FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)
USD
The dollar made significant gains during the Asia session after February trade data out of China disappointed consensus expectations. Although Lunar New Year celebrations are likely the cause of the unexpected deficit, investors were in no mood to take chances, and the US dollar strengthened against all its G10 peers. Earlier the NZD experienced some weakness of its own when the RBNZ cut the policy rate by 50bp (only a 25bp cut had been expected by consensus). This triggered an immediate 50-pip selloff in NZDUSD, but it soon partially retraced. EURUSD traded 1.3865-1.3925, and USDJPY traded 82.58-82.88. Asian equities are also weaker, after the S&P 500 finished down -0.14%. Gold and brent crude were both tightly range-bound. Our analysts expect initial jobless claims to tick slightly higher to 370k, while still leaving the broader downtrend intact.
EUR
Newswires reported that a French government source said EU leaders will not discuss Greek debt restructuring at the upcoming summit on Friday.
Sovereign bond yields remain elevated, and while the ECB’s apparent determination to push towards policy normalization has supported the euro over the past week, sovereign risk concerns are clearly coming back to the forefront, capping euro upside.
CHF
The CPI print was stronger than consensus at 0.5% y/y. While the Swiss franc strengthened on the data, we doubt this stronger inflation print will be enough to shake the SNB out of its current stance. Relative central bank tightening expectations continue to favour EURCHF upside, supporting our long EURCHF trade recommendation.
AUD
The AUD got a small boost from a mixed February employment report which on balance slightly beat expectations. Although employment fell by -10.1k (cons. +20k), full-time jobs expanded by 47.6k. The unemployment rate was steady and in line with consensus at 5.0%.
NZD
The RBNZ cut the OCR by 50bp, taking the policy rate back to its crisis low of 2.5%. Governor Bollard noted that the recent earthquake has caused ‘immense disruption to business activity’, and that economic activity nationwide would be negatively impacted. The RBNZ expects GDP growth will be ‘quite weak’ in H1, but this will eventually give way to a “very large reconstruction program by 2012″. As far as policy guidance is concerned, Bollard added that the “current monetary policy accommodation” will need to be removed once the rebuilding phase materializes, although he was clear that “future monetary policy adjustments” will be guided by incoming data.
TECHNICAL OUTLOOK
EURJPY 114.19 support.
EURUSD BULLISH Rise through 1.3989 would open up 1.4036/86 area next. Support is defined at 1.3833.
USDJPY NEUTRAL Near-term resistance at 83.07, while support is at 82.21.
GBPUSD NEUTRAL Recovery through 1.6344 required for resumption of uptrend. On the downside, pullback through 1.6126 would expose 1.6072.
USDCHF BEARISH As long as resistance at 0.9392 holds, expect losses towards 0.9262/00 zone ahead of 0.8951 next.
AUDUSD NEUTRAL 1.0202 and 0.9944 mark the near-term directional triggers.
USDCAD BEARISH Currently holds support at 0.9668 ahead of 0.9600. Resistance is defined at 0.9776.
EURCHF BULLISH Support at 1.2788 holds, initial resistance at 1.3040 ahead of 1.3086.
EURGBP BULLISH Move above 0.8636 would open up 0.8654/72 area. Near-term support is at 0.8479.
EURJPY BULLISH As long as the cross maintains above 114.19, expect gains to target 116.00/65 and 118.07.
SCHEDULE
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