Greenback sustained post-Fed, RBNZ turns neutral

Market Brief

The Fed verdict has been less-dovish-than the market positioning, as suspected. The FOMC kept rates unchanged, dropped “considerable tome” rhetoric while calling the markets for patience before the first rate hike occurs. The economy is recovering at solid pace according to Fed officials, with good progress on jobs market. The US 10-year yields retreated to 1.70% post-Fed.

EUR/USD gave back gains to 1.1262. Short-term bids are presumed at 1.1275+ (200-hma), while early Syriza actions/propositions in Greece keeps the upside limited in the EUR-complex. EUR/GBP remains well offered with large vanilla puts trailing from 0.7525 up to 0.7800 for today expiry. The EUR/GBP bias is negative as GBP/USD tests resistance at 21-dma (1.5156). We see potential for GBP appreciation on both crosses. GBP/USD bulls gain momentum, September-January downtrend top (1.5375) is in focus.

The JPY-complex traded mixed in Tokyo, Nikkei stocks wrote-off more than 1% as retail sales contracted another 0.3% on month to December, and large retailers’ sales slowed to 0.1% on year from 1.2% a month ago. USD/JPY offers remain solid at daily Ichimoku cloud top (118.46) despite USD favorable sentiment. Technicals are flat, a break above the cloud top should ease selling pressures. Option bets are supportive above 118.50/119.00. EUR/JPY confronts offers at 133.89/134.78 area (conversion line / Fibonacci 23.6% on Dec-Jan sell-off / light option barriers) as market look to sell rallies on EUR-crosses.

In New Zealand, the RBNZ kept the OCR unchanged at 3.50% as expected and delivered neutral accompanying statement. “Future interest rate adjustments, either up or down, will depend on the emerging flow of economic data” said Governor Wheeler. The RBNZ reiterated that NZD remains unjustifiably high. NZD/USD broke below the Fibonacci 61.8% on 2009-2011 hike (0.7335), as traders’ attention shift to 0.70s last seen mid-2010. Large put expiries wait to be activated at 0.7295/0.7300 today.

AUD/USD traded at the tight range of 0.7854/0.7907 on mounting RBA rate cut speculations at next week policy meeting. Solid offers trail below 80 cents.

In Brazil, the state-controlled oil company Petrobras’ delayed earning reports could give no precision on the impact of the corruption affair. USD/BRL traded up to 2.5908, yet no key technicals level have been damaged on the upside. Trend and momentum indicators point the downside with first line of resistance seen at 2.6253/2.6360 (Fibonacci 76.4% on July-December lift / 21-dma). EUR/BRL upside attempt has been limited at 2.9408. The attractiveness of rate differential in favor of BRL keeps the carry inflows sustained. Solid resistance is building at 3 psychological level. In Turkey, USD/TRY rallied to 2.4017 on speculations that the CBT may proceed with additional rate cut post-CPI report due next week. The market is clearly not ready to buy lower lira rates, given that the TRY-denominated bond yields are already below the inflation breakeven and even a full percentage point drop in CPI is not enough to cover both the inflation (even though significantly lower) and the risk premium (on country’s eco-political risks before mid-2015 general elections). The key resistance stands at 2.4146 (Dec 16th & record high).

Today’s economic calendar : Swedish January Manufacturing and Consumer Confidence and Economic Tendency Survey, Swedish December Retail Sales m/m & y/y and Household Lending y/y, German January CPI m/m & y/y, Spanish December Retail Sales m/m & y/y, German January Unemployment Rate, Euro-zone December M3 Money Supply y/y, Italian December Hourly Wages m/m & y/y, Italian January Consumer & Business Confidence and Economic Sentiment, Euro-zone January Final Consumer, Industrial and Economic Confidence, US January 24th Initial Jobless & January 17th Continuing Claims and US December Pending Home Sales m/m & y/y.