FX Daily Planet: Sydney/Asia Open

FX Daily Planet: Sydney/Asia Open

Click here for the full Note and disclosures.

View for the day

With little economic data of note, it’s been an uneventful day for in the US session, and markets are generally trading within fairly tight ranges. US equities are flat in afternoon trading and there are few notable moves to speak of in FX as G-10 currencies are moving less than 0.3% for the most part. NOK remains today’s best currency, up by 0.5% vs. the USD. Vols have continued to soften in NY trading, down anywhere from 0.3-0.5vols in short maturities across the majors and vol curves moving steeper in concert.

The US session today featured the Chicago Fed index for January which was slightly stronger than expected and the Dallas Fed index for February which was weaker than expected, but neither appeared to have been significant market movers. With few policy developments expected on Greece beyond a possible bond issue and no data due in China, G-10 markets are most likely to be driven by the large amount of G-10 data releases this week The heavy data calendar kicks off tomorrow with UK mortgage lending, Euro area Ifo and BNB as well as house prices and consumer confidence in the US session.

Overnight news

USD: January Chicago Fed survey (index) was slightly stronger than expected at 0.2 (Cons: -0.2); February Dallas Fed survey (%) was weaker than expected at -0.1 (Cons: -10)

USD: Fed’s Yellen spoke on the US economy: the Fed is “attentive” to potential bubbles, but so far sees nothing; Fed will need to tighten before full employment is reached.

HUF: NBH leaves rates unchanged (JPM: 5.75, Cons: 5.75)

Israel: BOI leaves rates unchanged (JPM: 1.25, Cons: 1.25)

USD: Aggregate IMM longs in USD slightly declined to $7.6bn (from $7.7bn) as longs in CAD vs USD increased from flat to $2.3bn; meanwhile, EUR shorts continued to increase, marking a new record high at -$10.1bn. .

EUR: Greek central bank Governor Provopoulos said he’s confident the government will meet its “very ambitious” deficit-reduction golas and ward off any further credit agencies.

Today’s watchlist (all times GMT; +11hrs for Sydney, +9hrs for Tokyo, -5hrs for New York)

JPY: BoJ minutes for Jan. 25-26th meeting @23:50

Overnight price action

FX: G-10 currencies traded in tight ranges. NOK remains today’s strongest currency.

FX vol: Vols have continued to soften in NY trading, down anywhere from 0.3-0.5vols in short maturities across the majors and vol curves moving steeper in concert.

Commodities: oil is up slightly to just under $80barrel; gold is down about 0.8%.

Bonds: US yields down about 3bp in short maturities, and flat or up 1-2bp farther out the curve.

Equities: US equities are generally trading marginally lower to flat.

Technical View for the day

A lackluster start to the week with mixed price action as a near term consolidation develops following Friday’s reversals. Still, the short term themes remain intact and while additional consolidation can develop, the recent trends for the USD are expected to continue. In that regard, the recent breakout levels for the USD remain intact including the 1.3850 area for EUR/USD and 1.5850 zone for Cable, along with the 79.50/60 levels for the Dollar Index. Again, these levels should maintain the short term bullish bias for the USD. We continue to focus on USD/JPY as last week’s failure amid the 92.15/30 resistance zone suggests some near term pause is likely. Again, this area includes the April downtrendline and 200-day moving average in a repeat of the reversal from the January high particularly as US 10s and 2s reversed from key short term levels. However, it is important to note that last week’s 90.50 breakout area will maintain the more immediate upside bias now for an extension of this rally. Yesterday’s poor action in cross JPY suggests some additional near term consolidation can develop in line with the short term overbought setup and the test of key resistance levels including the 82.75/83.35 area for AUD/JPY The other important focus for the short term setup is EUR against commodity FX on the crosses. Again, we see an important juncture as the declines have entered critical medium term support levels particularly for EUR/AUD and EUR/CAD and suggest a short term pause is close.

ENDS

© Scoop Media