Markets continue to trade generally calmly for the moment. US equities turned mixed overnight with DJIA losing another -118.79 pts or -0.58% to close at 20404.49. S&P 500 dropped -4.02 pts or -0.17% to close at 2338.17. NASDAQ, however, gained 13.56 pts or 0.23% to close at 5863.03. Asian stocks are steady in tight range as Nikkei and HK HSI recover with slight gain. US treasury yield also stabilized with 10 year yield closing up 0.023 at 2.202. Gold continues to feel heavy ahead of 1300 handle and dips through 1280 handle briefly. The selloff in WTI Crude oil is more apparent as it reaches as low as 50.09, comparing to last week’s high at 53.76. In the currency markets, commodity currencies are trading generally higher. New Zealand dollar is given additional boost from inflation data. Japanese Yen, on the other hand, trades broadly lower with Dollar for today.

Boston Fed Rosengren: Balance sheet normalization won’t alter rate path

In US, Boston Fed President Eric Rosengren said that the process of the USD 4.5T balance sheet reduction "could begin relatively soon". And, that "should not significantly alter the FOMC’s continuing gradual normalization of short-term interest rates." He noted that "by initially retiring only a small percentage of maturing securities, and then very gradually shrinking the volume of the securities being reinvested, the tightening of short-term interest rates should not need to be much different than it would be in the absence of shrinking the balance sheet." Meanwhile, " if done appropriately, the exit from the current large balance sheet can serve as an important ‘playbook’ for future recovery periods should it prove necessary."

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Fed’s Beige Book: Modest to moderate expansion in all districts

Fed’s Beige Book economic report noted that activity increased across all twelve districts. And, the pace of expansions was "equally split between modest and moderate". Meanwhile, "the pickup was evident to varying degrees across economic sectors." Job markets tightened with "difficulty filling low-skilled positions" found in most districts. There were also increased demand for higher skilled labors. Inflation was modest only on balance.

European Commission: Two agencies will leave London after Brexit

European Commission spokesman Margaritis Schinas said that the European Medicines Agency and the European Banking Authority will leave London after Brexit. The two agencies employ more than 1000 staff in total. Schinas said that "the United Kingdom is leaving the European Union and it will have no say in the location of EU agencies." And relocating as "a matter for the negotiations will be the duty for the United Kingdom to facilitate the transfer of these agencies, helping to ease the practical and financial burden for the experts working there who will have to relocate to another city in the EU." Schinas also said yesterday that "the real political negotiations on article 50 with the United Kingdom will start after the elections foreseen for the 8th of June."

US House of Representatives Speaker Paul Ryan said that the US stood "ready to forge a new trade agreement with Great Britain as soon as possible so that we may further tap into the great potential between our two people." He urged that UK and and EU to "come together and strike a lasting agreement". And, "a strong UK-EU relationship is in all of our best interests".

Macron and Le Pen still leading in French president race

In France, all focuses are on the first round of presidential election on the coming Sunday. A closely watched Cevipof opinion poll published yesterday showed that centrist Emmanuel Macron and far-right Marine Le Pen are still leading the race. But both are losing momentum. On the other hand, conservative Francois Fillon and far-left Jean-Luc Melenchon are gaining momentum and are still in contention. First round support for Macron, Le Pen, Fillon and Melenchon are at 23.0%, 22.5%, 19.5% and 19.0% respectively. Another poll by BVA showed Macron at 24%, Le Pen at 23%, Fillon and Melenchon at 19% both. That will take Macron and Le Pen to the head-to head run-off in May and Macron is widely tipped to win.

On the data front…

New Zealand CPI rose 1.0% qoq in Q1, above expectation of 0.8% qoq. Australia NAB business confidence rose 1 pt to 6 in Q1. Japan trade surplus narrowed to JPY 0.17T in March. German PPI will be featured in European session. US will release jobless claims, Philly Fed survey and leading indicators later in the day.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7471; (P) 0.7516; (R1) 0.7542; More…

AUD/USD recovers mildly today but intraday bias remains on the downside for 0.7472 support. Firm break there will revive the case that whole rise from 0.7158 is completed at 0.7740. In that case, AUD/USD will target a test on 0.7158 key support level next. On the upside, above 0.7562 minor resistance will turn bias back to the upside for 0.7609 resistance. Break will target a test on 0.7748 high.

In the bigger picture, we’re still treating price actions from 0.6826 low as a correction. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seen to 55 month EMA (now at 0.8144) and above.

AUD/USD 4 Hours Chart

AUD/USD Daily Chart

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
22:45 NZD CPI Q/Q Q1 1.00% 0.80% 0.40%
23:50 JPY Trade Balance (JPY) Mar 0.17T 0.61T 0.68T 0.61T
1:30 AUD NAB Business Confidence Q1 6 5
6:00 EUR German PPI M/M Mar 0.20% 0.20%
6:00 EUR German PPI Y/Y Mar 3.10%
12:30 USD Initial Jobless Claims (APR 15) 241K 234K
12:30 USD Philly Fed Manufacturing Index Apr 25.6 32.8
14:00 EUR Eurozone Consumer Confidence Apr A -5 -5
14:00 USD Leading Indicators Mar 0.20% 0.60%
14:30 USD Natural Gas Storage 10B





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