FOREX: USD Bounce Drags EUR/USD Further Off Recovery High
- The RBNZ rate decision spurred initial heavy selling in NZD, as markets responded to the 50bps rate cut to prompt a 0.5678 low in NZD/USD. The move proved short-lived, with the rally off lows coinciding with the RBNZ's signals that the OCR may only have limited room to fall further. As such, a short-covering bounce to 0.5732 has stuck, keeping the NZD the strongest performer in G10 headed into the NY crossover.
- The single currency is the poorest performer so far, pressing EUR/USD back below 1.0450 and through yesterday's lows in the process. The move comes as part of the a broader bounce off lows for the USD Index in a move that looks idiosyncratic relative to broader market risk appetite: the EuroStoxx50 continues to plumb alltime highs.
- UK inflation data came in ahead of expectations, however the details show little evidence that should push any MPC votes in either direction - with the upside surprises stemming from core goods and food prices - leaving UK rates markets primed for the next BoE cut at the June meeting.
- Datapoints are few and far between Wednesday, with US housing starts and building permits the primary releases. This should leave markets with plenty of capacity to digest the FOMC minutes later today - at which traders will be on watch for the rationale behind the Fed's recent shift in statement language concerning inflation.
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BONDS: Bund edges toward Friday's low
- The lighter liquidity seems to exacerbate some of the early small moves in Govies, Bund is drifting back towards Friday's low.
- Earlier small block trade and paying interest has seen the contract finding some selling interest.
Initial support for the Bund is at 131.50. - And despite the Lower Euribor Fix, the front ERH5 as well as the rest of the strip are testing their respective lows.
- The latest flows in Govies saw a 1.5k seller in OAT and 1k in Gilt, all cumulative Volume.
COMMODITIES: Trend Structure in WTI Futures Remains Bullish After Recent Rally
The trend structure in WTI futures remains bullish and the Jan 15 rally reinforces current conditions. The recent strong impulsive climb has resulted in a breach of $75.91, the Oct 8 high. Attention is on $79.48, the Apr 12 ‘24 high. A clear break of this hurdle would strengthen the bullish theme. Sights are on 80.63, a Fibonacci projection. On the downside, a reversal lower would expose the 20-day EMA, at $73.89, a key short-term support. The recent climb in Gold appears corrective - for now. However, the yellow metal continues to hold on to its latest gains and scope is seen for a continuation higher near-term. The stronger recovery exposes $2726.2, the Dec 12 high and an important resistance. Clearance of this level would be a bullish development. On the downside, a reversal lower would expose $2583.6, the Dec 19 low. Initial support is at $2649.0, the 50-day EMA.
- WTI Crude down $0.46 or -0.59% at $77.42
- Natural Gas down $0.15 or -3.85% at $3.796
- Gold spot up $2.55 or +0.09% at $2706.25
- Copper down $1.7 or -0.39% at $434.95
- Silver down $0.09 or -0.29% at $30.283
- Platinum down $1.87 or -0.2% at $942.47
EQUITIES: Last Week's Gains Undermine Bearish Theme in E-Mini S&P
A bull cycle in the Eurostoxx 50 futures contract remains intact. Last week’s climb resulted in a breach of 5054.00, the Jan 8 high, to confirm a resumption of the uptrend. The contract is holding on to its gains. The focus is on a climb towards 5200.00, a round number resistance point. Key short-term support has been defined at 4931.00, the Jan 13 low. A break of this level would be bearish. S&P E-Minis traded higher again Friday. Last week’s gains undermine the recent bearish theme. The contract has traded through the 50-day EMA and attention is on resistance at 6107.50, the Dec 26 high. Initial resistance is at 6068.25, the Jan 6 high. Clearance of 6107.50 would strengthen a bullish theme. Key support has been defined at 5809.00, the Jan 13 low. A reversal lower and a breach of this level would reinstate a bear theme.
- Japan's NIKKEI closed higher by 451.04 pts or +1.17% at 38902.5 and the TOPIX ended 31.85 pts higher or +1.19% at 2711.27.
- Elsewhere, in China the SHANGHAI closed higher by 2.557 pts or +0.08% at 3244.378 and the HANG SENG ended 341.75 pts higher or +1.75% at 19925.81.
- Across Europe, Germany's DAX trades higher by 11.96 pts or +0.06% at 20916.83, FTSE 100 higher by 21.59 pts or +0.25% at 8526.91, CAC 40 up 16.02 pts or +0.21% at 7725.7 and Euro Stoxx 50 up 7.82 pts or +0.15% at 5156.12.
- Dow Jones mini up 20 pts or +0.05% at 43716, S&P 500 mini up 4.5 pts or +0.07% at 6038, NASDAQ mini up 26.5 pts or +0.12% at 21620.75.
