Data suggests SNB keeps wekening CHF, USD reversal possible

Forex News and Events

Another evidence of SNB intervention (by Arnaud Masset)

Last week sight deposits at the Swiss National Bank saw their highest rise since mid-February, suggesting that the central bank has in fact intervened in the FX market to weaken the Swiss franc. Total sight deposits surged CHF 2.67bn to CHF 486.4bn in the week ending April 8. Similarly, domestic banks sight deposits ticked up CHF 3.3bn to CHF 423.6bn. Taking into account the sharp increase in the foreign currency reserves in March - from 570.9bn to 575.8bn - it is now clear that the SNB had to intervene in the FX market to weaken the Swiss franc. In fact, since the beginning the the year, sight deposits with the SNB have increased steadily due to soaring global-level uncertainty in particular concerning China and the US economy.

Unfortunately for the SNB, this situation is not likely to change anytime soon as the Greek debt story will likely take center-stage in the coming months. Therefore a second summer of “staycation” looks to be on the cards for SNB members as the franc will come under renewed buying pressure. Moreover, the ECB easing bias will not help to improve this situation.

Watching for a USD reversal (by Peter Rosenstreich)

The USD pattern of weakness continues this week against Asian regional currencies. US 10-year yields have struggled to extend bullish momentum above 1.71% and are looking to retrace back to 1.65% levels. A decline in yields should prompt additional selling pressure on USD. However, IMM data indicates that notional long USD positions are small and well off the November 2015 peak, suggesting that there is room for a fundamental based reversal. Investors continue to evaluate the probability of a deeper slowing in the Chinese economy making the scope of economic releases this week significant. The pace of Chinese CPI slowed more than expected after a solid four month strengthening trend. March CPI fell -0.4% vs. -0.3% m/m exp, 2.3% vs. 2.5% y/y expected indicating that deflationary pressures remain dominant. This prompted Ambrose Evans-Pritchard of the Daily Telegraph to suggest that Beijing risks 'ERM-style' currency crisis as deflation persists in China. Investors will carefully monitor Thursday’s Q1 GDP for direction in risk appetite.

In the US, Tuesday brings a steady lineup of hawkish Fed speakers which will likely drive USD higher. Judging from the recent effects of Fed speeches on market sentiment, comments from Harker, Williams and Lacker could easily shift USD direction by increasing expectations for a June rate hike. San Francisco Fed President Williams’s address will likely be the most important fed communication this week. The hawkish subdivision of the Fed is looking for leadership and Williams is likely to pick up the mantle. Yet not to be outdone Richmond Fed President Lacker remains one of the most hawkish FOMC members and is likely to provide critical comments concerning Chair Yellen (from an inflation fighting and leadership perspective). We anticipate that EURUSD will be range-bound, reversing the bullish trend and targeting 1.1335 range floor.

EUR/USD - Consolidation

 

