FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)
USD
USDJPY recovered during the Asia session as liquidity conditions improved, but not before a new all-time low was reached at 76.36 (according to Bloomberg data). Japanese government officials also downplayed expectations that domestic insurers may be forced to repatriate assets to cover the cost of insurance payouts. EURUSD traded 1.3867-1.3968, USDJPY 76.36-80.28. Concern remains over the status of malfunctioning nuclear reactors in Japan, although the Nikkei-255 pared initial losses, and managed to close down only -1.4%. US economic data was mixed, with weaker housing starts and building permits and higher y/y headline and core PPI prints. But as has been the case the past few days, much of the data has been shrugged off as market participants await any new developments from Japan. CPI and initial jobless claims are due but any impact for the dollar could be overshadowed by continued risk aversion.
EUR
The euro weakened too during the flight to safe havens. Rate expectations for the ECB have slightly pared back since the tragedy in Japan and so ECB speakers are garnering more attention as market participants want to see how central banks might react. Bank of Finland Governor and ECB governing council member Liikanen suggested an April rate hike remains in the cards but the path thereafter remains uncertain. He says it is too early to say how the Japan situation will affect policy and deflects it to say future meetings will take into account what information/data is available at the time. He also said the bank’s stance had not changed much since the March 3 meeting.
Eurozone February headline CPI was as expected at +2.4% y/y and core was slightly below consensus at 1.0% y/y.
JPY
USDJPY set an all-time low of 76.36, according to Bloomberg. USDJPY collapsed in a matter of minutes on the back of continued headlines related to the nuclear reactors in Japan, which eventually triggered a cascade of stops.
GBP
UK February claimant count was better than expected at -10.2k. This is the biggest monthly drop since June 2010. The unemployment rate was unchanged at 4.5%. ILO jobless numbers rose +27,000 in 3 months to Jan, the rate of 8.0% is the highest rate since January-March 2010. Our analysts note that the data is unlikely to have a material impact on the MPC decision in April or May; events at the global stage are overshadowing most local data.
CHF
We expect no change at today’s SNB policy meeting, in line with the other 19 economists surveyed by Bloomberg. But we do look for some material adjustments to the SNB’s growth outlook and also think the latest CPI in February suggests risks are to the upside for the SNB’s near-term inflation outlook. The SNB adjusted growth forecasts higher at their September 2010 assessment but lowered their long-term inflation expectations at the same time. We don’t expect that to be the case for this decision but just be aware that there is precedent. And even if forecasts are raised, recent currency strength could cause the SNB to err on the more dovish side.
TECHNICAL OUTLOOK
EURUSD BULLISH Remains below 1.4013/36 resistance area, move above this would open way towards 1.4086. Initial support lies at 1.3855.
USDJPY BEARISH The pair defined an all time low at 76.36. Initial resistance is at 80.22, previous low.
GBPUSD BEARISH Focus is on support zone 1.5977/64; break of this would confirm the bear trend and open up 1.5845 next. Near-term resistance lies at 1.6200.
USDCHF BEARISH The pair cleared 0.9014 and 0.8951; next support at 0.8795. Initial resistance is at 0.9198.
AUDUSD BEARISH Break below 0.9804 key support has opened up the way towards 0.9625 and 0.9537. Initial resistance lies at 0.9963.
USDCAD BULLISH Initial resistance is at 0.9974, move above this would open 1.0011/58 area. Near-term support is at 0.9807.
EURCHF BEARISH Fall through 1.2727/06 support zone has exposed 1.2402, key low from Dec 30. Resistance at 1.2706, previous low.
EURGBP BULLISH Upside potential, the cross targets 0.8787 Fibonacci level ahead of 0.8818. Near-term support is at 0.8626.
EURJPY BEARISH Sudden sell-off today found support at 106.61 ahead of 105.80/44 support zone. Near-term resistance is at 111.31.
SCHEDULE
Please visit GCI’s Economic Calendar for a schedule of market news and events.
