Market Roundup

  • Dollar index inching closer to 98.665 Tuesday’s high 
  • BOJ Gov Kuroda: Even if yields rise BOJ does not book losses on its JGB holdings; JGB buying is aimed at achieving 2 pct inflation target.

  • Greek Economy Minister Stathakis says expects agreement with Greece’s creditors on reforms will be reached next week.
  • United Kingdom Mar Markit/CIPS mfg PMI increase to 54.4 (consensus 54.3 ) vs previous 54.1.
  • European Union Mar Markit mfg final PMI increase to 52.2 (consensus 51.9 ) vs previous 51.9.
  • Germany Mar Markit/BME mfg PMI increase to 52.8 (consensus 52.4 ) vs previous 52.4.
  • France Mar Markit mfg PMI increase to 48.8 (consensus 48.2 ) vs previous 48.2.
  • Italy Mar Markit/ADACI mfg PMI increase to 53.3 (consensus 52.3 ) vs previous 51.9.
  • China Mar HSBC mfg PMI final increases to 49.6 vs previous 49.2.

Economic Data Ahead

  • (0800 EDT/1200GMT) US MBA Weekly Mortgage Application Activity Indices
  • (0915 EDT/1315GMT) US ADP National Employment Report (Mar) consensus +240k, previous +212k
  • (1045 EDT/1445GMT( US Markit Manufacturing PMI (final Mar) previous 55.3
  • (1100 EDT/1500GMT) US Construction Spending (Feb) consensus 0.0% m/m, previous -1.1% m/m
  • (1100 EDT/1500GMT) US ISM Manufacturing (Mar) consensus 52.5, previous 52.9
  • (1130 EDT/1530GMT) US EIA Weekly Petroleum Statistics

Key Events Ahead

  • (0830 EDT/1230GMT) FRB San Francisco’s Williams on financial stability; Stone Mountain, GA
  • (1245 EDT/1645GMT) FedTrade 30-year Fannie Mae/Freddie Mac (max $2.025 bln)
  • (1530 EDT/1930GMT) FedTrade 15-year Fannie Mae/Freddie Mac (max $650 mln)

FX Recap

The USD is expected to return to its strengthening trend, but the pace of appreciation will be slower than recently witnessed. Higher short-term interest rates remain the base case scenario, yet the timing of the first move by the Federal Reserve (Fed) has been reassessed.EUR/USD fell 70 pips from 1.0793 (today’s high) and currently trades as 1.0739 levels. The euro (EUR) retains a defensive tone and further weakness is in sight. Europe remains fragile, and there is no evidence of material shifts in a bearish fundamental picture in the European landscape. An uptick in inflation and high-frequency data releases suggest that Europe is stabilizing, benefitting from the combination of stimulus provided by EUR depreciation, low oil prices, and low bond yields. However, the divergence in monetary policy and growth will likely keep the EUR trending lower. It is likely to find support at 1.0710, 1.0650 and 1.0500 levels. Resistance is seen at 1.0750 and then at 1.800 levels. Option Expiries at 1.0750 (359M), 1.0800 (2.4BLN).GBP/USD traded in the red in mid-European session as traders completely ignored upbeat UK manufacturing PMI. It currently trades at 1.4753 levels, having posted a fresh session low at 1.4750 levels. The British pound (GBP), which has been steadily underperforming versus the USD since July 2014, is vulnerable to extend its declining trend. The GBP will be influenced by the combination of disinflationary dynamics, a well-entrenched global investor preference for the USD and to a lesser extent policy uncertainties linked to the approaching general elections scheduled for May 7th, 2015. The Bank of England will remain data-sensitive in the near term, as it faces a disinflationary environment, with the most recent consumer prices print at 0.0% y/y. The pair sees resistance at 1.4872 levels and then at 1.4900 levels. Support is located at 1.4750 and 1.4720 levels. Option expiries at 1.4900 (226M). USD/JPY recovered its losses in Asia and has broken above the 120 mark. It currently trades at 120.20 levels. The Japanese yen (JPY) remains on the defensive. Japan’s fundamental backdrop has deteriorated and the Bank of Japan (BoJ) is expected to struggle towards its 2% inflation goal without further stimulus. Pair sees near-term resistance at 120.34, 120.81 levels and support at 119.69, 119.51 levels. Option expiries at 119.50-55 (740M).  USD/CAD was unsuccessful to hold its move above the 1.27 mark and currently trades at 1.2693 levels. Weakness in commodity prices seems to be helping the Canadian dollar. WTI was trading at USD 47.20/barrel, down 40 cents on the day. The CAD is expected to reach fresh lows in 2015, closing the year at 0.75 (USDCAD at 1.33) but then stabilize in 2016, averaging 0.76 (USDCAD 1.32). Resistance is seen at 1.27 levels and support at 1.2672 levels. Option expiries at 1.2680 (256M), 1.2700 (220M), 1.2800 (200M).USD/CNY currently trades at 6.1985 levels. The Chinese renminbi (CNY) rebounded in March on the back of better support for Asian currencies against the USD, and stronger than expected fixings from the central bank. The yuan’s fundamentals are relatively strong and this combined with ongoing currency policy liberalization should support modest gains from here. It faces strong support at 6.1840 and 6.1687 levels, resistance at 6.220 and 6.2370 levels.AUD/USD continued its downward move on Wednesday and currently trades at 0.75891 levels. The Australian dollar (AUD) is expected to reach fresh multi-year lows in Q3 based on a soft domestic backdrop, disappointing Chinese growth, and the Reserve Bank of Australia’s interest rate path and desire for a lower currency. Resistance might be located at 0.7912 levels and further at 0.7938 levels. Support is likely to be found at 0.7565 levels. Option expiries at 0.7640-50 (1BLN), 0.7600-05 (360M). 

The material has been provided by InstaForex Company –