RBA Harper: Still plenty of excess capacity in the economy

    RBA board member Ian Harper said there’s “still plenty of excess capacity in the economy”. The tendency for monetary stimulus to product an asset-price bubble is “way off where we’re presently headed”. Policymakers indeed wanted asset prices to be increasing to speed up investment. Harper added, “the bank can continue to buy bonds for as long as it likes, there’s no obstacle to that.”

    “The recent changes that the Fed made, well that was to bring them up to where we are basically,” he said. “We’ve never religiously or rigidly interpreted the timeframe over which we would seek the inflation rate to be within the target band.”

    Fed Powell: Far from a strong labor market despite surprising recovery

      In a relatively dovish speech, Fed Chair Jerome Powell said, “despite the surprising speed of recovery early on, we are still very far from a strong labor market whose benefits are broadly shared.” And, “even those grim statistics understate the decline in labor market conditions for the most economically vulnerable Americans.”

      “Given the number of people who have lost their jobs and the likelihood that some will struggle to find work in the post-pandemic economy, achieving and sustaining maximum employment will require more than supportive monetary policy,” he added. “It will require a society-wide commitment, with contributions from across government and the private sector.”

      Full speech here.

      US oil inventories dropped -6.6m barrels, WTI rally lost momentum but further rise still in favor

        US commercial crude oil inventories dropped -6.6m barrels in the week ending February 5, smaller than expectation of -0.9m barrels. At 469.0m barrels, oil inventories are just about 2% above the five year average for this time of year. Gasoline inventories rose 4.3m barrels. Distillate inventories dropped -1.7m barrels. Propane/propylene inventories dropped -4.5m barrels. Commercial petroleum inventories dropped -11.2m barrels.

        WTI oil price rally continued this week and met 100% projection of 47.24 to 53.92 from 51.58 at 58.26 already. Though, upside momentum diminished mildly since then, as seen in 4 hour MACD. For now, further rise is still expected as long as 57.18 minor support holds. Sustained break of 58.26 will confirm underlying momentum. Some upside acceleration could then be seen to 161.8% projection at 62.38. However, break of 57.18 will indicate short term topping and bring deeper pull back.

        ECB Panetta: Innovations not well designed can become a source of financial disruption

          ECB Executive Board member Fabio Panetta said in a speech that “a digital euro represents a natural evolution in response to this transformation – not only to underpin efficiency and innovation, but also to preserve the role of the central bank in offering safe means of payment”.

          A key goal of digital euro should “should therefore be to preserve a fine balance between sovereign and private money to ensure payments remain stable and efficient.” However, “if innovations in central bank money are not well designed, they can become a source of financial disruption.”

          Panetta added that ECB will publish the consultation replies on digital euro in the spring. That would provided the input to the decision on, towards the middle of the year, about whether or not to formally launch a digital euro preparation project.

          Full speech here.

          US CPI unchanged at 1.4% yoy in Jan, core CPI slowed to 1.4% yoy

            US CPI rose 0.3% mom in January, matched expectations. Core CPI rose 0.0% mom, below expectation of 0.2% mom. Annually, headline CPI was unchanged at 1.4% yoy, below expectation of 1.5% yoy. Core CPI slowed to 1.4% yoy, down from 1.6% yoy, missed expectation of 1.6% yoy.

            Full release here.

            GBP/USD accelerates up as 10-yr Gilt yield approaches 0.5 psychological level

              Sterling’s rally gains strong upside momentum again today, with the support of rise in UK treasury yields. 10-year Gilt yield is currently up 0.016% at 0.48%. It’s now pressing an important psychological zone around 0.50%., which was the floor before the pandemic.

              4 hour MACD in GBP/USD suggests that the rally in accelerating. Focus is now on 61.8% projection of 1.1409 to 1.3482 from 1.2675 at 1.3956. Decisive break there will bring further rally to 1.4376 (2018 high). But to do that, we’d probably need 10-year Gilt yield to break through 0.50% decisively. We’ll keep an eye on both developments.

              France industrial output dropped -0.8% mom in Dec, manufacturing output down -1.7% mom

                France industrial output dropped -0.8% mom in December, second straight month of decline. Manufacturing output dropped -1.7% mom, first contraction since April 2020. Compared to prepandemic levels, industrial output were down -4.9% comparing to February, manufacturing output down -5.7%.

                Full release here.

                BoJ Nakamura: Prolonged holding of assets could affect market functions

                  BoJ board member Toyoaki Nakamura said the March policy review will seek ways to make the easing framework more “effective” and “sustainable”. The review will also looking into whether the asset purchases and various tools are “exerting intended effects”.

                  Nakamura maintained that ETF purchases “will remain a necessary tool” to eradicate the deflationary mindset”. But “this is not just about ETFs but by buying huge amounts of assets and holding onto them for a prolonged period, the BOJ could affect market functions. That is something we need to be mindful of”.

                  Australia Westpac consumer sentiment rose to 1.9%, remains extraordinarily confident

                    Australia Westpac consumer sentiment rose 1.9% to 109.1 in February. The index hit a 10-year high at 112.0 in December, then retreated to 107.0 in January. February’s bound-back “signals that consumer remains extraordinarily confident”, noted Westpac.

                    Westpac said RBA’s move to extend the QE program by AUD 100B in February, not in March, “emphasises the Board’s commitment to providing as much support as necessary to assist the economy in closing the output gap that has opened up during the pandemic.”

                    It expects further extensions of QE after RBA’s next program completes in October.

                    Full release here.

                    RBNZ Orr: Many Covid-19 risks are still with us

                      RBNZ Governor Adrian Orr told a parliamentary committee today that “many covid-19 related economic risks are still with us”. “Although recovery is now underway, it will be a lengthy and difficult process but we are well prepared for this challenge and we stand ready to provide stability and support,” he added.

                      The central announced yesterday to tighten up the Loan-to-Value Ratio (LVR) restriction again to reduce the financial stability risk caused by high-risk mortgage lending. Orr said the central bank was trying to “head off excesses in housing leverage” with the move.

                      AUD/CAD ready to resume up trend as Aussie outperforms

                        Australian Dollar appears to be outperforming other major currencies in this week’s risk-on rally. In particular, AUD/CAD’s strong rebound from affirms near term bullishness Immediate focus is now on 0.9853 minor resistance. Firm break there should confirm that the correction from 0.9898 has completed at 0.9713. Further rally should be seen to retest 0.9898 next.

                        Decisive break of 0.9898 will resume larger up trend form 0.8058. Next near term target is 61.8% projection of 0.9247 to 0.9898 from 0.9713 at 1.0115.

                        Italian yield drops to record low as Draghi wins backing from politicians and investors

                          Italy 10-year yield dropped to record low of 0.501% in early trading and remains low for the moment. Former ECB President Mario Draghi seemed to be winning confidence from a wide spectrum of political parties, as well as investors, for forming a new government.

                          Draghi will continue to meet with parties to get their backing. Yesterday, he reiterated that a common Euro-are budget will be one of his key priorities. He’s seen as someone who’s “pro-EU” and “pro-reform” at the same time, who could prompt a paradigm shift for the country.

                          Bitcoin’s powerful rally continues, 50k might post temporary resistance

                            Bitcoin’s powerful rally continues today and reaches as high as 48276 so far. 50k handle is the next target and overbought condition might limit upside on first attempt. Break of 45600 minor support will indicate temporary topping and bring consolidation first.

                            But even in case of pull back, downside should be contained by 41964 resistance turned support to bring rally resumption. Current up trend is expected to target 100% projection of 17629 to 41964 from 29283 at 53618 next.

                            DOW finally made new record high, targets 32932 next

                              DOW finally caught up with other major US indices and closed at record high overnight, up 0.76% at 31385.76. The solid support from 55 day EMA affirmed near term bullishness too. Further rise is now expected as long as 29856.30 support holds. Next target is 61.8% projection of 18213.65 to 29199.35 from 26143.77 at 32932.93.

                              NASDAQ has been even stronger, considering that it’s kept comfortably above rising 55 day EMA all the way in the past few months. It’s on track to 61.8% projection of 6631.42 to 12074.06 from 10822.57 at 14186.12.

                              Australia NAB business confidence rose to 10, but conditions dropped to 7

                                Australia NAB business confidence rose from 5 to 10 in January. However, business conditions dropped from 16 to 7. Looking at some details, trading conditions dropped from 22 to 11. Profitability condition dropped from 13 to 9. Employment condition also dropped from 10 to 3.

                                “Business started the year on a more optimistic note, even as conditions eased from the strength we saw in December. Importantly, employment conditions remain in positive territory – so overall businesses are still expanding their workforce,” said Alan Oster, NAB Group Chief Economist. “The decline in conditions was broad-based across industries, except for a small improvement in recreation & personal services, which continues to make small gains as restrictions ease.”

                                Full release here.

                                Fed Mester: Policy to be accommodative for a very long time

                                  Cleveland Fed President Loretta Mester said yesterday monetary policy is “going to be accommodative for a very long time because the economy just needs it to get back on its feet.” Recovery is going to pick up momentum in the second half after vaccination. But until then, fiscal support on vaccine distribution and employment could help stabilize the economy. Also, “It’s going to take a while for the economy to get back to maximum employment,” she added.

                                  Separately, Richmond Fed President Thomas Barkin said in a Financial Times interview that the economy still need support. “I still think there are a lot of people out of work who need a bridge to the other side, and I am supportive of what we can do to help them.” He expected some “short-term price volatility” but there are deflationary risks too. He’s keeping the focus on “medium-term” inflation expectations.

                                  ECB Lagarde: Vaccine provides eagerly awaited light at the end of the tunnel

                                    ECB President Christine Lagarde told the European Parliament yesterday that vaccine rollout across the Eurozone “provides the eagerly awaited light at the end of the tunnel… When containment measures are lifted and uncertainty recedes, we expect the recovery to be supported by favorable financing conditions, expansionary fiscal policies and a recovery in demand.”

                                    Though, she also emphasized, “if we want to pave the way for a sustainable recovery, we need to maintain and strengthen the common European approach that proved so effective last year. The ECB is committed to doing its part, within its mandate.”

                                    “Underlying price pressures are likely to remain subdued owing to weak demand, low wage pressures and the appreciation of the euro exchange rate,” Lagarde said. “Our pledge to preserve favorable financing conditions is crucial in the current environment.”

                                    Bitcoin hits record on Tesla news, targeting 53618 next?

                                      Bitcoin surges to new record high after Tesla disclosed that it has acquired USD 1.5B in bitcoin Additionally, the company said it may accept bitcoin as a form of payment in the future.

                                      Following up on a previous post, while the upside breakout was delayed by a deep retreat, it did finally happened as expected. 61.8% projection of 17629 to 41964 from 29283 at 44322 is already met.

                                      Based on current upside momentum, the rally should be finished yet. Outlook will stay bullish as long as 38699 resistance turned support holds. Sustained trading above 44322 will target 100% projection at 53618.

                                      Gold recovers after hitting 1784, but outlook stays bearish for another fall

                                        Gold’s fall from 1959.16 resumed by break through 1810.07 support and hit as low as 1784.67. But a temporary bottom was formed there and gold recovered. Some sideway trading could be seen but upside should be limited well below 1875.59 resistance to bring fall resumption. Below 1784.67 will target 1764.31 next.

                                        Overall, the corrective fall from 2075.18 is still in progress and could extend to 38.2% retracement of 1160.17 to 2075.18 at 1725.64 before completion.

                                        Nikkei resumes up trend to 30-yr high, 30k handle next

                                          Nikkei rose 2.21%, or 609.31 pts, to close at 29388.50 today, highest level in 30 years. The up trend from 16358.19 has just resumed. The index was contained well above rising 55 day EMA in the prior pull back, suggesting that some upside acceleration could be seen. Focus will be on whether daily MACD could break through the trend line resistance in next move, as well as the reaction to medium term channel resistance.

                                          But in any case, outlook will stay bullish for now as long as 27619.80 support holds. 30k psychological level is the next target. But real obstacle is 100% projection of 6994.89 to 24129.34 from 16358.19.