USD weakens post-Yellen, the Cable at fresh year high

Market Brief

The greenback turned broadly offered after Fed Chair Yellen said the rates will remain lower for longer due to persisting effects of crisis. Yellen repeated that there is considerable time between the end of bond-buying program and the first rate hike. The US stock futures fell, the US 10-year government yield remains at one-month lows.

USD/JPY and JPY crosses traded down in Tokyo. USD/JPY tested the daily Ichimoku cloud base on the upside yesterday (102.37 to 103.10). The pair faded to 101.87 as BoJ Governor Kuroda gave no signs of future easing at the BoJ Branch Managers meeting. The focus is on PM Abe’s speech today. Option bets are mixed with negative skew below 103.00/25. The key supports are placed at 101.50 (Feb-April uptrend base), then 100.76 (2014 low). EUR/JPY sees resistance at the 21-dma (141.39). Trend and momentum indicators are steadily bearish.

In Australia, the business confidence deteriorated in Q1 according to NAB. AUD/USD advanced to 0.9391 post-Yellen yet failed to extend gains. Trend and momentum indicators are now flat, the MACD (12, 26) will turn negative for a daily close below 0.9372. Next supports are eyed at 0.9275 (21-dma) and 0.9209 (Fib 50% on Oct’13 – Jan’14). AUD/NZD sees resistance pre-1.0900, option bids are waiting to be activated above this level.

Released yesterday, the UK’s 3-month average unemployment rate fell to 6.9% in February, the average wages showed improvement. GBP/USD hit the fresh year high of 1.6837 as Asia walked in today. EUR/GBP pulled out our first target at 0.82250, currently tests the April downtrend channel base. Bearish techs suggests extension of weakness to 0.82042 (March 5th low) as long as 50-dma resistance holds (0.82797).

The BoC kept the policy rate unchanged at 1.00% yesterday and remained neutral regarding its future policy outlook. The BoC Governor Poloz said he looks to confine the fastening of the inflation as the companies’ investments remain slow. Canada will release March inflation report today. The CPI y-o-y may have accelerated from 1.1% to 1.4%, the core inflation from 1.2% to 1.3%. USD/CAD rallied 1.1034 post-BoC and consolidates gains pre-CPI. A daily close above 1.1010 suggests deeper upside correction (MACD pivot).

Today, traders are focused on German March PPI m/m & y/y, EU 27 New Car Registrations in March, Canadian March CPI m/m & y/y, Us April 12th Initial Jobless Claims and April 5th Continuing Claims, Philadelphia Fed Business Outlook in April.

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