FX Daily Planet: Sydney/Asia Open

FX Daily Planet: Sydney/Asia Open

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View for the day

Mixed equity market performance is weighing on high beta and the USD is higher against the majors in afternoon trading. Equities failed to move significantly and are currently about flat in afternoon trading despite positive economic reports earlier in the day. In particular, the consumer confidence report from the Conference Board came in at 52.5, better than forecast and fully erasing last months weak number and confirming that the decline in February was likely seasonal. In addition, the labor market differential (jobs plentiful less jobs-hard-to-get) moved to -414 from -43.3, another potentially positive sign for this Friday’s labor market report.

Heading into month-end and quarter-end, fixing flows are likely to dominate trading activity in the run up to the payrolls report on Friday. USD selling is quite likely. US equities rallied in March (+6%), which leaves non-US investors under hedged on their US exposure. Accounts must therefore sell additional USD at month-end to rebalance hedges Tomorrow is a heavy data day globally, beginning with building approvals and retail sales in Australia, nominal wages and housing starts and construction orders in Japan, business confidence in New Zealand and unemployment data in the Eurozone. Later in the US session ADP employment, factory orders, Chicago PMI and earnings releases from Research in Motion, Rite-Aid and Dollar General are all due.

Overnight news

USD: Jan S&P/CS HPI (%oya) is -0.7 (JPM: -0.9, Cons: -0.6); Mar consumer confidence (index, sa) came in at 52.5 (JPM: 51.0, Cons: 51.0) and the labor market differential moved to -41.4 from -43.3 last month.

NOK: Norwegian retail sales are weaker than expected, falling 0.1% m/m.

GBP: Nationwide house prices are stronger than expected, rising 0.7% m/m. Q4 GDP revised slightly higher to +0.4%q/q.

JPY: Feb overall household spending at -0.5%oya vs 1.5% consensus; Feb unemployment rate and jot-to-applicant ratio in line with expectation at 4.9% and 0.47; Feb IP preliminary at -0.9% vs -0.5%.

JPY: Finance Minister Kan, who travels to China on April 3rd, said “(CNY) is a very sensitive issue for China and I’m well aware of the significance of the topic”, adding that “I would like to have a positive discussion”.

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

USD: SAIC releases 1Q10 earnings @Aft-Mkt

AUD: Building approvals (%m/m, sa) for Feb (JPM: 1.5, Cons: 2.1) @ 00:30; Retail sales (%m/m, sa) for Feb (JPM: 0.2, Cons: 0.3); Pvt sector credit (%m/m, sa) for Feb (JPM:0.2, Cons: 0.4) @ 00:30; RBA Debputy Governor Debelle speaks @ 02:00

JPY: Mar PMI manufacturing (index, sa) @23:15 (JPM: 53.0); Nominal wages (%oya) for Feb (JPM: -0.3, Cons: -0.1) @ 01:30; Housing starts for March (%oya) (Cons: 0.6, JPM: -1.0); Shoko Chukin small firm survey (DI) for Mar (JPM:45); Construction orders (%oya) for Feb @ 05:00

NZD: NBNZ business confidence (index) for Mar (JPM: 34) @ 02:00

EUR: Unemployment rate (%) for Feb (Cons: 10) @ 09:00; CPI estimate (%oya) for Mar (Cons: 1.1) @ 09:00; ECB’s Bini Smaghi to speak @ 17:30

CHF: KoF Leading indicator (JPM: 1.9, Cons: 1.9) @ 10:30

PLN: NBP rate announcement for Mar (JPM: 3.5, Cons; 3.5)

USD: @ Bef-Mkt Dollar General releases earnings Q310 (JPM: 0.34, Cons: 0.425); @ Bef-Mkt Rite-Aid releases earnings Q410 (JPM: -0.220,, Cons: -0.194); ADP employment (000’s change) for Mar (Cons: 40) @ 12:15; Chicago PMI (index) or Mar (Cons: 61.7); Factory orders (%m/m, sa) for Feb (JPM: 0.4, Cons: 0.5) ; Research in Motion releases earnings Q410 (JPM: 1.290, Cons; 1.274); Atlanta Fed president Lockhart speaks on Prospects for Sustained Recovery and Employment Gains @ 16:30; Fed’s Duke speaks on “Restoring Credit to Communities” @ 16:30

Overnight price action

FX: The USD is regaining ground against the majors for the most part

FX vol: vols are lower in shorter maturities.

Commodities: Gold is broadly unchanged whilst oil trades nearly 1% lower.

Bonds: Yields are about flat across the curve.

Equities: US equities are about flat.

Technical View for the day

The USD shifted higher yesterday reversing course after approaching the next line of key support levels. The short term bias can still allow for additional consolidation, but we still view this retracement as a correction within the medium term USD bull trend particularly as the main support levels continue to hold. Note the bullish reversal for the DXY, as well as the bearish outside day down for EUR/USD imply additional follow-through is likely to develop which is in line with the impulsive nature of yesterday’s USD strength. Note that this also follows the approach of the key 1.3570 resistance area for EUR/USD and the 81.00/10 zone for the DXY. As such, we continue to hold EUR/USD short positions. The bullish setup for USD/JPY remains intact following last week’s breakout, and while the action has stalled near the 93.00 area, the overall upside risks remain intact as near term support levels are so far holding. In turn, a closer test, if not break of the 93.79 January high remains likely. GBP bucked the trend yesterday with the bounce taking Cable into the key January trendline resistance near 1.5145. The action in the crosses suggests an important test as well with the focus on EUR/GBP as the decline is quickly approaching key support in the .8870/.8840 zone (includes the 200-day moving average). Note that AUD/USD approached the key .9235/55 resistance area yesterday before reversing. Again, we sense some additional consolidation is likely to develop below this area and above the key .9000/.8975 support area. Still, the overall upside risks remain intact given the corrective pullback from the mid-March high and the sharp reversal from last week’s low while the short term momentum studies have worked off the overbought setup.

ENDS

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