Global Markets: 

  • Asian stock markets: Nikkei down 0.50 %, Shanghai Composite gained 0.80 %, Hang Seng rose 0.30 %, ASX dropped 0.65 %
  • Commodities: Gold at $1223 (+0.10 %), Silver at $17.78 (unch), Crude Oil at $91.57 (unch)
  • Rates: US 10 year yield at 2.54 

News & Data: 

  • New Zealand Trade Balance NZ$-472M, Expected: NZ$-1.27B, Previous: NZ$-692M
  • New Zealand Exports NZ$3.52B, Expected: NZ$3.15B, Previous: NZ$3.70B
  • New Zealand Imports NZ$3.99B, Expected: NZ$4.45B, Previous: NZ$4.39B
  • Australia CB Leading Index 0.5 %, Previous: 0.2 %
  • Japan Manufacturing PMI 51.7, Expected: 52.5, Previous: 52.4
  • Japan PM Abe: to conduct GPIF portfolio review as soon as possible, attaches great importance to GPIF reform
  • Abe: Watching the impact of the weak Yen on the local economy
  • Fed’s Kocherlakota: Fed has tools to keep inflation under control.  More worried about raising rates too quickly 

FX Overview: 

  • AUD – The AUD/USD rally after the solid Chinese PMI number failed to sustain momentum and the pair fell to fresh low in the NY session as the US Dollar was bid across the board. The 0.8830 support level held on the first test and AUD/USD is now back above 0.8860. However, it is unlikely we will see larger gains above 0.89 given the strong USD sentiment currently. Selling rallies remains the preferred strategy with 0.8920 and 0.8950 the key resistance levels to the topside. In the crosses, it is worth keeping an eye on the AUD/JPY as a break of the 96.00 would very likely trigger further position unwinding there and pave the way for a 94.50 test.
  • CAD – USD/CAD is slowly approaching the 1.11 level after weak Canadian retail sales data yesterday. Dealers report option-related supply ahead of the level, but a breakout seems imminent. To the downside, there are solid bids at 1.1020 and then towards 1.0980. Overall, leveraged names are still keen buyers and selling interest isn’t likely to intensify much until 1.12. The Canadian Dollar also remains offered in the cross pairs, with EUR/CAD up almost 200 pips since the Sunday open. The next big resistance level is 1.4395, which is the current monthly high.
  • EUR – EUR/USD briefly traded above 1.29 yesterday, but quickly retraced the move, heading back to 1.2830 eventually. The Euro remains resilient however, partly thanks to the EUR-positive cross flows. With little tier-1 data releases this week, trading both sides of the 1.28-1.2930 range seems the appropriate strategy. Asia reports good bids towards 1.28, while larger offers are resting between 1.2910 and 1.2920.
  • JPY – The comments from BoJ officials and now from the Prime Minister about the Yen weakness got the market worried and leveraged names were seen covering long positions again. It is not the direction of the USD/JPY that is worrying the government, but rather the rapidness of the move. While the overall trend should remain intact, a correction to 107.50 seems possible in the near-term.

 

 Upcoming Events: 

  • 08:00 GMT – German IFO Business Climate (105.7)
  • 08:00 GMT – German IFO Business Expectations (101.2)
  • 14:00 GMT – US New Home Sales (430k, 4.4 % MoM)
  • 17:00 GMT – Chicago Fed President Evans speaks