FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)
USD
Dollar performance was mixed during the Asia session with losses incurred against the euro, while further gains were made versus the yen. EURUSD traded 1.3473-1.3528, USDJPY 83.20-83.56. AUDUSD was temporarily supported by China’s CPI print, which was more benign than consensus forecasts. An uneventful BoJ policy announcement had no currency impact. There were no major data releases in the US overnight, but today should be more eventful. Advance retail sales are due and the winter weather in January could make it a more volatile release. We are looking for +0.1% on the headline release vs. consensus of +0.5%, largely due to bad weather. A disappointing headline print could knock the dollar and Treasury yields lower. But our economists note that even if the data comes in around their lower estimate, their forecast is consistent with total real consumer spending (including services), staying largely unchanged on the month.
EUR
A regular monthly meeting of Eurozone finance ministers broke up as expected without any agreement on how Europe’s existing financial rescue mechanism might be enhanced over the coming weeks. However, Eurogroup president Juncker said agreement had been reached on the size of the ESM – the permanent mechanism that is due to take over in 2013. Juncker said the EU’s contribution to the ESM would ensure an effective EUR500 bn lending capacity, and said the IMF will make contributions on top of that. Juncker also said there could be an extra Eurogroup meeting on March 21, ahead of the end of month EU leaders summit.
The ECB revealed it had purchased no sovereign bonds under the Securities Markets Program by Tuesday of last week.
JPY
The BoJ kept the policy rate unchanged and continues to target a range of 0-0.1%. No changes were made to any of the asset purchase or lending facilities.
GBP
We expect another above-target CPI print of 4.00% y/y, in line with consensus, which could keep BoE rate hiking expectations elevated.
CHF
We raise our 3m EURCHF forecast to 1.35 to reflect that Swiss outperformance may be coming to an end as the global economy reflates and as the SNB continues to ease rates.
AUD
The RBA minutes from the Feb 1 meeting provided little in the way of additional insight into the policy board’s current thinking. The key message was that recent consumer caution and lower than expected CPI have convinced the RBA that it need be in no hurry to hike again. Our Australian economists continue to see the first 2011 policy rate hike in August/September.
TECHNICAL OUTLOOK
EURUSD 1.3428 support.
EURUSD NEUTRAL Move below 1.3428 would expose 1.3364. Initial resistance at 1.3621.
USDJPY BULLISH Resistance at 83.68 continues to hold; push above the level would expose 84.51. Support at 82.71.
GBPUSD BULLISH While support at 1.5922 holds, expect recovery towards 1.6138 and 1.6186.
USDCHF BULLISH Break through 0.9776/84 would expose 0.9852. Support is at 0.9575.
AUDUSD NEUTRAL Model is neutral; 1.0137 and 0.9961 mark the near-term directional triggers.
USDCAD BEARISH Support at 0.9832/20 zone holds; break through this would expose 0.9712. Near-term resistance at 0.9918.
EURCHF BULLISH Clearance of 1.3086 exposes 1.3015. Resistance at 1.3206.
EURGBP BEARISH Momentum is negative; eyes 0.8389/77 support zone. Near-term resistance is at 0.8462.
EURJPY BULLISH Rise above 113.44 would expose 114.01/94 resistance area. Support lies at 112.06.
SCHEDULE
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