U.S. Dollar Trading (USD) with most stock markets still closed on Monday we saw a small push lower in Asia before grinding higher for the rest of the day on the back of bargain hunting. The only data yesterday was Chinese CPI which was higher than expected and raised questions as to whether they can loosen monetary policy to support a faltering growth outlook. Looking ahead, February Wholesale Inventories at 0.5% vs. 0.4%.
The Euro (EUR) the EUR/USD moved back above 1.3100 as light markets kept the 1.3000 level safe for now. A break of the key level could see a move lower to 1.2850 and more pressure on the crosses. Yields on Spanish and Italian bonds increased again and is a worrying sign the debt crisis may come back. The Sterling (GBP) GBP/USD grinded back above 1.5900 and is showing strength on GBP/JPY and EUR/GBP. The outlook is mixed with a EUR/USD slump likely to drag the GBP/USD lower while the upside is linked to risk appetite and the US/global recovery.Looking ahead, February Trade balance forecast at 13.6bn vs. 14.2bn previously.
The Japanese Yen (JPY) the USD/JPY selling eased and we saw a small bounce to Y81.60 with the crosses also enjoying small rallies overnight. The downside is likely to continue with the EUR/JPY cross under pressure and the AUD/JPY falling on China concerns. Australian Dollar (AUD) stopped falling even with the hot Chinese CPI number finding support at 1.0260 and bouncing above 1.0300. The AUD/USD has been steadily falling for the last 4 weeks and could test Parity soon if the EUR/USD falls and China continues to falter. Looking ahead, March AUD Business Confidence Index previously at 1.
Oil & Gold (XAU) Gold was very quiet in holiday markets yesterday sticking to a $5 range for most of the day under $1650.Oil dipped to $101 before finding support and rallying to fresh day highs above $102.50.
Pairs to watch
EUR/GBP Clear downtrend has to break support at 0.8200 to continue
EUR/CHF Can 1.2000 and the SNB hold the selling pressure?