Dollar Runs into Resistance that Requires a Fundamental Break
Monday's trading session was framed by a high profile breakout in risk trends - namely US equities. At the same time, the US Dollar slowed into resistance. That is a meaningful reversal in roles from last week where the S&P 500 was chopping back and forth in an ill-defined range and EURUSD collapsed in its biggest two-day slump since the Fed announced a sustained path of Tapering on
Why is the positive pressure on risk trends not the negative driver for the greenback that it once was just a few years ago? On one hand, the dispersion of returns on US assets is comparable to many of its global counterparts - in other words, higher return European or Asian investments do not carry that much premium over their US counterparts. On the other hand, there is an persistent doubt undercutting the capital market's effort to advance. Financial headlines Monday were just as likely to imply doubt as they would celebration for the new heights. Dollar resilience in the face of 'risk on' is proving rather vigorous. The real test of fundamental role comes should committed risk aversion set in and the dollar's safe haven appeal is weighed. In the meantime, interest rate expectations are the more proactive fundamental venue. The benchmark 10-year yield notably climbed above 2.65 percent with accompanying moves down the curve. This merely checks us back within the range though. Commitment and trend likely awaits more meaningful signals - less Tuesday's retail sales and more Thursday's CPI.
Euro Slowly Slipping as Stimulus Threat Sinks into Market, Pricing
A sharp Euro sell-off this past week aptly reflects the market's concern with the growing probability for a stimulus shift from the ECB. However, we haven't seen recognition of a monetary policy change evolve into panicked repricing. This may lead some to believe that this is yet another, short-lived adjustment to bombastic rhetoric that will end with an impotent central bank and a quick return to 1.4000. Yet, we are seeing evidence of a more lasting - if controlled - shiftin underlying conditions. A drop in periphery government bond yields (Spain,
British Pound Outstrips Its Counterparts as Rate Hopes Hit New Highs
There is major event risk ahead that can materially alter expectations for
Japanese Yen: Will a Record Low Current Account Translate into More Stimulus?
The data flow from
Australian Dollar Traders' Rate Expectations Easing
The 2014-2015 Australian budget is due today at
Chinese Yuan: New Lending Drops as China Says No Large Stimulus
Chinese regulators have made it their point very clear: there is no major stimulus expected moving forward for the Chinese capital markets. For a country that has drawn heavily on the support the government has offered, that is a very real concern should an economic slowdown and bad loans further bite into the country's performance. Already Monday, April new lending cooled to
Emerging Markets: Indian and Ukrainian Elections Produced Different Reactions
Two important elections have drawn to a close through the beginning of this week. While the election results in
Gold Bullish Interest Rises a Third Week as Volatility Hits a 13-Month Low
Australia Investment Lending (MAR)
Volatility is likely to be spurred with two medium event risks on tap for AUD and CNH crosses. Although Chinese data usually remains in line with expectations, Aussi home data could surprise.
Australia House Price Index (1Q) (QoQ)
China Retail Sales | Industrial Production (APR)
China Fixed Assets (APR)
France Current Account Balance (MAR)
Any disappointing CPI data out of
Spain House Transactions (MAR)
Portugal Consumer Inflation CPI (APR)
US Small Business Optimism - NFIB (APR)
US Retail Sales (APR) (MoM)
If this data comes in worse than expected, economists will not be able to simply blame it on the weather as was the case with prior prints.
US Import Price Index (APR) (MoM)
US Business Inventories
In the context of inflation data, Wheeler is likely to keep comments in line with those prior in regards to the Kiwi rate.
New Zealand Retail Sales (1Q)
Japan Business Level Inflation - CGPI (APR)
Japan Loans & Discounts Outstanding (MAR)
Upcoming Events & Speeches
Fed's Lockhart to Speak on the Economy
Spain to Sell 6-Mth | 12-Mth Bills
ECB to Announce 7-Day Refi Allotment
Fed's Lacker to Speak on Credit Markets
RBNZ Financial Stability Report
SUPPORT AND RESISTANCE LEVELS
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CLASSIC SUPPORT AND RESISTANCE
INTRA-DAY PROBABILITY BANDS
The information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified.