Trading news

AUD higher amid hawkish remark from Governor Stevens, Japan Manufacturing PMI shrinks

- Reiterated confidence in the Aussie economy may further strenghten AUD/USD above 0.76 although we believe that the rally has limited legs given the absence of significant news from both sides of the Pacific
- We maintain our negative view on USD/CAD as hopes for a Fed April rate hike fade away, while further recovery in oil prices appears increasingly likely. The next key support can be found at 1.2832 
- EUR/CHF was also trading sideways with a downside support to be found at 1.0810, while on the upside a resistance lies at 1.1023
- Japan’s declining new export orders are largely responsible for Japan’s manufacturing weakness and this should continue as the global economy is clearly slowing down
- In our opinion Japanese inflation will never reach the BoJ target of 2%
- We are bearish on the USDJPY and believe that the safe haven effect is likely to increase despite massive overflows of money from the BoJ
 
The Australian dollar was buoyed in overnight trading amid optimistic remarks from RBA Governor Stevens delivered during the ASIC annual forum. He reiterated his confidence in the Aussie economy, underlining the strength of the country’s macroeconomic framework, “which could, if needed, respond as appropriate to significant negative events”. He also added that the Aussie economy “is adjusting quite well in the circumstances”, even though it is “still a work in progress.” AUD/USD erased yesterday’s losses and returned above 0.76. However, we believe that the rally has limited legs given the absence of significant news from both sides of the Pacific. Australian equities were off 0.32% as Asian regional markets exhibited mixed returns.
 
USD/JPY traded sideways during most of the session in response to the release of mixed data. Japan’s March manufacturing PMI came in on the soft side, printing at 49.1 versus 50.5 expected and compared to 50.1 in February. Separately, the all industry index rose 2% m/m in January, beating median forecasts of 1.9% and previous reading of -0.9%. USD/JPY is currently testing the resistance lying at 112.16 (previous support from March 1st). However, given the dovish tone of the last FOMC statement, we believe that the odds of a dollar rally are pretty low.
 
***Yann Quelenn, market analyst: “Japan Manufacturing PMI shrinks: Difficulties continue for Japan as the preliminary data for the Nikkei Japan PMI Manufacturing fell to 49.1 for March from 50.1 a month earlier. It is now below the 50-point mark which separates contraction from expansion. Manufacturing activity has not shrunk in almost a year. New export orders, having declined strongly to 45.9 from 49.0, are largely responsible for Japan’s manufacturing weakness and this should continue as the global economy is clearly slowing down. In particular global demand is heading south and this is increasing downside pressures on consumer spending and as a result on inflation which in our opinion will never reach the BoJ target of 2%.
 
The willingness of the BOJ to drive inflation higher is irrelevant as the global environment will prevent any monetary policy from being effective. Japan is capable of increasing consumer spending but if its exports keep on falling, the overall results will not have the desired effect. Japan’s strength is that as they control their central bank, and can print as much money as they need and underpin the equities bubble as well as create ‘superficial’ growth from scratch. We are bearish on the USDJPY and believe that the safe haven effect is likely to increase despite massive overflows of money from the BoJ. Confidence is still on the central bank’s side even if the debt is massive and continues to mount.”***
 
The West Texas Intermediate rose sharply in Asia after PDVSA (Venezuela’s state-owned oil and natural gas company) said it had bought US crude from PetroChina for delivery in early April. The news came against the backdrop of rumours that the supply glut is overestimated. The WTI jumped sharply and traded above $41.60 a barrel, higher than the Brent crude. The US crude gauge has risen almost 60% since mid-February when it traded at around $26 a barrel. Should the rally continue, the WTI will face a first key resistance at $43.46 (high from November 24th).
 
The WTI’s bounce gave a fresh boost to the Canadian dollar, which surged 0.40% against the greenback, before partially erasing gains in the early European session. USD/CAD is currently trading at around 1.3080. We maintain our negative view on the pair as hopes for a Fed April rate hike fade away, while a further recovery in oil prices appears increasingly likely. The next key support can be found at 1.2832 (low from October 16th).
 
USD/CHF was treading water in Asia as traders had no real motivation to buy the US dollar. The pair moved between 0.9690 and 0.9710 throughout the entire Asian session. EUR/CHF also traded sideways and held ground above the 1.0895. On the downside, a support can be found at 1.0810 (low from February 29th), while on the upside a resistance lies at 1.1023.
 
Today traders will be watching the trade balance from Switzerland; retail sales from Denmark; PMIs from France, Germany and the euro zone; IFO and ZEW surveys from Germany; CPI, retail price index, RPI and PPI from the UK; Markit manufacturing PMI and Richmond Fed manufacturing index from the US.

Tuesday, 22 Mar, 2016 / 9:50

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Source : http://www.swissquote-fx.com/en/research-and-analysis/

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