Japanese equities higher amid trade surplus, Australia CPI unchanged

Market Brief

The Nikkei printed a new 15-year high at 20,144.66 during the Asian session as Japan reported a trade surplus for March of ¥229.3bn verse ¥44.6bn expected (Feb revised down to ¥-425bn); last trade surplus was booked in June 2012. The surprise is due to imports which fell by 14.5% while analysts were looking for a drop of -12.6%. More than 20 minutes before the closing bell in Asia, the Nikkei is up 0.87%, the Hang Seng increases by 0.30%, the Shanghai Composite is still climbing and pockets 1.7%. USD/JPY is running out of steam as the dollar is moving closer to the 119.74 key level (Fib 38.2% on March sell-off and high from April 15). Furthermore, USD/JPY is losing momentum as the hourly RSI(14) is presenting a declining bias and is close to break the 50% level, indicating a stronger selling pressure.

Australia’s CPI grew 0.2%q/q in Q1 verse 0.1% consensus. Year over year CPI matched expectations and came in at 1.3%. The CPI trimmed mean came in at 2.4%y/y, higher than expected (%2.3y/y). Since the RBA’s favorite measure starts picking up slightly, we expect the RBA to cut interest rate in May as a weaker Aussie will help to heal the economy. Australian equities are down -0.77% while AUD/USD reacted positively to headlines by jumping instantaneously by 60pips. The pair is heading to the 0.7784 resistance (Fib 61.8% on March rally). If broken the following one stands at 0.7850 (highs from April 17 and 19), however we expect the Aussie to fail at breaking the latter resistance.

In Europe, equity futures are all green this morning, except Italy, following Tokyo’s lead. The Footsie is up 0.24%, the DAX 0.55%, the CAC 0.25%, and the SMI 0.65% while the Euro Stoxx is up 0.25%. However, investors remain shy in Europe and are waiting the Eurogroup meeting in Riga next Friday.

EUR/USD is right in the middle of its March-April range and already failed to break the 1.0755 resistance (Fib 50% on March rally). We suspect that the euro will fail again to break it and will more likely present a declining bias over the next few days as the pressure will increase during the week.

GBP/USD couldn’t break the 1.4943 resistance (Fib 38.2% on Feb-April sell-off) yesterday and is currently making a new attempt. On the downside, a support stands at 1.4857 (low from April 21) while on the upside the sterling will need fresh boost to break the 1.0560 resistance (high from April 17).

Swiss francs is getting stronger. USD/CHF failed to break 0.96 on the upside and is currently heading south. A support stands at 0.9481 (low from April 3) while the closest resistance remains at 0.96. EUR/CHF is showing little volatility as it moves toward 1.0250. EUR/CHF is stuck in a declining trend since early February.

Today traders will watch consumer confidence index and retail sales from Germany; MBA mortgage application and existing home sales from the US and consumer confidence from EU.