Currency Updates:
AUD/USD A rally in Europe’s morning stalled shy of the March 16 high and 200-HMA. The pair slipped from the 0.7666 high & sat near 0.7650 into NY’s open. NY applied bear pressure right out of the gate even as housing data was soft. A broad based USD bid drove the pair steadily lower in NY’s session. The March 13 low was pierced but follow through was limited as a low of 0.7606 printed. A give back for some of the USD’s gains allowed a late day bounce and the pair sat just below 0.7630 into the close. Activity in Asia & Europe is likely to be limited as the market awaits the Feds decision. If the word ‘patient’ is removed the USD likely rallies. AUD/USD might then try to break the 2015 low. Should that occur the door to sub-0.7200 levels is opened.
EUR/USD Short covering in Europe had EUR/USD test above 1.0620. A brief dip just before NY’s open was bought though and the pair was firm as NY got going. The USD softened a bit on weak housing data and EUR/USD’s lift progressed. CTA & reserve manager buying saw the pair take out stops at 1.0625 and 1.0640. The pair hit 1.0651 where it ran into a wall of HF selling. The USD regained its footings and lifted off the lows. EUR/USD slid from the day’s high & sat just below 1.0600 late in the day. Traders now focus on the Fed’s meeting. the word ‘patient’ is expected to be removed from the Fed’s language. Should they follow through on expectations it’s likely EUR/USD will trade heavy as the market will expect rate hikes are surely coming. We might then see EUR/USD break the March 16 low and try to crack the touted 1.0450 barrier..
USD/JPY Reluctance to guess what the Fed will do at Wed’s meeting left USD/JPY in a tight range again above 121 importer, spec & pension bids and below last Thur’s 121.67 high. Despite a Ldn A.M. pullback in USD-JPY 2-yr yields and N225 futures, USD/JPY found bidders into the 200-HMA by the 121.11 session low. US Housing Starts missed badly, but Permits beat to take some of the sting out of the weather-skewed report; one of many of late. The FOMC is seen removing “patience” from their statement Wed, but also perhaps highlighting “international” risks and the need for data to confirm a rate hike later this year is warranted. The BOJ are seen on hold until Oct, by which time even fudged BOJ CPI f/cs will look too incredible w/o another dose of QQE to goose prices. Weekly USD/JPY techs are a bit top-heavy and this month’s high is close to the down TL off the ’90-’98 peaks, not to mention the ’07 pre-GFC peak at 124.14. GPIF & Trade flows remain supportive, but more of the burden is falling on the Fed now. Shunto results are due out Wed & probably will not quell doubts about the virtuous reflation cycle Abenomics is supposed to bring. Japan Trade data tonight.
Looking Ahead – Economic Data (GMT)
• 21:45 NZ Current Account – Qtrly* Q4 f/c -3.150b, -5.010b-prev
• 21:45 NZ Current Account- Annual* Q4 f/c -7.88b, -6.09b-prev
• 21:45 NZ C/A Balance To GDP Q4 f/c -3.4%, -2.60%-prev
• 23:50 JP Exports YY* Feb f/c 0.3%, 17.00%-prev
• 23:50 JP Imports YY* Feb f/c 3.1%, -9.00%-prev
• 23:50 JP Trade Balance Total Yen* Feb f/c -1050.7b, -1177.5b-prev
• 01:30 CN China House Prices YY* Feb -0.05-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
