Dollar continues to trade mixed after weaker than expected data. Durable goods orders grew 1.8% in January, below expectation of 1.9%. Ex-transport orders dropped -0.2% versus expectation of 0.5% growth. Traders are staying cautious ahead of the highly anticipated address to Congress by US president Donald Trump tomorrow. Trump would likely provide details on dismantling the Affordable Care Act, or so-called Obamacare. However, market’s attention will be on other economic related issues. That include the long-awaited tax reform that boosted stocks to new records highs. Traders started to reposition late last week as seen in the divergence in major indices. Also the greenback pull backed back following sharp fall in yields. The greenback could be vulnerable to selloff if Trump fails to live up to expectations again.
Separately, Fed Chair Janet Yellen and Vice Chair Stanley Fischer will be speaking on Friday on the economic outlook. The market has priced in higher chance of a rate hike in March with the OIS implied probabilities rising to 47.8% from 46.3% previously, following comments from Philadelphia Fed’s Patrick Harker and Dallas Fed’s Robert Kaplan, both appeared to support a March hike. Comments from Yellen and Fischer later this week should give more hints on Fed’s normalization schedule.
Euro mildly higher as Macron closes gap with Le Pen
Euro strengthens mildly today on news that centrist French presidential candidate Emmanuel Macron opened up his lead over Republican Francois Fillon. Macron also managed to narrow the gap with rightist anti-Euro Marine Le Pen. Two polls published over the weekend showed that Macron has 25% support from French electorate going into April’s election, just two points behind Le Pen. Overall, analysts maintained their view that no candidate can get majority vote in first round of election. And Macron is favorite to beat Le Pen in and one-on-one run-off in second round. However, as Le Pen’s win would increase the risk of Frexit, Euro will remain sensitive to political news from France.
Eurozone confidence improved in January
Eurozone business climate rose to 0.82 in February, above expectation of 0.79. Economic confidence improved to 108.0 but missed expectation of 108.1. Industrial confidence rose to 1.3, above expectation of 1.0. Services confidence also rose to 13.8, above expectation of 13.3. Consumer confidence was finalized at -6.2. M3 money supply rose 4.9% yoy in January, slowed from 5.0% yoy. Lending to house holds grew 2.2% yoy, up from 2.0% yoy. Loans to businesses rose 2.3% yoy.
Sterling lower as Scotland worries resurface
Sterling is under broad based selling pressure today. Selloff in the Pound is seen as a reaction to news that Prime Minister May is preparing for Scotland to call for another independence referendum. And that would come as May triggers the Article 50 for Brexit negotiation with EU by the end of March. It’s reported that May could agree to the vote on condition that it happens after completing the Brexit process.
USD/JPY Mid-Day Outlook
Daily Pivots: (S1) 111.70; (P) 112.33; (R1) 112.72; More…
USD/JPY continues to stay in range of 111.58/114.94 and intraday bias remains neutral first. The corrective fall from 1118.65 could extend lower. But we’d still expect strong support from 38.2% retracement of 98.97 to 118.65 at 111.13 to contain downside and bring rebound. On the upside, above 114.94 resistance should confirm completion of pull back from 118.65. In such case, intraday bias will be turned back to the upside for retesting 118.65.
In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. The impulsive structure of the rise from 98.97 suggests that the correction is completed and larger up trend is resuming. Decisive break of 125.85 will confirm and target 61.8% projection of 75.56 to 125.85 from 98.97 at 130.04 and then 135.20 long term resistance. Rejection from 125.85 and below will extend the consolidation with another falling leg before up trend resumption.
Economic Indicators Update
|00:30||AUD||Company Operating Profit Q/Q Q4||20.10%||8.00%||1.00%||1.50%|
|09:00||EUR||Eurozone M3 Y/Y Jan||4.90%||4.80%||5.00%|
|10:00||EUR||Eurozone Business Climate Indicator Feb||0.82||0.79||0.77||0.76|
|10:00||EUR||Eurozone Economic Confidence Feb||108||108.1||107.9|
|10:00||EUR||Eurozone Industrial Confidence Feb||1.3||1||0.8|
|10:00||EUR||Eurozone Services Confidence Feb||13.8||13.3||12.9||12.8|
|10:00||EUR||Eurozone Consumer Confidence Feb F||-6.2||-6.2||-6.2|
|13:30||USD||Durable Goods Orders Jan P||1.80%||1.90%||-0.50%||-0.80%|
|13:30||USD||Durables Ex Transportation Jan P||-0.20%||0.50%||0.50%||-0.90%|
|15:00||USD||Pending Home Sales M/M Jan||0.90%||1.60%|