- The Australian economy seems to have weathered relatively well the financial market volatility and escalation in global economic concerns. This is due to the rally in most commodity prices and fading expectations for further rate hikes by the Federal Reserve this year
- AUD/USD, on the medium-term, the technical structure favours a bullish bias, however the pair will need a fresh boost to break the strong resistance that lies between 0.7850 and 0.80
- EUR/USD may stay longer within the 1.14-1.1420 range as traders await the next batch of economic data from the US tomorrow. The closest resistance can be found at 1.1454
- USD/JPY may have bottomed out at around 108 as speculators failed to push the yen higher on fears that the BoJ would move to weaken the JPY. On the downside, a support lies at 107.63, while on the upside a resistance can be found at 109.10
With the exception of the Japanese yen, the Aussie and the Kiwi, which all moved substantially, FX markets traded sideways during the Asian session in response to an extremely light economic calendar. In Asia, the Australian dollar rose for a third straight day amid a strong improvement in business conditions and confidence (NAB report). According to the National Australian Bank, the business condition gauge jumped to 12 in March from 8 in the previous month, the highest level since October 2014, as all three components (trading, profits and employment) improved during the month. Similarly, business confidence surged to 6 in March from 3 in February, suggesting that the recovery in non-mining sectors is still on track. Overall, the Aussie economy seems to have weathered relatively well the financial market volatility and escalation in global economic concerns. This is due to the rally in most commodity prices and fading expectations for further rate hikes by the Federal Reserve this year. AUD/USD hit 0.7646 in Sydney but was unable to break the 0.7637 resistance (high from April 7th) to the upside. On the downside, the main support can be found at 0.7477 (low from March 24th). On the medium-term, the technical structure favours a bullish bias, however the pair will need a fresh boost to break the strong resistance that lies between 0.7850 and 0.80.
Peter Rosenstreich, head of market strategy, Swissquote is focused on Fed speakers: "Looks like all the hype around rising volatility in the past weeks has settled down as we anticipated. US corporate earnings releases have been largely uneventful, keeping S&P 500 in its tight 40 point range, and allowing VIX index to pause around 16.26 levels. While the US yield curve has further flattened, US 2-year yields are struggling to stay above 0.71%. USD was marginally weaker against G10 (exception is JPY due to Japan FinMin Aso comments and speculation over FX intervention) EM currencies ahead of a heavy Fed speaker line-up today. As we mentioned yesterday the bearishness surrounding USD (highlighted by IMM data indicated the rapid liquidation of USD longs) based on skepticism on the FOMC interest rate path could reverse in the short term due to hawkish communication. FX markets are increasingly sensitive to fed comments and this afternoon brings known hawks Philadelphia Fed President Harker, San Francisco Fed President Williams and Richmond Fed President Lacker. Fed Harker is a new member for the FOMC this year that has steadily shifted towards the hawkish end of the spectrum. Harker's comments could shed some light on the migration of balanced members towards a hawkish stance and influence on the fed’s March communications. Fed Lacker is probably the most hawkish FOMC member and is likely to take direct aim at Chair Yellen’s leadership in a speech entitled “Economic Leadership in an Uncertain World”. Lacker has been critical of Yellen’s control of the FOMC and is expected to develop this view today. Further confusion and divergent views within the Fed will only increase the market’s uncertainty. A steady stream of hawkish headlines should drive temporary USD bullishness. However, without interest rate support it is unlikely that any strength will last. EURUSD upside should be contained by 1.1450 resistance with a bearish target located at 1.1327 support.” ---
EUR/USD moved sideways in Tokyo and stayed within the 1.14-1.1420 range as traders await the next batch of economic data from the US. March’s retail sale, PPI and the Beige Book are due tomorrow. We will therefore get some action then - at least. From a technical standpoint, the closest resistance can be found at 1.1454 (high from April 7th). On the downside a support area lies between 1.1310 and 1.1350 (multi lows).
In the equity market, Asian regional markets were mostly trading in positive territory with the exception of mainland Chinese markets. The Shanghai and Shenzhen Composite were down 0.84% and 1.60%. In Hong Kong the Hang Seng edged up 0.27%. In Japan, equities reversed yesterday’s losses with the Nikkei and Topix indices surging 1.13% and 1.53% respectively as USD/JPY bounced back.
USD/JPY seemed to have bottomed out at around 108 as speculators failed to push the yen higher on fears that the BoJ would move to weaken the JPY. On the downside, a support lies at 107.63, while on the upside a resistance can be found at 109.10 (high from April 8th).
Today traders will be watching the inflation report from Sweden and the UK; RPI, PPI and ONS house prices from the UK; CPI and industrial production from India; retail sales from Brazil; monthly budget statement; speeches from Fed’s Lacker, Williams and Harker from the US.