AUD boosted by jobs report, Singapore eases monetary policy

Forex News and Events

AUD hold ground amid strong jobs report (by Arnaud Masset)

The Australian dollar demonstrated resilience on Thursday as it was able to hold ground against the strengthening US dollar. With the exception of the Japanese yen, which consolidated against the greenback after falling almost 2%, the Aussie was the only currency among the G10 complex that was able to extend gains overnight. The Australia dollar consolidated gains at around 0.7660 amid strong job report. The unemployment rate fell to its lowest level since October 2013, falling to 5.7% in March from 5.8% in the previous month, signalling that the Aussie economy adjusted well to the low commodity prices environment and weaker demand from China.

Nevertheless, one should take this encouraging news with a grain of salt as the improvement in the unemployment rate was mostly due to an unexpected surge in new part time jobs (+34.9k versus -14.7k in February), while full time jobs contracted in March (-8.8k versus +13.9k in February). It is therefore a bit early to claim that the Aussie economy is out of the wood as it keeps sending relatively mixed signals. AUD will need more than a good job report to break the 0.77-0.7725 area to the upside as the market is well aware that the RBA still has an easing bias. The risk remains on the downside in AUD/USD as renewed rate hike expectation in the US would drag the pair lower.

Unexpected policy easing in Singapore (by Peter Rosenstreich)

In an unexpected easing move, the Monetary Authority of Singapore (MAS) flattened their policy slope of the SGD nominal effective rate (NEER) to zero% (or neutral) from a modest appreciation policy. A zero slope policy has not been used in Singapore since the financial crisis. Despite the dramatic change in FX easing the MAS provided no change in the bank’s forecasts. The MAS only mentioned that labor markets had weakened and inflation and growth were likely to come in below projections. Data released today indicated that Singapore GDP stagnated in 1Q 2016 as q/q came in at 0.0% from 6.2% (y/y 1.8% unchanged) as services declined. Outside the softer domestic backdrop, the MAS sighted weaker growth in US, China, Japan and Europe as a rational for the surprise move. Prolonged sluggish global growth, despite our expectations for a slight improvement in Chinese economic activity indicates risk of further policy easing and downside to official forecasts. Asian regional equity indices rallied as the policy move was seen as a reaction to unwanted regional currency strength. However, the MAS strategy is clearly part of the ongoing currency wars (or competitive devaluation if you want to be PC) and likely negative for other Asian currencies, until they individually activate counter measures. For broader risk sentiment additional easing should be positive for risky asset and reinforce our constructive view on EM and commodity linked currencies against the G10.

BoE rate decision against a backdrop of likely Brexit (by Yann Quelenn)

Markets expect the Bank of England to hold its bank rate unchanged at 0.5%, a record low, this early afternoon. Rates have been at this level for the past seven years. We also believe that no change in the monetary policy will happen this year and the chance of a rate cut exists. The UK needs to remain competitive as the ECB continues to ease while the Fed shows an increasingly dovish stance at each FOMC meeting.

For the time being, Brexit is the number one key issue for the UK (and Europe!) and recent polls are very mixed. Massive debt, austerity policies, deflation, loss of sovereignty are massive drawbacks for Europe. David Cameron is running a campaign to remain and he has decided to spend a £9-million on an EU propaganda leaflet explaining “Why the Government believes that voting to remain in the European Union is the best decision for the UK”. Testimonies from Portugal or Greece would have been welcomed additions to this leaflet but are regrettably missing.

Currency-wise, downside pressures on the GBP against the EUR are still lively and the sterling is approaching a 28-month low at around £0.80 for one euro. Right now, there is a massive consensus that in case of Brexit the EUR/USD will reach parity. As a result, the Swiss franc is not out of the woods yet and a sharp euro decline will push the SNB to react. The history of pro-activity from the Swiss National Bank, which always tries to be ahead of the ECB, makes us believe that there will be action in Switzerland before the referendum date on the 23rd of June as anxious anticipation is the key emotion being felt here at present.

EUR/GBP - Ready To Clear 0.8000.

