USD: The Market Is Short, But The Trend Is Your Friend

This morning the market might be a little disappointed to not get anything concrete from President Trump's speech. Microsoft and Meta will headline earnings on Wednesday, this morning Super Micro tumbled on preliminary third-quarter sales that were well short of estimates, a sign its comeback plan has been slow to gain traction. Snap plunged after omitting its sales guidance for the current quarter and warning of headwinds in advertising. MNI Aust Economists - There are high correlations between NZ and Australian CPI data and given NZ’s Q1 has already been released, Australia may see a pickup in goods inflation, while sticky services may moderate. While the RBA prefers quarterly CPI data, the January/February trimmed mean outcomes signal that it may have returned to the 2-3% band in Q1. Headline will continue to be impacted by government electricity rebates meaning that the focus remains on core.

• EUR/AUD - Overnight range 1.7725 - 1.7888. Asia is trading around 1.7830, support is seen in the 1.7600/7700 area.
• GBP/AUD - Overnight range 2.0863 - 2.1030. Asia is trading back around 2.0995. Good support around 2.0600/2.0700 continues to hold, the market is now attempting to push higher from this base. 
• AUD/JPY - Overnight range 90.59 - 91.57, Asia is trading around 98.85. AUD/JPY failed once more towards 92.00 drifting back towards its recent support. Price action is interesting considering how well stocks held up.
• AUD/NZD -  Overnight range 1.0744 - 1.0775, the cross is dealing in Asia around 1.0764. The cross has finally seemed to find some support towards 1.0650, bounces back towards 1.0800/50 should find supply.

Fig 1: GBP/AUD spot Hourly Chart

Source: MNI - Market News/Bloomberg

European gas prices fell 2.2% to EUR 31.70 on Tuesday and only slightly off the intraday low of EUR 31.20. They are now down around 22% in April, and flashing oversold, driven by not only the end of the winter but also concerns over the impact of US protectionism on global energy demand. Uncertainty remains over the progress of US trade negotiations especially with China, which it continues to deny are taking place. 

• The sharp fall in gas prices in April in addition to warmer weather has helped the outlook for Europe’s ability to refill storage ahead of next winter. Current weak demand from Asia has also contributed to increased LNG shipments to Europe. However, the region remains vulnerable to unexpected outages and a heatwave, particularly in Asia.
• Scheduled Norwegian maintenance has taken place this week.
• US natural gas rose 1.1% to $3.38 after reaching $3.46 earlier in the session, but it is still down over 20% this month which is part of the shoulder season with little demand for either cooling or heating. The rally was driven by unwinding of oversold positions as forecasts for the eastern and southern US signalled cooler weather, according to the Commodity Weather Group.

Japan retail sales were slightly below market forecasts. We were -1.2%m/m, against a 0.7% forecast, with Feb revised to a 0.4% gain. In y/y terms we rose 3.1%, against a 3.5% forecast and 1.3% in Feb. 

• The y/y trend is around mid range of the past 12 months as we have oscillated between flat to +5%. The authorities remain focused on driving sustained/positive real household spending growth, aided by positive real wages growth. The next round of labour earnings data is due next Friday.
• Looking at the detail, the biggest m/m declines were for motor vehicles -4.8%m/m, and department stores -3.7%m/m.