FX Daily Planet: Sydney/Asia Open

FX Daily Planet: Sydney/Asia Open

Click here for the full Note and disclosures.

View for the day

Risk markets are adding to overnight gains in the US session, with equities up 0.5% and the USD down against high beta. NZD is today’s top currency among the majors, up around 1% and rebounding sharply against other commodity currencies which it has lagged recently. GBP also remains stronger on the day following overnight labor market data which was stronger than expected with the claimant count posting a large 32k fall confirming that the January spike was likely weather related. In vol space, vols continue to move lower. With a good deal of the event risk having passed, vols are under pressure and likely to remain so in the near term. Today’s only notable economic release was PPI which declined 0.6%, more than expected (consensus -0.4%, JPMorgan -0.2%) due mainly to energy prices which fell nearly 3%. The core PPI increased 0.1% (consensus 0.1%, JPMorgan 0.0%). Tomorrow we’ll receive the BoJ monthly report in the Asian session followed by Eurozone current account data, and later US CPI, current account data, jobless claims, and the Philly Fed index in the data-packed US session.

Overnight news

USD: Feb PPI (%m/m, sa) decreased -0.6% (JPM: -0.4, Cons: -0.2); Feb PPI core (%m/m, sa) increased 0.1% (JPM: 0.0, Cons: 0.1)

USD: Bernanke and Volcker testified on bank supervision by Bernanke and Volcker. Bernanke commented that oversight of bank sizes improves monetary policy and that the Fed is “uniquely suited” to supervise big firms. Bernanke additionally stated that he has not seen reduced demand for Treasuries. Volcker

GBP: UK labour market is stronger than expected with a 32k decline in the claimant count. Bank of England votes 9-0 to keep rates and asset purchases unchanged.

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

JPY: BoJ monthly report @ 05:00; Leading index final (CI) for January @ 05:00; Coincident index final (CI) for January @ 05:00

Overnight price action

FX: High beta currencies continue to rally with GBP and NZD leading the way.

FX vol: Front-end vol is lower.

Commodities: Oil is up more than 1% and gold is down slightly.

Bonds: Yields are up 1-2bp in short maturities and down 1-2bp in the long end. 2/10s is 272bp.

Equities: US equities are higher by 0.5%.

Technical View for the day

With risk sentiment still bullish, the USD was on defensive yesterday leading to a closer test of critical short term support levels Importantly, the focus remains on the well-defined 1.3840/50 area in EUR/USD and the critical 79.50 range lows for the Dollar index. Again, these levels should help define whether the recent range action persists, or a deeper short term corrective phase for the USD is underway. The action in the commodity currencies continues to point to additional outperformance against the USD though as highlighted by the continued breakdown in USD/CAD. The short term setup points to a test of the 1.00/.9975 support area, but note that the more immediate downside bias will remain intact against the 1.0230/1.0320 resistance levels. Moreover, the break through the key .9200 area for AUD/USD should allow for a closer test of the critical .9330 January high Still, NZD has led the way over the past few days with yesterday’s break through the key .7155 resistance area arguing for a deeper short term corrective phase. In that regard, AUD/NZD has pulled back into initial support at 1.2850/1.2760 zone, while NZD/CAD faces an important test at the .7265 zone. The range bias for USD/JPY is intact while the price action continues to consolidate below the next line of important resistance in the 91.25/75 zone. Importantly, a break above this area is necessary to reassert the upside bias for a retest of the January, if not February highs. While additional near term consolidation is likely for the JPY crosses, note that nearby support levels have thus far held suggesting a growing risk of an extension. Again, we view corrective retracements as buying opportunities given last week’s breakout through a number of important resistance levels highlighted by AUD/JPY and CAD/JPY.

ENDS

© Scoop Media