On Monday, the German Ifo business climate came in on the downside, printing at 106.6 in April, versus 107.1 median forecast and below previous month’s reading of 106.7 as the slowdown in the global economy weighed on the German mood. However, the index seems to have stabilised somewhat since February when it printed at the lowest level since December 2014. With the exception of the New Zealand dollar, most G10 currencies traded sideways during the Asian session. After gaining 0.50% on Monday amid disappointing German Ifo, EUR/USD moved range bound between 1.1257 and 1.1276 in Tokyo. On the downside, a support can be found at 1.1217 (low from April 24th), while on the upside, the nearest resistance lies at 1.1465 (high from April 12th). Over the next couple of days, the pair should continue to trade sideways with traders reluctant to build large positions ahead of Wednesday’s FOMC meeting.
In spite of rising US front-end yields, USD/JPY has continued to trade with a downward bias since Monday as traders become increasingly convinced that the BoJ will stand idle on Thursday, while the uncertainty is relatively high across the Pacific. Indeed, even though there is no doubt that the Fed will leave federal fund rates unchanged, the accompanying statement will be key in assessing the likelihood of a June rate hike. USD/JPY hit 110.78 in Tokyo, down from 111.30 in the early Asian session.
Overnight, the New Zealand dollar rose sharply with NZD/USD climbing 0.29% to 0.6880 as the Reserve Bank of New Zealand is expected to leave the official cash rate unchanged at 2.25% at its meeting on Thursday. Overall, the Kiwi continued to consolidate at around 0.6850-0.6880 after free falling roughly 3% percent over the previous week as the commodity rally lost steam. On the technical side, the pair is currently testing the bottom of its multi-month uptrend channel as it returned below the strong resistance at 0.98 (previous highs and psychological levels). In the absence of renewed upward pressure on commodity prices, we see no reason to expect further NZD appreciation.
On the equity side, Asian regional indices are mixed this morning as Japanese shares headed lower with the Nikkei and Topix down 0.49% and 0.72%, while in mainland China the Shanghai and Shenzhen Composites were up 0.37% and 0.89% respectively. In Hong Kong, the Hang Seng fell 0.44%, while in South Korea the Kospi index blinked green on the screen, up 0.25% as the first quarter’s preliminary estimate showed the South Korean economy grew 2.7%y/y, matching median forecast. In Europe, equity futures are trading in positive territory, suggesting a higher open.
Today traders will be watching PPI from Sweden; durable goods orders, S&P/CaseSchiller index; Markit PMIs, consumer confidence index ad Richmond Fed manufacturing index from the US.