RBA rates unchanged, Soft data out of China & Japan

Market Brief

The RBA kept its cash rate target unchanged at 2.50% and reiterated its outlook for a period of stability in interest rates. RBA said that the recent data suggests solid improvement in house construction sector, while the employment demand remains subdued. The historically high AUD and the recent upside pressures are expected to weigh on the economy. AUDUSD shortly spiked to 0.9304 before easing to intra-day lows of 0.9255 (at the time of writing). Trend and momentum indicators remain comfortably bullish. The next resistances are eyed at 0.9339 (Fibonacci 61.8% on Nov’13 – Jan’14 pullback) and 0.9499/0.9500 (Fibo 76.4% & psychological level). On a similar pattern AUDNZD spiked to 1.0716 (50-dma). The bias is one the upside, the key resistance stands at 100-dma & broad downtrend channel top (1.0828).

HSBC/Markit revised Chinese manufacturing PMI down to 48.0 (from 48.1) in the final reading for March. The Chinese stocks recorded gains as speculations on additional stimulus from PBoC gained traction. Versus USD, Yuan couldn’t make it long below 6.2000 onshore, remained well bid above 6.2023 in Hong Kong.

In Japan, the Tankan index in 1Q were mainly flat-to-negative, the Tankan large all industry capital expenditures grew 0.1% (vs. 0.0% exp. & 4.6% last). The sales taxes rise from 5% to 8% become effective from today. A BoJ official highlighted that large and small manufacturing outlook are better compared to their levels seen at the time of previous sales tax hike in 1997. USDJPY and JPY crosses are well supported today, while Nikkei stocks drop 0.24%. USDJPY cleared resistance at the daily Ichimoku cloud top (103.10) yesterday, and remained well bid above this level. Option bids trail above 102.95/103.00 for today expiry, stops are seen below. Bullish momentum gains pace; the next key target stands at 103.76 (March high). EURJPY recorded decent buybacks on Friday and Monday, crossed above its 21-dma (141.66) and remains bid above 142.00 today. MACD (12, 26) turned positive and will remain in the bullish zone for a daily close above 141.84.

Despite soft inflation reading yesterday, EURUSD doesn’t show signs of dovish bets regarding the ECB meeting scheduled on Thursday. EURUSD remained in the tight range of 1.3769/78 in Asia. The sentiment remains mixed; traders are reluctant to take direction pre-ECB. Option bets are mixed with light stops seen below 1.3725 (Monday’s post-CPI low). On the upside, offers trail above 21-dma (1.3828). EURGBP remains offered below its 50-dma (0.82782), bias is clearly on the downside.

Today, the economic calendar consists of March Final PMI Manufacturing readings out of Sweden, Norway, Spain, Switzerland, France, Italy, Germany, UK, Euro-Zone, Canada and US. Traders will also watch German, Italian and EZ March Unemployment, Canadian February Industrial Product and Raw Materials Price Index, US February Construction Spending, US April IBD/TIPP Economic Optimism and Italian March New Car Registrations.