Forex News and Events

Risk of more easing bias in RBA (by Peter Rosenstreich)

Overnight Australian February retails sales m/m disappointed coming in unchanged against 0.4% expected. The weaker retail sales highlight the risks building in domestic data downside expectations given the tightening in monetary and fiscal conditions. At tomorrow RBA policy meeting we expect the committee to stand pat yet the risk towards more easing has increased. Traders will be watching for clues on understanding recent volatility in commodity prices. With better than expected GDP in 4Q at 3.0% y/y and stabilizations of Chinese economic data the RBA has accepted AUD strength. However, the passive behavior might be coming to an end. For FX traders, the RBA recently has not meaningfully talked down the AUD given the currencies 3-month bull-run (supported rally in iron ore), suggesting we could hear more explicit comments on AUD overvaluations and easing bias. With a full rate hike only priced in by November meeting strong dovish comments could have the markets quickly bring forward rate cut expectations. That said political considerations revolving around the federal budget and early elections on 2nd July could force the central banks to delay in order to evaluate the fiscal environment. We remain bearish on AUDUSD ahead of the RBA meeting, yet the pair needs a solid break of 21d MA (0.7560 support) to confirm downside. Baring knee jerk reaction, risk / yield seeking behaviors by investors should keep this commodity linked currency supported.

Limited USD upside on hike expectations (by Peter Rosenstreich)

Asian regional equity markets were broadly strong in thin trading following Friday’s solid US payroll report. FX trading was choppy today with JPY gaining (sending Nikkei -.25% lower) against the USD, yet high beta currencies improved. Equity markets in China and Hong Kong are closed today for holiday. On Friday, March US labor reports came in at 215k (marginally higher than expectations), while data showed steady wage growth and significant increase in labor force participation which initially had traders pricing in a higher potential for an interest rate hike in June. Elsewhere, manufacturing PMI unexpectedly surprised to the upside as the global outlook, led by China, improved. The firm US data helped USD marginally rally yet demand quickly faded. Importantly, US front-end yields failed to adjust to the stronger US data, indicating that the markets remain unconvinced about a June hike. We remain slightly confident that the Fed will not hike rates in June, suggesting that the currency rally in emerging markets (search for high yields) and commodity linked currencies should continue. We favor long positions in ZAR, MXN, BRL, KRW, against JPY and USD. We suspect that Chair Yellen's dovish communication still represents the dominant feeling within the Fed, international conditions remain soft (distinct downside risks) and the pace of domestic inflation is no immediate threat (despite US economy remains on track). This week, March FOMC meeting minutes are scheduled to be released, which should echo Yellen’s cautious tone. Traders will be focused on member’s emphasis on international developments and external risk factors, which should support Yellen’s vigilant stance. Barring a catalyst from Europe there is no fundamental justification for a sustained USD rally at this point as the market is over positioned for a Fed June rate hike. That said the conflicting communications from the Fed makes deciphering the message more complex and will likely drive volatility.

BRL takes advantage of political mess (by Arnaud Masset)

Last week the Brazilian real ended the week on a positive note as market participants still view the current political mess in a favourable light. USD/BRL fell 3.40% last week, stabilising below the 3.56 threshold, as traders rushed into short USD/BRL position, betting that the current mess would result in a political shake-up that might unlock the situation. Last week, President Dilma Rousseff lost the support of her party’s main coalition partner, the Brazilian Democratic Movement Party (PMBD), putting her in a tough situation as the impeachment vote is getting closer. The equity market was even to weather the global equity sell-off as the Bovespa Index rose 1.75% last week.

A week ago, the last BCB’s weekly economist survey showed that economists were turning more and more optimist about Brazil’s inflation outlook as they revised lower their inflation forecast to 7.31% for 2016 from 7.43%. USD/BRL forecast was also lowered to 4.15, compared to 4.20 the previous week. Still on a positive note, industrial production, released last Friday, printed at -9.8%y/y, beating consensus of -10.5%, while the previous month’s reading was revised to -13.6% from -13.8%. On Monday, emerging market currencies started the week on the back as most commodity prices were heading south; the real will therefore most likely lose a bit of steam today.

AUD/USD - Failed To Go Any Higher.

