EUROPEAN INFLATION: German HICP/CPI Y/Y Expected To Decelerate By 0.1pp [2/2]
Recap: German final March HICP was unrevised from the flash readings at 2.3% Y/Y (2.6% prior) and 0.4% M/M (0.5% prior). The final reading of national CPI was also unrevised at 2.2% Y/Y (2.3% prior) and 0.3% M/M (0.4% prior). Core CPI printed at 2.6% Y/Y (0.1pp upwardly revised, 2.7% prior), the lowest rate since June 2021.
- Overall, the CPI data confirmed a notable deceleration in services Y/Y inflation (a -0.13pp smaller contribution than in February) but with a caveat that it was mostly driven by airfares with the Easter holidays in April this year vs March last year.
- Goods inflation slightly accelerated (+0.04pp contribution vs prior) as softer energy was not quite able to cancel out firmer food / core goods inflation.
- The March CPI report highlighted differing Y/Y trends in services-heavy CPI subcategories:
- The mixed-weight transport category (i.e. across goods & services) was key in March at 0.88% Y/Y (state-level data had implied 0.9-1.0%) after 2.4% in Feb. It confirmed that energy (-2.77% vs -1.6% in Feb) and travel services (airfares -8.04% Y/Y vs 9.26% prior) acted in tandem here.
- Within the services-heavy CPI subcategories, there were some considerable differences in the Y/Y pace since December. Moderation was seen in education (4.67% Y/Y vs 5.0% Feb), restaurants and hotels (3.84% vs 4.2%) and recreation & culture (1.05% vs 1.1%). To the upside however, communications at -1.10% Y/Y (vs -1.2%) and healthcare at 2.98% (vs 2.8%).
- A material acceleration in food inflation was also confirmed, at 3.4% Y/Y after 2.8% in Feb.
- Categories associated with the core goods sector appear also firmer than before - clothing and footwear came in at 1.0% (after 0.5% prior) and furnishings and household Equipment at -0.25 (after -0.7%).
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USDCAD TECHS: Trend Signal Remains Bullish
- RES 4: 1.4700 Round number resistance
- RES 3: 1.4641 76.4% retracement of the Feb 3 - 14 bear leg
- RES 2: 1.4452/4543 High Mar 13 / 4 and a bull trigger
- RES 1: 1.4402 High Mar 20
- PRICE: 1.4325 @ 08:08 BST Mar 31
- SUP 1: 1.4235 Low Mar 26 and a key near-term support
- SUP 2: 1.4151/4107 Low Feb 14 / 50.0% of Sep 25 - Feb 3 bull run
- SUP 3: 1.4011 Low Dec 5 ‘24
- SUP 4: 1.3944 61.8% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
USDCAD continues to trade above last week’s high. A return lower and clearance of 1.4235, the Mar 26 low, would undermine the bull theme and instead highlight potential for a test of 1.4151, the Feb 14 low and a bear trigger. Moving average studies continue to highlight a dominant uptrend. A reversal higher would refocus attention on the bull trigger at 1.4543, the Mar 4 high. First resistance to watch is 1.4402, the Mar 20 high.
AUDUSD TECHS: Support Remains Intact For Now
- RES 4: 0.6429 High Dec 12 ‘24
- RES 3: 0.6414 38.2% retracement of the Sep 30 ‘24 - Feb 3 bear leg
- RES 2: 0.6409 High Feb 21 and a bull trigger
- RES 1: 0.6331/91 High Mar 26 / High Mar 17 and 18
- PRICE: 0.6287 @ 08:04 BST Mar 28
- SUP 1: 0.6258 Low Mar 21
- SUP 2: 0.6187 Low Feb 4
- SUP 3: 0.6171/6088 Low Feb 4 / 3 and a key support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
AUDUSD is unchanged and is trading in a tight range. A S/T bull theme is intact and the latest move down appears corrective. Key short-term support to watch is 0.6187, the Mar 4 low. Clearance of this level would reinstate a bear threat. First support is at 0.6258, the Mar 21 low. A stronger recovery would refocus attention on 0.6409, the Feb 21 high. Clearance of this hurdle would strengthen the bull cycle and resume the uptrend that started Feb 3.
US TSY FUTURES: Screen Buyer Of TU Helps Underpin Rally
Note that a 5K screen lift of TU futures at 103-23 helps underpin the space, even as European equity index futures edge away from lows.
