FX Daily Planet: New York Open

FX Daily Planet: New York Open

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View for the day

The major theme for the European session has been broad based USD weakness as the USD Index breaks through trendline support following the rally since the start of the year. European currencies have been the major beneficiaries with SEK and CHF leading the charge. European stocks are also broadly higher, providing a more conducive backdrop for risk markets. EUR has been helped by stronger than expected Euro area industrial production data in an otherwise quiet session for economic releases. With the speculative community still significantly long USD and with key US data releases due later in the session in the form of retail sales and Michigan consumer confidence, investors are probably lightening up positions ahead of the releases. In FX options, front-end vol has softened, particularly JPY crosses which are 0.3-05% lower.

Overnight news

EUR: Euro area industrial production is stronger than expected, rising 1.7% m/m.
JPY: The Nikkei newspaper reported that the BoJ’s discussion on additional monetary easing at the next week’s meeting will likely focus on a proposal to double the scale of a lending facility introduced in December to ¥20trn.
JPY: Prime Minister Hatoyama said “I think we need to take firm steps against the yen strength”. BoJ governor Shirakawa said “BoJ’s commitment to very easy policy affecting FX moves”.
USD: NY Fed President Dudley said clamping down on government spending too soon could “jeopardize the recovery and push a convalescent economy into a double-dip recession”
USD: The Fed reported that US households’ net worth edged up $700bn to $54,2trn in 4Q, marking a third consecutive quarter of rising net worth.

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

CAD: Feb unemployment rate (%, sa) @12:00 (JPM: 8.4, Cons: 8.3); Feb employment (ch, m/m 000s, sa) @12:00 (JPM: 0.0, Cons: 15.5)
USD : Feb retail sales (%m/m, sa) @13:30 (JPM: -0.2, Cons: -0.2); Feb retail sales ex autos (%m/m, sa) @13:30 (JPM: 0.1, Cons: 0.1); Mar U.Michigan consumer conf. prelim (index) @14 :55 (JPM : 73.0, Cons : 74.0); Jan business inventories (%m/m, sa) @15:00 (JPM: 0.2, Cons: 0.1)

Overnight price action

FX: USD is lower across the board as investors lighten up positions ahead of key US data releases.
FX vol: Cross Yen vol softens by 0.3%-0.5%
Commodities: Oil rises 1%; gold rises 0.5%
Bonds: European bond futures are mixed.
Credit: European iTRAXX high grade credit tightens 2bps; high yield crossover tightens 10bps.
Equities: European equities trade higher.

Technical View for the day

The uninspired corrective trading action of the last week seems to be prolonged for another week as markets keep on treading water across board without triggering any decisive chart levels which would indicate a change in general direction. Only equity markets remain in the trending mode but are expected to run out of steam shortly as shown structures suggest that this latest thrust could well be the completing leg of the so-called accumulation phase which started in March last year. That said volatility is expected to increase substantially the moment these markets switch to the consolidation mode. The latter is expected to be supportive for USD and JPY again where existing up-trends are still intact as key-barriers at 1.3840/71 in EUR/USD and at 125.35 in EUR/JPY have not been taken out yet. Only a sustained stock market rally would potentially lead to a break of these resistances which would call for a much stronger countertrend rally. An equivalent resistance barrier to watch is at 92.44 in USD/JPY (weekly trend line). Once taken out the upside would be open for a broader up-swing towards key-resistance at 99.85.

Research from the region you may have missed

BoJ preview: Odds are rising that the BoJ will take another small step for easing

BoJ’s monetary policy has little impact on USD/JPY

Ends

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