Forex News and Events:
Yesterday's Greece issuance of €1.2bn worth of 26 and 52 week T-bills was generally hailed as a success, with the order book oversubscribed 7.67 times for the 26-week issue. But what one actually considers a success is variable at best, yet paying roughly 450bp above the German benchmark is hard to quality as a success. In addition, issuance was the very short end of the curve and the real test will be if investors are equally confident in the longer dated Greece paper. Slightly concerning to our EUR forecast is the fact that so far yields have stayed persistently elevated in spite of the EU/IMF package and Greece CDS prices downwards adjustment has come to an abrupt halt. The EURUSD was able to rally in the Asian session, but that had more to do with Singapore's MAS re-centering of the SGD NEER (and pressure on the USD) than a shift in sentiment. Moreover, the markets continue to develop valid concerns over the feasibility of the bailout plan. Yesterday, participants were focused on the parliamentary votes that might have to occur in many of the Eurozone nations before a wider EU wide vote. Today, it seems markets are analyzing the fiscal sustainability of a rescue plan. First is the concerned that around 5% is not particular beneficial for Greece in the longer term. Second the contribution by certain high deficit nations (Spain , Italy and Ireland ), would be a noticeable portion of overall GDP, and hinder efforts to meet stability program deficit targets. In addition, the German newspaper Handelsblatt reported that unidentified sources in the European Commission had said that the rescue package could be as much as 3x its current size. This would put the figure at roughly €90bn. The German public is already very unenthusiastic on the prospects of bailing out a fiscally irresponsible neighbor and this news will only further erode political support. Showing her political astute side, German Chancellor Merkel was quick to announce that the oversubscribed Greece auction was a sign that no EU sponsored rescue package was needed. Luckily for the EUR today, the market's attention will shift to incoming US economic data and a horde of speakers. A strong rebound in auto sales driven by dealer incentive should push headline retail sales m/m up to 1.1%. The CPI figures, at this point, are a non-issue. Core Inflation y/y is expected to drift lower, while headline CPI m/m is expected to rise slightly above zero. In the Asian session, Singapore's MAS was slightly more aggressive the market expected in re-centering the SGD NEER to the established level. The shift was effectively a 1.0% upward revaluation in anticipation of pre-emptive inflationary pressures. In addition, it changed its stance to one of modest and gradual appreciation. And on a final note, SNB's Vice-Chairman Thomas Jordan will be speaking in Zurich and markets will be highly tuned to any comments regarding the central banks FX interventionist policy.
|Today's Key Issues (time in GMT):|
08:00 SEK AMV Unemployment rate, %Mar
09:00 EUR Industrial production, % m/m (y/y wda)Feb 0.1 exp, 1.6 (1.1) prior
13:15 EUR ECB Board Member Stark speaks
13:30 USD CPI, % m/m (y/y) 0.1 (2.4) exp, 0.0 (2.1) prior
13:30 USD Core CPI, % m/m (y/y)Mar 0.1 (1.2) exp, 0.1 (1.3) prior
13:30 USD CPI index nsa Mar 216.741 prior
12:30 USD Mar retail sales/ex-autos, +1.2%/+0.6% m/m eyed; last +0.3%, +0.8%.
