Daily Forex Snapshot

Market Brief

Asia stocks declined across the board as Chinese economic data showed more weakness. China Caixin manufacturing PMI final (different from the official read which fell to a five-month low at 50.0) contracted to a 2-year low at 47.8 in July compared with flash estimates of 48.2 and down from 49.4 in June. The Shanghai composite fell -2.33% and Shenzhen declined 2.30%. The Hang Seng fell -1.01% and the Nikkei -0.17%. In the FX markets volatility was subdued after Fridays wild swings. EURUSD was range bound between 1.0966 to 1.0991 while traded slightly higher from 123.90 to 124.10.

AUDUSD edged lower despite solid economic data. AUDUSD fell from 0.7321 to 0.7290. US rates were slightly higher as the 10yr yields rose 2.5bp to 2.205% on the open but quickly slipped to 2.194%. The PBoC kept the USDCNY fix steady at 6.116. With a busy GBP week ahead, the sterling was range bound. Commodties remain under pressure with oil falling in early trading. According to a Bloomberg report, ahead of the China's top leadership’s annual gathering, policy makers are preparing new fiscal spending initiatives to safeguard against economic weakening wouldn’t put there 2015 target out of reach (as in 2014). In the European session, Greece is anticipated to open its stock markets for the first time in over one month. Heavy selling is excepted and headwinds in stock across Europe.
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According to Bloomberg, BoJ Governor Haruhiko Kuroda stated that there was no current need for additional monetary easing. The inflation trend was improving, yet the BoJ stood ready to adjust policy if needed. He went on to say that in his view the private sector remained more pessimistic then the central bank on inflation outlook. Finally, it was the official BoJ view that its inflation target of 2% would be achieved around the first half of 2056. In economic data, Nikkei manufacturing PMI expanded to 51.2 in July revised lower from 51.4 of preliminary estimates.

Australia, July AIG performance of manufacturing index expanded to 50.4 recovering from a contraction of 44.2 in June. While, HIA new home sales rose 0.5% m/m in June against a prior fall of 2.3% in May. Australia, house prices continue to surge despite efforts of regulators to control growing real-estate prices (dampening RBA easing expectations). Elsewhere, South Korea’s BoP current account surplus quickened to a record high of $12186.5mn against revised lower figures of $8618.1mn in May.
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In the European session, traders will expect EU, UK and Swedish manufacturing PMI. Switzerland will release sight deposit data which will be of interest due to the fact that EURCHF has traded well above intervention levels. This read will help us understand if the SNB is looking to push the EURCH higher or only intervene to in defensive of the CHF. In the US personal income and spending, PCE and ISM manufacturing are anticipated to be release.

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Market Brief

FX markets were quiet, shifting into summer trading patterns. USD was marginally weaker against G10 and EM currencies as US rates were unchanged at 2.264%. EURUSD traded from 1.0929 to 1.0949 in controlled behavior. USDJPY traded in a u-shaped pattern down from 124.25 to 123.91 then back to 124.16. Indicative of a sleepy August Friday trading session. Asia regional equity indices were higher across the board. The Nikkei was up 0.12%, the Hang Seng rose 0.52% and the Shanghai composite increased 0.60%.

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Commodities remain under pressure with gold falling from $1089 to $1083. Since interest rates have begun to rise globally, gold cost of carry has increased making the precious metal an unfavorable asset to hold. VIX index fell to 12.13 as volatility in stocks dried up. In FX, volatility also continued to decrease indicating that carry based trades should become popular again. In our view CHF and JPY would be the strongest candidate for funding they interest rate driven trades. According to newswire, Alexis Tsipras won his battle against the far left dissenters for the governing of Syriza party. The terms of the current €86bn bailout being negotiated remains highly divisive and we are likely to get a end of year snap election. Elsewhere, the IMF board has told Athens that the unsustainable high level of debt and weak history of reform implementation could keep the IMF from participating in the third bailout. Lingering concerns over Greek bailout negotiations and technical break of 1.0930 should keep EURUSD risk to the downside. Finally, the Swiss National Bank has reported a loss of CHF 50.1 billion for the first half of 2015 (chf 10bn above prior report). Residual costs of abandoning the EURCHF minimum exchange rate.

Japan’s June CPI increased 0.4% y/y above market expectation of 0.3% y/y, but slower than the 0.5% rise in May. Core inflation was unmoved at 0.1% y/y against 0.0% expected and CPI excluding food & energy surged to 0.6% y/y, both above expectation of 0.4%. Overall household spending disappointed falling -2.0% y/y in June, below then consensus growth of 1.9% following a 4.8% increase in May. Weak consumption spending will weigh on 2Q GDP growth and has become a worrying signals that Abenomics effect are slowing.

New Zealand July business confidence fell to -15.3 following a dip -2.3 in June and activity outlook continued falling to 19.0 in July from 23.6. These reads indicated a further weakening of growth momentum. South Korea’s June industrial production growth hastened 1.2% y/y above expectations of a -2.0% fall and revised slump of 3.0% in May.
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In a light European session, traders will see EA June unemployment rate which is expected to fall 11.0% from 11.1%. EA July flash HICP inflation is anticipated to be unchanged at 0.2% y/y and core inflation at 0.8% y/y. In Russia, we expect that central banks to cut 50bp in line with consensus. The central bank is in a real bind with inflation rising yet growth collapsing. We remain buyers of USDRUB, as the fragile growth outlook and lower official rates, will have markets selling RUB (CBR interventions have paused due to increase RUB decline and high volatility).

In the US session, Canada GDP is expected to be flat at 0.0% m/m from -0.1% in May. The BoC recent rate cut would suggest that market will overlook this weak read. We remain significantly bearish on the CAD due to slowing growth, weak commodity prices and dovish central bank. In the near term USDCAD bullish trend remains intact and likely challenge 1.3103 July 15 high, break would extend strength to 1.3275.

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FOMC statement boosts USD

USD continues to find buyers post-FOMC meeting. The Feds accompanying statement was encouraging for US hawks as the committee upgraded its view of the housing and labor markets. However, the critical modification came when “some” was introduced to the sentence “the Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market.” This indicates that the Fed has moved closer to hiking rates at the September meeting although clearly the FOMC remains data dependent. In reaction to the meeting USD, US rates, US stocks and oil rallied (signal the market is reading it the same).
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USDJPY 3-day bullish run has now taken the pair above the 124 handle. EURUSD fell sharply on the report to 1.0960, then staged a minor rally but heading into the European session is under heavy supply pressure (1.0950 last). Commodity currencies were mixed in Asian with AUD performing well while NZD fell. Recent stabilization in commodity prices has allowed EUR funded carry traders to become less cautions, supporting AUD in the process. Asia's regional equity indices there was green across the board. The Nikkei rallied 1.04%, Shanghai composite rose 1.00% and Hang Seng was marginally higher at 0.14%. Following the increase in Fed Fund rates, US 10 year treasury yields rose 3bp to 2.130% and Asian rates were higher across the board.
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Overnight, Australia’s June building approvals fell -8.2% m/m, well below market expected decline of -1.0%. Annually, approvals increased 8.6% following a revised higher rise of 18.3% in the prior month. New Zealand’s June building permits declined 4.1% m/m. From Singapore, 2Q unemployment rate increased to 2.0% above expectations of 1.9% and prior read of 1.8% in 1Q. In Japan, June industrial production quickened by 0.8% m/m above consensus of 0.3% and May decline of 2.1%. A report by the IMF released overnight stated that Japans economic outlook is for growth is actually weaker than during the nations extended period of deflation, despite gains made under Abenomics. According to Giovanni Ganelli who compiled the IMF report low levels of business investment and slow progress in reforms (ie third arrow) will hamper expansion. We remain bearish on the JPY due to policy divergence theme.

In the European session, headline EA consumer confidence is expected to fall, to -4.4 from -3.4. The fall can be easily attributed to the Greek crisis. Spanish Q2 GDP is likely to quicken to 1.0% q/q from 0.9% q/q , which would be in line with the government forecast. Swedish 2Q GDP is expected to rise to 0.7 % q/q from 0.4% q/q. Swiss KOF leading indicator is expected to increase to 90.4 from 89.7 in July, which would be good news after some weak economic data reads.

The US 2Q GDP is expected to rebound solidly to 2.5% from -0.2% in 1Q. However, recent improvement in housing markets, government spending and production skews the risk to the upside surprise. A strong read should provide one of the final two key data points for a rate hike in September. The second will be Augusts inflation data. We remain bullish on the USD (encouraged by the FOMC statement) especially against the JPY and CHF. Finally, Mexico central banks is expected to hold policy rate at 3.00%. The rapid collapse of the MXN might prompt members to enact FX measures to limit the peso’s rapid deprecation. We remain bullish on the USDMXN, due to oils low prices, Mexico’s uncertain economic outlook and expectation of Fed hikes. Should USD strength accelerate and MXN decline, we would watch for Banxico to move forward with defensive rate hikes.
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China's PMI drops, equity markets lower

Equities were trading broadly lower in New York yesterday amid mixed earning reports. The S&P 500 lost 0.57%, the Nasdaq retreated -0.49% while the Dow Jones fell -0.67%. In addition to this negative sentiment among equity investors, Caixin (ex HSBC) China July flash PMI fell unexpectedly to 48.2 versus 49.7 consensus and 49.4 in the previous month, this is the lowest level in 15 months. All Asian regional equity markets are therefore trading in negative territory, with the exception of… China. In Hong Kong, shares lost -0.99%, in Japan the Nikkei dropped -0.69% while the broader Topix index declined 0.63%, in South Korea the Kospi is down 0.93%, Australian shares lost 0.43% and in India the Sensex retreated 0.29%. In China, mainland shares were lucky to find strong support from national institutions - the sale of stock by large stakeholders is still prohibited while the PBoC keeps pumping liquidity in the stock market to maintain it in positive territory. Shanghai Composite is up 0.24% while Shenzhen gained 0.34%.
In New Zealand, posted a trade deficit of NZ$60mn in June while market analysts were looking for a trade surplus of NZ$100mn (previous figure revised higher to NZ$371 to NZ$350). NZD/USD hit the top of its declining channel and lost more than 1 figures since then. Further east in Australia, the Aussie is heavily sold-off on weak Chinese PMI and lost 0.83% against the US dollar as it broke the previous low at 0.7328.

In South Africa, the central bank delivered what was expected and increased its benchmark interest rate by 25bps to 6% in an attempt to curb inflation. However, it isn’t enough to bring USD/ZAR lower as the rand lost another 0.60% against the greenback.
In Canada, the loonie reacted aggressively to better-than-expected May retail sales figure. The data printed at 1%m/m versus 0.6% median forecast while ex auto retail sales came in at 0.9%m/m versus 0.8% consensus and -0.5% previous month. USD/CAD therefore takes a breather around 1.3020 after having surge more than 7.50% in roughly a month.

In Brazil, the real continue to lose ground against the US dollar as June unemployment rate increased to 6.9% from 6.7% previous month, in line with expectations. USD/BRL dropped 1.90% yesterday and reached a 4 month high.

Today traders will be watching Markit PMI from Germany, France and Eurozone; PPI from Spain; trade balance from Sweden; Markit manufacturing and new home sales from the US.



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RBA holds easing bias
21.07.2015
Early this morning, the Reserve Bank of Australia released the minutes of its July 7 meeting where they maintained the cash target rate at a record-low 2%. The central bank said that despite “output growth in the March quarter had been stronger than expected” and noted that growth remained below average, and early indications that were that the strength in the March quarter had not carried through to the June quarter. However, the RBA acknowledged that “non-mining business profits had increased over the past year and that business conditions had generally improved over recent months to be a bit above average”.
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Members indicated that despite the Aussie depreciated considerably against the US dollar, the depreciation had been more modest against a basket of currencies and “the exchange rate had thus far offered less assistance than would normally be expected”. Therefore, we can reasonably expect that the RBA will cut rate before the end of the year as it clearly held an easing bias. However, it’s more likely that Governor Stevens will wait for further economic data before doing so; we therefore do not expect a rate cut at the August 4 meeting given the current economic conditions. The Aussie reacted negatively to the headline and is moving lower since then as AUD/USD is heading towards the 0.7328 support (previous low).
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In New Zealand, net permanent migration (s.a.) fell to 4,800 in June versus 5,080 previous month while credit card spending grew by 6.5%y/y in June versus previous month upward revision of 7.2%y/y. NZD/USD is right in the middle of its declining channel and is taking a breather after last week’s sharp sell-off. Traders are currently positioning themselves ahead of tomorrow’s RBNZ rate decision and, as most market participants, we expect the central bank to cut its official cash rate by 25bps to 3%.