AUDUSD

 

 

 
Today's Key Issues Country/GMT
Feb Unemployment Rate SA, last 3,60% DKK/07:00
Feb Unemployment Rate Gross Rate, exp 4,40%, last 4,40% DKK/07:00
Mar CPI MoM, exp 0,65%, last -0,02% TRY/07:00
Mar CPI YoY, exp 8,20%, last 8,78% TRY/07:00
Mar CPI Core Index YoY, exp 9,50%, last 9,72% TRY/07:00
Mar PPI MoM, exp 0,53%, last -0,20% TRY/07:00
Mar PPI YoY, exp 4,08%, last 4,47% TRY/07:00
Mar Unemployment MoM Net ('000s), exp -50, last 2,2 EUR/07:00
Apr 1 Total Sight Deposits, last 483.3b CHF/07:00
Apr 1 Domestic Sight Deposits, last 419.6b CHF/07:00
4Q Deficit to GDP YTD, last 2,90% EUR/08:00
Mar Markit/CIPS UK Construction PMI, exp 54,1, last 54,2 GBP/08:30
Apr Sentix Investor Confidence, exp 7, last 5,5 EUR/08:30
ECB's Praet Speaks at Luiss University in Rome EUR/08:30
Feb PPI MoM, exp -0,50%, last -1,00% EUR/09:00
Feb PPI YoY, exp -4,00%, last -2,90% EUR/09:00
Feb Unemployment Rate, exp 10,30%, last 10,30% EUR/09:00
Central Bank Weekly Economists Survey (Table) BRL/11:25
Fed's Rosengren Speaks at Cybersecurity Conference USD/13:30
Mar ISM New York, exp 54,1, last 53,6 USD/13:45
ECB Reports Weekly, Monthly QE Settlements EUR/13:45
Apr 1 Bloomberg Nanos Confidence, last 54,5 CAD/14:00
Mar Labor Market Conditions Index Change, last -2,4 USD/14:00
BOC's Poloz Speaks about Search for Woman on New Bank Note CAD/14:00
Mar Foreign Reserves, exp 412, last 421,5 DKK/14:00
Feb Factory Orders, exp -1,80%, last 1,60% USD/14:00
Mar Change in Currency Reserves, last -8.2b DKK/14:00
Feb Factory Orders Ex Trans, exp -0,50%, last -0,20% USD/14:00
Feb F Durable Goods Orders, exp -2,80%, last -2,80% USD/14:00
Feb F Durables Ex Transportation, exp -1,00%, last -1,00% USD/14:00
Feb F Cap Goods Orders Nondef Ex Air, last -1,80% USD/14:00
Feb F Cap Goods Ship Nondef Ex Air, last -1,10% USD/14:00
U.K. PRA's Moulder Speaks at Insurance Forum in London GBP/15:00
Mar Foreign Reserves, last $365.76b KRW/21:00
Feb Leading Index, last 98,12 CNY/22:00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Risk Today

Yann Quelenn

EURUSD keeps on pushing higher and is now lying around former resistance at 1.1376 (11/02/2016 high). Hourly support is given at 1.1144 (24/03/2016 low). Stronger support is located a 1.1058 (16/03/2016 low). Expected to show further consolidation. In the longer term, the technical structure favours a bearish bias as long as resistance at 1.1746 ( holds. Key resistance is located region at 1.1453 (range high) and 1.1640 (11/11/2005 low) is likely to cap any price appreciation. The current technical deterioration implies a gradual decline towards the support at 1.0504 (21/03/2003 low).

GBPUSD is still trading without direction despite the medium-term technical structure is clearly bearish. Hourly resistance is given at 1.4591 (05/02/2016 high) while hourly support can be found at 1.4171 (01/04/2016 low). A break of stronger resistance at 1.4668 (04/02/2016) is nonetheless needed to show a reverse in the medium-term momentum. The long-term technical pattern is negative and favours a further decline towards key support at 1.3503 (23/01/2009 low), as long as prices remain below the resistance at 1.5340/64 (04/11/2015 low see also the 200 day moving average). However, the general oversold conditions and the recent pick-up in buying interest pave the way for a rebound.

USDJPY is medium term momentum is negative. Yet, the pair has traded in range over the last two months. On the short-term, selling pressures are increasing. Hourly support is given at 110.67 (17/03/2016 low). Hourly resistance is given at 113.80 (29/03/2016 high) while stronger resistance is given at 114.91 (16/02/2016 high). Expected to further weaken. We favour a long-term bearish bias. Support at 105.23 (15/10/2014 low) is on target. A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems now less likely. Another key support can be found at 105.23 (15/10/2014 low).

USDCHF has weakened over the last month which confirms increasing selling pressures. Yet, the pair is now consolidating. Hourly support can be found at 0.9556 (01/04/2016 low) while hourly resistance is located at 0.9788 (25/03/2016 high). Stronger resistance can be found at 0.9913 (16/03/2016 high). Expected to show continued weakness. In the long-term, the pair is setting highs since mid-2015. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours a long term bullish bias.

 

Resistance and Support:


 
EURUSD GBPUSD USDCHF USDJPY
1.2570 1.4969 1.0093 115.17
1.1714 1.4668 0.9913 114.91
1.1495 1.4591 0.9788 113.80
1.1371 1.4225 0.9604 111.59
1.1144 1.4171 0.9476 110.67
1.1058 1.4033 0.9259 107.61
1.0822 1.3836 0.9072 105.23

This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

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