Global Markets:

  • Japan National CPI (y/y): 1.5%, Previous: 1.4%
  • Japan National Core CPI (y/y): 0.8%, Previous: 0.7%
  • Japan Unemployment Rate (FEB): 3.6%, Expected: 3.7%, Previous: 3.7%
  • Japan Retail Sales (y/y): 3.6%, Expected: 3.2%, Previous: 4.4%
  • UK GfK Consumer Confidence: -5, Expected: -6, Previous: -7
  • Fed’s Evans says he sees zero interest rates ‘well into’ next year
  • Fed’s Evans says a rate increase depends on inflation picking up
  • Fed’s Evans says he sees rates increasing ‘at least six months’ after QE
  • Asian markets are trading higher as of 05:00 GMT with the Nikkei up 0.20 % and the Shanghai Composite gaining 0.35 %
  • The Hang Seng rallied 1.20 % while Australia’s ASX rose 0.30 %
  • Gold is almost unchanged on the day at $1295
  • US 10 year yield stands at 2.687

FX Flows/Orders:

  • Macro funds sold USD/CAD overnight as position covering continues
  • Dealers see bids scattered below 1.10 down to 1.0950, while on the topside there are stops above 1.1050
  • Talk of Japanese bids around 101.80-85 in solid size and large demand ahead of the 101.50 level
  • Exporter offers starting above 102.25 up to 102.50
  • EUR/USD bids at 1.3720/25; CTAs looking to sell a break of the 1.37 level
  • Topside, offers at 1.3780 and in better size at 1.3820
  • In GBP/USD, dealers see Asian demand around 1.6580
  • Short-term speculators have stops above 1.6660

Market Sentiment:

Emerging markets had a sharp recovery yesterday and the Euro, who was one of the biggest beneficiaries during the recent EM crisis, suffered. Adding to the bearish EUR sentiment are dropping yields in Euro Zone markets, driven by expectations of further ECB easing. A dealer at a major investment bank noted that he expects further EUR/USD supply today as traders position themselves for the German CPI release & the ECB meeting next week and amid corporate month-end demand for US dollars. 1.3706 is now the key level to watch to the downside. Banks also saw heavy EUR/AUD selling in the past few sessions, mainly from leveraged funds. The pair bounced just ahead of the 200 DMA at 1.4776 on profit-taking flows, but further losses are likely.

The British Pound rallied during yesterday’s London session after Retail Sales data exceeded market expectations and a test of the 1.6667 resistance level seems imminent. The focus will be on the UK GDP release at 09:30 GMT.

Japanese econ data had little impact on the Yen and USD/JPY is still caught in a tight range. Strong flows in AUD/JPY and NZD/JPY are benefiting the pair, while declining US yields are keeping gains limited. Further Yen weakness can be expected in April as Japanese institutional investors will very likely allocate fresh money offshore into the new fiscal year, making a USD/JPY breakout to the topside more likely. However, until the month-end flows are done we can expect further consolidation. Intraday, keep an eye on the 101.70/75 area for buy opportunities and sell rallies towards 102.50/60.

Commodity currencies – AUD, NZD, CAD – saw further gains overnight. A trader at one of the big banks said the broad macro picture does not justify further AUD gains, but flow dynamics remain the driving force at the moment, making further gains likely. Good intraday support lies at 0.9245 and 0.9215, while the next big resistance level on the charts lies around 0.9335.

The New Zealand Dollar hit a fresh high at 0.8695, a level we haven’t been at since July 2011. A test of 0.8842 seems increasingly likely with key support now at 0.8580 and 0.8520. A Swiss investment bank put out two trade recommendations to clients, short EUR/NZD and long NZD/JPY. The bank notes that both trending and momentum indicators across the daily, weekly and monthly charts are pointing lower in EUR/NZD, indicating further losses are likely. After the break beneath the 1.5920 level, little support seen until 1.5081. They recommend a new short on a close below 1.5921, targeting 1.51 with a 1.6250 stop loss. On NZD/JPY, the bank recommends a new long on a close above 88.00, with a 97.00 target and a stop at 86.00.

Good luck!

Upcoming Events:

  • 07:45 GMT – French GDP (0.3 % QoQ)
  • 07:45 GMT – French Consumer Spending (0.8 % MoM)
  • 09:00 GMT – Italian PPI (0.2 % MoM, -1.5 % YoY)
  • 09:30 GMT – UK GDP (0.7 % QoQ, 2.7 % YoY)
  • 09:30 GMT – UK Current Account (-14.0B)
  • 10:00 GMT – Euro Zone Consumer Confidence (-13.0)
  • 12:30 GMT – US Personal Spending (0.3 % MoM)
  • 12:30 GMT – US Core PCE Price Index (0.1 % MoM)
  • 13:00 GMT – German CPI (0.4 % MoM, 1.1 % YoY)
  • 13:55 GMT – US Michigan Consumer Sentiment (80.5)
  • 13:55 GMT – US Michigan Consumer Expectations (70.2)