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U.S. Dollar Trading (USD) Stocks enjoyed a fresh leg higher Tuesday but so far in Asian trade Wednesday we have seen some profit taking and the European market has started on the back foot. USD/JPY has led the market lower falling from Y109.30 to 108.60 and is a good gauge atm the watch the general risk sentiment of the markets as a whole. Some debate has emerged this week as to what the FED should do vs. what the FED will actually do in June and later this year with many eminent economists and analysts suggesting that US rates should be much higher.
The Euro (EUR) the downside has been slow going for the EUR/USD with support found at 1.1360 overnight and we seem content to orbit the 1.14 figure for the moment. The 2nd week of the month is always slow for economic data so the market will have to search for other reasons to move substantially in the coming days. If stocks go sideways then the EUR/USD will likely be muted. The Sterling (GBP) had a little more life than the Euro but was still contained with a small rally to 1.4470 capped overnight and with attention now turning to tomorrow Bank of Englang meeting i don't expect much movement today. The EUR/GBP is still struggling to fall and this may become the pair to watch for relative strength of the GBP in coming days. At the height of the Brexit concerns we trade near 0.8100 and any move above 0.8000 will signal fresh weakness of the GBP broadly.
The Japanese Yen (JPY) with a successful jawbone and recovery above Y109 the sellers have reemerged today and we are pressuring the downside in early European trade searching for support. A break back below Y108 would be very bearish and entice the sellers for another attempt to Y105 in my opinion. The bulls are hoping for more jawboning from the BOJ/MOF in coming days to help cement a "low" at 105.50 a few week.The Australian Dollar (AUD) Has stabilized in the 0.7300 for now and enjoyed some rebound on the crosses but the market is still pricing in 1-2 more RBA cuts this year and this will weigh as we come closer to each RBA meeting on the first Tuesday of each month. NZD is enjoying a better time with no new housing measures announced in the Financial stability report released today. This is interpreted to mean the RBNZ will not cut rates as the housing bubble in New Zealand will continue to grow. The AUD/NZD while now at very low levels near 1.08 will struggle to rebound whilst the it is viewed that the RBNZ will not cut rates.
Stocks Indices(DAX) Failed at 10100 a few times now and is currently searching for support just under 10000. The outlook is mixed at these levels but the failure to hold onto gains in recent sessions is likely to prompt a bigger downside test.US Stocks (DOW) Enjoyed 200 point gains on Tuesday but we have given up alot in the Asian session and early European session. Earning have not been great so far this season and more choppy sideways trade is likely. I still favor buying dips on the balance of risks moving forward.
Pairs to watch
NZD/USD alot of room on downside if it follows AUD and CAD lower
USD/JPY Y108 critical support for the next few days
Economic Data Ahead
UK March Manufacturing Production forecast at 0.4% vs. -1.1%
US Weekly Crude Oil Inventories forecast at 0.1m Build vs 2.8m Build previously
By Anthony Darvall (TonyD)