Today's Key Issues	Country/GMT
Apr Consumer Inflation Expectation, last 3,40%	AUD/01:00
Bloomberg April Japan Economic Survey (Table)	JPY/01:00
Mar Employment Change, exp 17.0k, last 0.3k, rev -0.7k	AUD/01:30
Mar Unemployment Rate, exp 5,90%, last 5,80%	AUD/01:30
Mar Full Time Employment Change, last 15.9k, rev 13.9k	AUD/01:30
Mar Part Time Employment Change, last -15.6k, rev -14.7k	AUD/01:30
Mar Participation Rate, exp 65,00%, last 64,90%	AUD/01:30
Mar Non Resident Bond Holdings, last 68,30%	NZD/03:00
Maeklarstatistik Housing Price Data	SEK/06:00
Mar Tokyo Condominium Sales YoY, last -13,90%	JPY/06:00
Mar Producer & Import Prices MoM, exp -0,20%, last -0,60%	CHF/07:15
Mar Producer & Import Prices YoY, exp -5,00%, last -4,60%	CHF/07:15
Norges Bank 1Q Bank Lending Survey	NOK/08:00
Mar CPI FOI Index Ex Tobacco, last 99,5	EUR/08:00
Mar F CPI EU Harmonized YoY, exp -0,30%, last -0,30%	EUR/08:00
Mar CPI MoM, exp 1,20%, last 0,20%	EUR/09:00
Mar F CPI YoY, exp -0,10%, last -0,10%, rev -0,20%	EUR/09:00
Mar F CPI Core YoY, exp 1,00%, last 1,00%	EUR/09:00
Feb Mining Production MoM, exp 2,20%, last -4,90%	ZAR/09:30
Feb Gold Production YoY, last 27,00%	ZAR/09:30
Feb Platinum Production YoY, last 3,30%	ZAR/09:30
Feb Mining Production YoY, exp -5,60%, last -4,50%	ZAR/09:30
Apr 14 Bank of England Bank Rate, exp 0,50%, last 0,50%	GBP/11:00
Apr BOE Asset Purchase Target, exp 375b, last 375b	GBP/11:00
Apr FGV Inflation IGP-10 MoM, exp 0,39%, last 0,58%	BRL/11:00
Feb New Housing Price Index MoM, exp 0,10%, last 0,10%	CAD/12:30
Apr 9 Initial Jobless Claims, exp 270k, last 267k	USD/12:30
Feb New Housing Price Index YoY, exp 1,80%, last 1,80%	CAD/12:30
Apr 2 Continuing Claims, exp 2183k, last 2191k	USD/12:30
Mar CPI MoM, exp 0,20%, last -0,20%	USD/12:30
Mar CPI Ex Food and Energy MoM, exp 0,20%, last 0,30%	USD/12:30
Mar CPI YoY, exp 1,10%, last 1,00%	USD/12:30
Mar CPI Ex Food and Energy YoY, exp 2,30%, last 2,30%	USD/12:30
Mar CPI Index NSA, exp 238,544, last 237,111	USD/12:30
Mar CPI Core Index SA, exp 246,331, last 245,925	USD/12:30
Mar Real Avg Weekly Earnings YoY, last 0,60%, rev 0,70%	USD/12:30
Apr 8 Gold and Forex Reserve, last 387.0b	RUB/13:00
Apr 10 Bloomberg Consumer Comfort, last 42,6	USD/13:45
Fed's Lockhart Speaks in Chicago	USD/14:00
Fed's Powell Appears Before Senate Banking Committee	USD/14:00
BOE Governor Carney Speaks at IMF Meeting on Climate Change	GBP/17:00
BOE Deputy Governor Minouche Shafik Speaks at IMF Meeting	GBP/20:00
Mar BusinessNZ Manufacturing PMI, last 56, rev 55,9	NZD/22:30
Mar RICS House Price Balance, exp 50%, last 50%	GBP/23:01
Apr 8 Japan Buying Foreign Bonds, last -¥1555.1b, rev -¥1555.5b	JPY/23:50
Apr 8 Japan Buying Foreign Stocks, last -¥50.1b, rev -¥47.8b	JPY/23:50
Apr 8 Foreign Buying Japan Bonds, last ¥30.2b	JPY/23:50
Apr 8 Foreign Buying Japan Stocks, last ¥415.2b	JPY/23:50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Risk Today

Yann Quelenn

EURUSD continues to weaken and has broken support at 1.1339. However, pair is still moving within a horizontal range defined by the key support area between 1.1144 (24/03/2016 low) and resistance at 1.1465 (12/04/2016 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.

GBPUSD is riding downtrend channel near the hourly support at 1.4006 (04/06/2016 low) have been broken. Hourly resistance is given at 1.4320 (04/04/2016 high). Expected to show further weakening. 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 keeps on reversing and is challenging hourly support at 109.90 (07/04/2016 high). The pair has broken clearly hourly resistance at 109.10 (08/04/2016 low) and this means a weakening of short-term selling pressures. Hourly support can be located at 107.68 (07/04/2016 low). Expected to further consolidation. 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 continues to strengthen as can be seen by the break of the hourly resistance at at 0.9651 (17/03/2016 high). Hourly support can be found at 0.9499 (12/04/2016 low). Further resistance is located then 0.9788 (25/03/2016 high). Expected to show further bearish 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
1.2570	1.4668	1.0093	113.80
1.1714	1.4591	0.9913	112.68
1.1465	1.4348	0.9788	109.90
1.1268	1.4174	0.9662	109.13
1.1144	1.4006	0.9476	107.63
1.1058	1.3836	0.9259	105.23
1.0822	1.3503	0.9072	100.82