Today's Key Issues	Country/GMT
Mar CPI MoM, exp 0,50%, last 0,70%	DKK/07:00
Mar CPI YoY, exp 0,40%, last 0,30%	DKK/07:00
Mar CPI EU Harmonized MoM, exp 0,60%, last 0,50%	DKK/07:00
Mar CPI EU Harmonized YoY, exp 0,20%, last 0,10%	DKK/07:00
Feb Current Account Balance, exp -2.20b, last -2.23b, rev -2.34b	TRY/07:00
Apr 8 Total Sight Deposits, last 483.8b	CHF/07:00
Apr 8 Domestic Sight Deposits, last 420.3b	CHF/07:00
Mar CPI MoM, exp 0,30%, last 0,50%	NOK/08:00
Mar CPI YoY, exp 3,20%, last 3,10%	NOK/08:00
Mar CPI Underlying MoM, exp 0,40%, last 1,00%	NOK/08:00
Mar CPI Underlying YoY, exp 3,40%, last 3,40%	NOK/08:00
Mar PPI including Oil MoM, last -2,60%	NOK/08:00
Mar PPI including Oil YoY, last -14,90%	NOK/08:00
Feb Industrial Production MoM, exp -0,90%, last 1,90%	EUR/08:00
Feb Industrial Production WDA YoY, exp 1,40%, last 3,90%	EUR/08:00
Feb Industrial Production NSA YoY, last 0,70%	EUR/08:00
Bank of Italy Publishes Monthly Report `Money and Banks'	EUR/09:00
BOE Chief Cashier Cleland Speaks at Conference	GBP/10:05
Apr IGP-M Inflation 1st Preview, exp 0,23%, last 0,43%	BRL/11:00
Central Bank Weekly Economists Survey (Table)	BRL/11:25
Feb Exports, exp 17.6b, last 17.6b	RUB/13:00
Feb Imports, exp 11.5b, last 9.7b	RUB/13:00
Feb Trade Balance, exp 7.9b, last 7.9b	RUB/13:00
1Q P Current Account Balance, exp 15800m, last 14952m	RUB/13:00
Fed's Dudley Speaks on Community Development in New York	USD/13:25
ECB Publishes Weekly QE Holdings	EUR/13:45
Apr 8 Bloomberg Nanos Confidence, last 54,7	CAD/14:00
Fed's Kaplan Speaks in Ruston, Louisiana	USD/17:00
Apr 10 Trade Balance Weekly	BRL/18:00
Mar Import Price Index YoY, last -7,40%	KRW/21:00
Mar Import Price Index MoM, last 1,60%	KRW/21:00
Mar Export Price Index MoM, last 0,80%	KRW/21:00
Mar Export Price Index YoY, last -2,00%	KRW/21:00
Mar Foreign Direct Investment YoY CNY, exp 2,40%, last 1,80%	CNY/22:00
Feb Leading Index, last 98,12	CNY/22:00
Mar New Yuan Loans CNY, exp 1100.0b, last 726.6b	CNY/22:00
Mar Aggregate Financing CNY, exp 1400.0b, last 780.2b	CNY/22:00
Mar Money Supply M0 YoY, exp 4,30%, last -4,80%	CNY/22:00
Mar Money Supply M1 YoY, exp 18,40%, last 17,40%	CNY/22:00
Mar Money Supply M2 YoY, exp 13,50%, last 13,30%	CNY/22:00
1Q Real Estate Index Family Homes, last 450,6	CHF/22:00
ABPO Mar. Cardboard Sales	BRL/22:00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Risk Today

Peter Rosenstreich

EUR/USD is moving within a horizontal range defined by the key support area between 1.1339 (06/04/2016 low) and resistance at 1.1454 (07/04/2016 high). Stronger support is located a 1.1058 (16/03/2016 low). Expected to show further range-bound pattern. In the longer term, the technical structure favours a bearish bias as long as resistance at 1.1746 ( holds. Key resistance is located at 1.1640 (11/11/2005 low). The current technical appreciation implies a gradual increase.

GBP/USD is grinding higher. Hourly supports at 1.4171 (01/04/2016 low) and at 1.4033 (03/03/2016 low) have been broken. The short-term technical structure is positive as long as the hourly support at 1.4108 (08/04/2016 range low) holds. Hourly resistance is given at 1.4322 (04/04/2016 high). Expected to show further bullish 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.

USD/JPY is challenging the strong support area 107.61 (28/10/2014 high). A break of the resistance at 110.67 (17/03/2016 low) is needed to signal weakening short-term selling pressures. Hourly support can be located at 107.68 (07/04/2016 low). Hourly resistance is given at 109.88 (07/04/2016 high) while strong resistance is given at 113.80 (29/03/2016 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).

USD/CHF has managed to close above its key trendline support at 0.9522 (16/04/2013 low). The resulting selling pause is likely to lead to a short-term rebound. Hourly support can be found at 0.9522 (intraday low) while hourly resistance is located at 0.9622 (06/04/2016 high). Stronger resistance can be found at 0.9788 (25/03/2016 high). Expected to show further consolidation. 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
1.257	1.4668	1.0093	113.8
1.1714	1.4591	0.9913	112.68
1.1454	1.4459	0.9788	109.9
1.1383	1.4181	0.9556	108.1
1.1144	1.4016	0.9476	107.61
1.1058	1.3836	0.9259	105.23
1.0822	1.3503	0.9072	100.82