FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)
USD
With Japan on holiday, and the FOMC statement fully digested, the price action during the Asia session was relatively subdued. EURUSD traded 1.4773-1.4848, USDJPY 81.47-81.71. Earlier, US equities closed modestly positive and Treasury yields moved lower across the curve. Gold made no further gains and is trading at $1532.52 at the time of writing. US real GDP rose at a +1.8% annual rate in Q1, below consensus estimates. However, given Fed Chairman Bernanke’s warning that the number could be weak, the US dollar was not unduly affected. The deceleration mainly reflected a slowing of consumer spending growth and a drag from the government sector. In other data, jobless claims jumped, which probably reflected Easter distortions. Having said that, the downtrend in claims does appear to have paused for now. Chicago PMI and the University of Michigan confidence index are due but are not likely on their own to revive the dollar’s fortunes.
EUR
Sovereign CDS spreads in the Eurozone finally tightened and bond yields moved lower. Talks on the proposed program of external assistance for Portugal continue, but have not yet reached a conclusion. There were further headlines from Eurozone officials, denying a Greek debt restructuring.
ECB Governing Council member Mersch said the ECB will continue its gradual exit from its non-standard measures at an appropriate pace, and said the ECB never takes measures aimed at supporting banks in one particular country.
The flash estimate for Eurozone April CPI is due and is expected to remain in line with the March level at 2.7% y/y.
Germany’s seasonally adjusted jobless rate for April was unchanged at 7.1% (cons. 7.0%). Unemployment numbers fell 37k.
The Swiss KoF print is likely to remain broadly stable, dipping marginally to 2.12 from the last reading of 2.24 but at the moment the CHF is driven by external factors and we question whether current gains are sustainable.
CAD
Our analysts expect -0.1% m/m for GDP in February, versus consensus 0.0%. Even if growth does slip, this would only be the third monthly decline in the past 21 months. The BoC has recently upped its 2011 GDP forecast, which means a weak monthly print today could be shrugged off.
NZD
The NZD was briefly boosted by a larger than expected trade surplus, which came in at NZ$464 mn (consensus NZ$200 mn).
TECHNICAL OUTLOOK
EURGBP stalled at 0.8724/42.
EURUSD BULLISH Rise above 1.4905 would pave the way towards 1.5000 and 1.5038. Support lies at 1.4633.
USDJPY BEARISH Losses held at 81.27, move below this would expose 80.89/69 area. Initial resistance is at 82.79.
GBPUSD BULLISH Initial resistance is at 1.6747, yesterday’s reaction high; move above the level would expose 1.6878. Support is at 1.6432.
USDCHF BEARISH While resistance at 0.8893 holds, there is scope for weakness towards 0.8671/65 area.
AUDUSD BULLISH Momentum is positive; break of initial resistance at 1.1000 would expose 1.1017. Near-term support is at 1.0775.
USDCAD BEARISH Focus on 0.9455/46 support area, break of which would open 0.9400 next. Resistance lies at 0.9576.
EURCHF NEUTRAL Model has turned neutral; break of 1.2974 would favor upside, while a move below 1.2730 would signal continuation of the bear trend.
EURGBP BULLISH Stalled ahead of 0.8924/42 resistance area, break through this would open 0.9000 next. Support lies at 0.8847.
EURJPY BULLISH A break above 122.41 would clear the way for a bull run towards 123.33 key resistance. Support lies at 120.00.
SCHEDULE
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