FX Daily Planet: Sydney/Asia Open

FX Daily Planet: Sydney/Asia Open

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View for the day

The USD is taking back some ground in New York trading following a grind lower beginning last Friday. AUD and NZD remain higher versus the USD while JPY and GBP continue to lag. Today’s only notable economic data was housing starts in Canada which surprised mildly to the upside, but failed to impart any notable impact on CAD, which currently only slightly higher versus the USD. With little in the way of other economic data, equities are moving sideways in a uneventful quiet session, currently about flat in afternoon trading. Tomorrow features NAB business confidence in Australia and the coincident and leading indices in Japan. We are looking for the NAB survey to remain roughly unchanged, and for increases in each of the leading and coincident indices.

Overnight news

CAD: Feb housing starts (000s, saar) came in at 196.7k (JPM: 195, Cons: 190)

EUR: German industrial production is softer than expected, rising 0.6% m/m, but y/y rate is stronger at +2.2% and previous months data was revised higher.

JPY: January current account surplus was slightly larger than consensus at ¥899.8 bn (cons.¥783.9 bn). February Econ. Watchers survey was stronger than consensus at 42.1 (cons. 40.1).

JPY: According to the BoJ’s balance of payments data, capital inflows into Japan from Japanese corporates' repatriation of foreign retained earnings recorded JPY188.1 bn in January. This is three times larger the average inflow in January between 2006 and 2008 at JPY60bn.

EUR: Greek central bank governor Provopoulos – “Greece will not need foreign helps to deal with its debt problems”.

Today’s watchlist (all times GMT; +11hrs for Sydney, +9hrs for Tokyo, -5hrs for New York)

AUD: NAB business confidence (%bal, sa) (JPM: 15) @ 00:30; RBA Deputy Governor Lowe speaks @ 14:30

JPY: Leading index prelim. (CI) (Cons: 96.6) @ 05:00; Coincident index prelim. (CI) (Cons: 99.4, JPM: 99.6) @ 05:00

Overnight price action

FX: High-beta remains higher at the cost of USD and JPY.

FX vol: FX vol is slightly lower in shorter maturities.

Commodities: Gold is down 1%, oil is up slightly.

Bonds: Yields are about flat at the short end, and up 2-3bp farther out the curve.

Equities: US equities are about flat in afternoon trading.

Technical View for the day

A day of consolidation follows the post-payroll shift in risk. Yesterday’s mixed bias for the USD maintains the current short term themes highlighted by the corrective range action for the European currencies. In that regard, note yesterday’s failures below initial resistance for both EUR/USD and Cable. With the levels still well-defined, the overall risks continue to point lower beyond this short term consolidation phase. For the commodity currencies, a key focus remains on USD/CAD given the proximity of critical support in the 1.0205/35 area which includes the medium term range lows. For the short term view, we sense some near term retracement is likely but note the downside risks for a breakdown are increasing given the maturity of the range. Moreover, note that both AUD/USD and NZD/USD face tough short term challenges at initial resistance levels which can allow for some additional near term pause. These include the .9155/.9200 zone for AUD/USD and the .7050/.7085 levels for NZD/USD. Yesterday’s pullback in USD/JPY and cross JPY developed in a corrective manner which is consistent with the renewed bullish spin from last week. Again, the upside reversal week for USD/JPY and impulsive rally after failing to extend on the break of key support (8855) argues for a deeper retracement of the decline from the Feb/Jan highs. Moreover, the renewed bullish action in the crosses seems consistent with a shift implying additional upside this week. Note the breakouts through key intraday levels including the 80.85 area for AUD/JPY as well as the 121.90 zone for EUR/JPY and 134.85 pivot for GBP/JPY. These levels will maintain the near term upside bias.

ENDS

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