14:30 USD Cleveland Fed President Pianalto (FOMC voter) speaks
15:00 USD Business inventories, % m/m Feb 0.3 exp, 0 prior
15:00 USD Fed Chairman Bernanke testifies before Congress
18:00 USD Dallas Fed President Fisher (FOMC non-voter) speaks
18:30 CHF SNB vice-chairman Thomas Jordan speaks in Zurich
19:00 USD Fed releases Beige Book report
23:01 GBP Nationwide consumer confidence, index Mar 80 exp
|The Risk Today:|
EurUsd There has not been a great deal of volatility for EURUSD in the last few sessions which makes saying something new about the pair a somewhat tricky task. However, yesterday evening's dip down to 1.3546 has since been followed by a strong bound back above 1.3600 levels, and we still remain resolutely bullish until we get a compelling technical argument to abandon this bias. Looking at the daily chart, the double bottom formation we have been monitoring still seems valid, and measuring from the 25 March lows to the neckline (at 1.3590) the target can be expected to be around 1.3920. Resistance levels on the topside are Monday's highs 1.3692, then 1.3800 (50.0% fibonacci retracement level of 1.2457-1.5145), and 1.3850 pivot levels not seen since 4 February. First supports on the downside are 1.3579 (50-day moving average), then yesterday's lows of 1.3546; the back side of the former downtrend should also be a strong area of bids, coming in today at 1.3435.As a quick treat in addition to the daily chart on the previous page, here's a look at the hourly chart as I currently have it -and the potential bullish flag pattern that might come into play in the coming days. The downward sloping consolidation range currently has an upper bound at 1.3665, and lower bound of 1.3540; should the pair manage to break above the upper edge, we can expect targets for the flag around 1.4070 (but the precise target would depend on where the break out comes).
GbpUsd After the fantastically successful symmetrical triangle pattern we followed last week in GBPUSD, we now seem to be fortunate enough to be getting another one forming on the hourly chart. Too good to be true? Perhaps, but given the big profits banked on the last one it seems worth a punt, and since the break of the major downtrend back on 29 March, we have not been given any reason to doubt the bullish momentum. The width of this symmetrical triangle is a little over 150 pips, so if another upside break-out does occur, we can expect targets in the region of 1.5600. The too good to be true part seems to be the very decent resistance levels above to contend with first; namely Monday's 1.5485 highs, the upper edge of the 2-week uptrend at 1.5540, and 1.5580 (23 February highs) -so it seems fair to only ride the profits on this one for a 100 pips or so in case the rally falters in the face of the latter two levels. Obviously one risk with the symmetrical triangle is that the break may just as easily come on the downside, in which case we would be looking at targets around 1.5200; but good bids can be expected at 1.5320 (resistance-turned-support), the 50-day moving average currently seen at 1.5281, then the lower bound of the 2-week uptrend at 1.5150.
UsdJpy Yesterday's low of 92.57 seems to have been the low watermark in USDJPY's recent correction, and the 2-week downtrend we have been monitoring looks to have been broken this morning at 93.35. As discussed previously, we take this as our cue to add to longs and look for another test of 95.00 in the coming days. Above here, resistance levels are still the 93.77 pivot, last Monday's high of 94.82 and just beyond there the major 95.00 resistance. If we do threaten 94.80-95.00 once more, we would play it conservatively and take half our position out to wait for the break-out to occur. If it does, then there are clear skies above until 97.80 levels that have not been seen since 7 August 2009. In terms of supports, we remain cautious of any breaks back within the 2 -week downtrend, but see bids at yesterday's lows around 92.50, 92.15 major support, then the back side of the former 3-year downtrend at 91.90.
UsdChf The steady sell-off in USDCHF has continued today, but so far, the 1.0500 support has done a good job of containing the sell-off, and indeed eliciting a bounce to 1.0530 levels. Given the high expectations for today's US data and the potential for more intervention comments when the SNB's Jordan speaks later today, we see a high probability that the rebound in USDCHF may be due today, taking us back towards the upper part of our current range around 1.0750-1.0800. If that rebound does not come, then we may have to accept that the recent sell-off is not merely another natural oscillation in the current range, but perhaps part of a concerted downtrend -a possibility given greater weight by the bearish engulfing candlestick pattern seen on the daily chart. Next supports below 1.0500 are the major 1 April lows at 1.0434, and finally downtrend support seen at 1.0360. Looking to the topside, first resistance is expected at 1.0750 (coinciding with 25 March highs), then 1.0810 (5 March highs) before the major resistance at 1.0900 that has not been threatened since early March.
Resistance and Support:
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot|