Dollar Attempts First 4 Day Rally in 3 Months, CPI Ahead
Two very potent fundamental themes are starting to throw their weight behind the dollar's recovery. Yet, to mount enough strength to force a EURUSD, GBPUSD or AUDUSD reversal; these catalysts need to hit a fundamental stride we have not seen in the past weeks. In the meantime, the greenback has nevertheless managed a broad - albeit tepid - advance. In fact, its gains against the Euro and British pound were more technical than qualitative. That is the same impression we draw from the Dow Jones FXCM Dollar Index's (ticker = USDollar) 21 point cumulative gains through the first half of the week.
Moving forward, risk trends - as per usual - represent the greatest opportunity for the benchmark currency. The S&P 500, having exhausted its recovery before overtaking last month's record highs around 1,850, dropped 0.7 percent this past session. Given the weak participation and the constant second-guessing on the equity index's climb, this correction can build into fear rather easily. This past session, the IMF's warnings that the recovery is still weak and exposed to "significant downside risks" struck the right, discouraging tone to concern stock traders and feed the dollar's safe haven status. In measuring the amplitude of 'fear', traders should keep an eye on volatility measures. The equity-based VIX jumped 1.6 'vols' this past session off monthly lows. A more significant FX volatility response (it was barely changed) is crucial for the dollar.
While waiting patiently for a definitive sentiment catalyst - bullish or bearish - dollar traders will also have to keep an eye on US-based monetary policy expectations. The currency has generated limited strength from the FOMC's two Taper moves thus far, but the market is slowly resigning itself to the reality that QE3 will fully be wound down perhaps as early as September, and speculation of a rate hike will swell before that fateful day. This past session, Fed speakers and the FOMC minutes reinforced this bearing. Thursday's CPI may further offer its stamp.
British Pound Rate Outlook Deflating Quickly After Jobless Uptick
The second round of important, monetary policy-related event risk was released from the
Yen Crosses: A Steadfast BoJ Doesn't
A uniform advance from the yen against the majors this past session reflects the slow turn in risk trends we have seen in other markets. And, this drive seems to be already gathering a head of steam. Already, the funding currency is showing larger gains early in Thursday's session than what it wrenched in the previous trading day. Do nothing to correct this unwelcome (from a policy official's standpoint) development, the January trade statistics this morning offered little respite. The unadjusted deficit doubled to
Euro Faces Tests on
There was relatively little on the Euro newswires this past session, but the IMF made a point of highlighting that the regional economy was "turning the corner" with a fragile recovery. Moving forward, the event risk fills out with two particular highlights. Offering a tangible and direct update, the February Eurozone PMI figures are a timely GDP proxy to test the IMF's and market's dubiousness. Perhaps not as volatility-inducing - but arguably just as influential - Spain is planning auction sell 5, 10 and 30-year bonds. There is no better test of confidence.
Canadian Dollar Rebound Fails, USDCAD Soars
So much for the loonie recovery effort. The Canadian dollar was the biggest mover on the day Wednesday with a drop that ranged between 0.8 and 1.3 percent (NZDCAD and CADJPY respectively). There was certainly a 'risk' element to the faux carry currency's stumble, but the day's data seemed to proffer more than its fair share of influence. Wholesale Trade Sales marked its fourth largest drop in five years.
New Zealand Dollar: PPI Another Blow to Rate Forecasts
Though a March rate hike from the RBNZ is still fully priced in by the swaps and FX market, that is not what will lead the Kiwi's next move. The first hike is fully expected and thereby fully priced in. Further gains from the currency on the basis of yield forecasts means building on expectations of subsequent hikes. The drop from the 4Q factory-level inflation report (PPI) this past session does little to set that pace.
Emerging Markets Come Under Real Selling Pressure
In the IMF's (
Gold Posts First Back-to-Back Decline Since Late January
A rebound for the dollar and continued talk of moderating monetary accommodation this past session led spot gold to a 0.8 percent decline (to
ANZ Consumer Confidence Index (FEB)
As the Kiwi remains at major resistance, data this and next week out of
ANZ Consumer Confidence (MoM) (FEB)
Manufacturing PMI has been following service PMI to the downside as of late.
German Producer Prices (MoM) (JAN)
German Producer Prices YoY are at their lowest levels since 2010.
German Producer Prices (YoY) (JAN)
French CPI - EU Harmonised (MoM) (JAN)
If French CPI does not meet or beat estimates, we may see that reflect poorly on the EUR/USD pair as it will add to disinflation worries following
French CPI - EU Harmonised (YoY) (JAN)
French Consumer Price Index (MoM) (JAN)
French Consumer Price Index (YoY) (JAN)
French Consumer Price Index Ex Tobacco Index (JAN)
German PMI Manufacturing (FEB A)
German Purchasing Manager Index Services (FEB A)
Euro-Zone PMI Manufacturing (FEB A)
Euro-Zone PMI Services (FEB A)
Euro-Zone PMI Composite (FEB A)
CBI Trends Total Orders (FEB)
GBP has given up some strength over the past 24 hours, but selling pressure could be halted by strong retail sales on Friday.
CBI Trends Selling Prices (FEB)
Consumer Price Index (MoM) (JAN)
2014 has hardly been a stellar year thus far for U.S. data, especially in the context of housing data on Wednesday that largely missed estimates. Although we saw USD strength following the FOMC minutes, any disappointing CPI print could halt that move higher near term.
Consumer Price Index (YoY) (JAN)
Consumer Price Index ex Food & Energy (MoM) (JAN)
Consumer Price Index ex Food&Energy (YoY) (JAN)
Consumer Price Index n.s.a. (JAN)
Consumer Price Index Core Index s.a. (JAN)
Initial Jobless Claims (
Continuing Claims (
Markit Purchasing Manager Index (FEB P)
Philadelphia Fed. (FEB)
Mortgage Delinquencies (4Q)
MBA Mortgage Foreclosures (4Q)
Euro-Zone Consumer Confidence (FEB A)
We are at highs not seen since 2011.
Leading Indicators (JAN)
Est. was 0.4% last week.
DOE U.S. Crude Oil Inventories (
WTI crude is pressing highs not seen since the summer of 2013.
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China Economic Survey Bloomberg (FEB)
Spain to Sell 5, 10 and 30-Year Bonds
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