expectations of 0.6%. This masked the subsequent downward revisions to core capital goods orders that saw a 7th consecutive fall. The USD was largely sold off as a result with the EUR and AUD major beneficiaries combined with Greek optimism and a rally in the price of iron ore.
Yes, optimism out of Greece… I’m not reading too much into current sentiment with the cash troubles for Greece likely to remain in the near term with €1.8bn in wages and pensions due at the end of April, followed by a €200mn IMF interest payment in May. Add the EBC being strongly committed to completing its QE program in the foreseeable future, how long can ‘optimism’ actually last?
All eyes on FOMC midweek with expectation that the Fed will still talk up economic growth and support the USD.
On the Calendar Today:
New Zealand and parts of Australia off for Anzac Day today. There’s not much else on the calendar during Asia or Europe/the US. All eyes on Stevens speaking tomorrow in Sydney as well as the fact it’s FOMC week.
Watch for some flows as traders position themselves into the release at the conclusion of the meeting on Thursday morning.
Monday:
NZD Bank Holiday
Chart of the Day:
USD/JPY Daily:
Click on chart to see a larger view.
USD strength to end the week coincided with an almost perfect clean bounce off the 120.00 psych level. As you can see on the chart above, price has broken through trend line support and re-tested it now as resistance. The fact that price couldn’t rally through the 120.00 and was again capped shows weakness in the pair.
I’m looking for some carry through to the short side off this major level but the fact we are still in a consolidation top is keeping me wary.
Recommended Content
Editors’ Picks
EUR/USD: The first upside target is seen at the 1.0710–1.0715 region
The EUR/USD pair trades in positive territory for the fourth consecutive day near 1.0705 on Wednesday during the early European trading hours. The recovery of the major pair is bolstered by the downbeat US April PMI data, which weighs on the Greenback.
GBP/USD posts modest gains above 1.2450, BoE policymaker dampens hopes of summer rates cut
The GBP/USD pair recovers to 1.2450 during the early Wednesday. The downbeat US April PMI data and increasing appetite for the risk-linked space exert some selling pressure on the US Dollar.
Gold price struggles to lure buyers amid positive risk tone, reduced Fed rate cut bets
Gold price lacks follow-through buying and is influenced by a combination of diverging forces. Easing geopolitical tensions continue to undermine demand for the safe-haven precious metal. Tuesday’s dismal US PMIs weigh on the USD and lend support ahead of the key US data.
Crypto community reacts as BRICS considers launching stablecoin for international trade settlement
BRICS is intensifying efforts to reduce its reliance on the US dollar after plans for its stablecoin effort surfaced online on Tuesday. Most people expect the stablecoin to be backed by gold, considering BRICS nations have been accumulating large holdings of the commodity.
US versus the Eurozone: Inflation divergence causes monetary desynchronization
Historically there is a very close correlation between changes in US Treasury yields and German Bund yields. This is relevant at the current juncture, considering that the recent hawkish twist in the tone of the Fed might continue to push US long-term interest rates higher and put upward pressure on bond yields in the Eurozone.