FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)
USD
The yen spiked half a big figure lower after a strong earthquake hit Japan, and risk currencies in genera fell. EURUSD traded 1.3775-1.3832, USDJPY 82.78-83.30. One Thursday the S& P 500 finished 1.9% weaker amid a rise in risk aversion, and Treasury yields moved lower across the curve. Initial jobless claims surprised to the upside at 397k. The rise appears to reflect technical distortions rather than genuine deterioration and, despite the latest data, claims continue to show a downtrend since January. Also, the trade deficit dropped more than expected to $46.3bn.
Retail sales and the University of Michigan confidence index are due Friday. Further improvement here would keep us constructive on our 3m view of increasing dollar strength.
EUR
An EU summit is scheduled for today and expectations for any definite actions to emerge from it are low. But that may not derail the euro in the near-term as officials still have plenty of meetings to fall back on and rising sovereign bond yields could give the impression that officials will make some difficult decisions amid a worsening situation. Any resolution on the pressing issues will likely have to wait for the Eurogroup/Ecofin meetings on March 14-15 and then the next EU summit on March 24-25. The European Commission website indicates a press conference could come around 2000GMT.
Moody’s downgraded Spain by one notch to AA2 with a negative outlook. The ratings agency cited concerns over the eventual cost of bank restructuring and structural issue over broader government finances. The move brings Moody’s into line with S&P, but below Fitch. The Bank of Spain said 12 Spanish lenders need to raise EUR 15.2bn to meet new minimum capital levels otherwise they could face partial nationalization. The lenders have until September to meet these new core capital requirements of either 8% or 10%, depending if the lender is listed or not.
GBP
The BoE kept its policy rate and asset purchase target unchanged, as expected. Sterling weakened immediately after the decision. We now turn our attention to the MPC minutes due on March 23. Today, BoE Governor King is due to speak on the stability of the international monetary and financial system..
CAD
The trade surplus sharply narrowed from a revised down C$1.7bn to C$0.1bn, and added to downward pressure on the Canadian dollar during the session’s decidedly risk-off tone.
For the labour data, we expect a more modest net increase of +5k for employment vs. consensus +25k and we are looking for an unchanged unemployment rate of 7.8% vs. consensus of a dip to 7.7%. While disappointing job data could weaken the CAD, it would not deter us from continuing to look at Canadian dollar relative value longs versus AUD or NZD.
TECHNICAL OUTLOOK
EURJPY constructive above 114.19.
EURUSD BULLISH While the pair holds above 1.3744/32, expect recovery towards 1.3925 and 1.4036 next.
USDJPY BULLISH Break of 83.07 has exposed resistance at 83.54. Near-term support defined at 82.21.
GBPUSD NEUTRAL Move below 1.6031 and 1.5964 thereafter would trigger negative tone. Initial resistance is defined at 1.6213.
USDCHF BEARISH Focus is on 0.9236/00 support zone, move below this would expose 0.8951. Initial resistance is at 0.9392 ahead of 0.9421.
AUDUSD BEARISH Look for a break below 0.9944 to trigger bear trend. Near-term resistance is at 1.0118.
USDCAD BEARISH Focus is on initial support 0.9668; break of this would expose 0.9600. Resistance is defined at 0.9776 ahead of 0.9800.
EURCHF BEARISH The cross targets 1.2788 with scope for 1.2706 next. On the upside, resistance holds at 1.3040.
EURGBP BULLISH Break of 0.8636 is required to confirm the uptrend and pave the way towards 0.8654/72 area. Near-term support is at 0.8534.
EURJPY BULLISH Remains constructive above 114.19, resistance is at 116.00/65 area.
SCHEDULE
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