In Asia, equity returns are broadly positive with Shanghai Composite adding 0.45% and Shenzhen Composite 1.27%. In Japan, the Nikkei reopened higher after a public holiday on Monday. Tokyo’s leading index added 0.93% while the broader Topix index gained 0.66%. In Hong Kong, the Hang Seng is up 0.70%, in South Korea, the Kospi edges up 0.50% while in India the Sensex loses 0.12%.

In Europe, equity futures are edging higher amid Greece’s creditors plan to disburse the first tranche of the bailout by August 17. In the meantime, Greece has made its bonds payment to the ECB and cleared its arrears to the IMF, using the bridge loan obtained on Friday. However, the bailout package still needs to be approved by national parliaments. EUR/USD has proven unable to break the strong support lying at 1.0819 (low from May 27) and is currently trading slightly higher. German Dax edges down -0.01%, CAC 40 is up 0.40% while the Footsie gains 0.02%.


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Yesterday, the dollar was heavily sold-off as traders await today’s US GDP figures and FOMC rate decision; the dollar index lost 0.80% at 96.12 and validated the break of the 50dma (97.36). Asian equities are broadly lower this morning with Australian shares down 1.70% while the Hang Seng lost -0.35%, Shanghai Composite is flat and Sensex is down -0.73%. The S&P/ASX 200 is down more than 2% since the beginning of the week and will close in red for the third consecutive day.

AUD/USD appreciated sharply in London and tested a 3-month high before consolidating slightly lower during the Asian session. The Aussie reached 0.8028 and is now trading around 0.7990. The closest resistance stands at 0.8067 (low from May 10th) while a support area could be found between 0.7884/0.7938 (previous highs).

USD/JPY didn’t move much as Tokyo was closed due to Shōwa Day, the first holiday of the Golden Week. Volumes are expected to be thinner than usual until May 8th. The dollar is consolidating around 118.80 and should find some support around 118.33/72 (multi lows). Despite the Golden Week, a lot of economic indicators are due during the following days, as well as the BoJ meeting on April 30th. We therefore expect erratic moves over the following days.

European stocks had a really tough day, DAX lost -1.89%, Euro Stoxx -1.48%, CAC 40 -1.81%, Footsie 100 -1.03% and SMI -0.95%. EUR/USD appreciated sharply to 1.0981 – 3-week high - and stabilized slightly below 1.0971 (high from March 23rd). The euro should find some buying interest above 1.1052 (multi high). However we do not expect much movement during the day as traders await the FOMC rate decision (GMT 6pm).

The sterling didn’t react much to the release of UK Q1 GDP, which came in weaker-than-expected at 2.4%y/y verse 2.6%, and moved higher on USD weakness. GBP/USD finally broke the 1.5266 key resistance (consolidation area from early March) and is now heading to the psychological level of 1.54. On the downside, the cable will find some support at 1.5256 (previous resistance).
EUR/CHF found fresh boost over the last 24h as trend gains momentum. The euro is currently trading above 1.05, a level last seen on April 6th. The depreciation of the Swiss franc against the euro didn’t allow the USD/CHF to move lower. The greenback is moving sideways since last Thursday and is currently trading at 0.9560^, at the bottom of its hourly range.

USD/BRL dropped amid release of higher-than-expected unemployment rate (62.2% verse 6.1% exp), increasing the probability of a rate hike from the BoB, before bouncing back to 2.9373. Brazil’s central bank is expected to raise the Selic rate by 50bps from 12.75% to 13.25% as inflation is running out of control, reaching 8.13% in March. We expect the BRL to appreciate further as traders will rush into the currency to play the carry.
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In Asia, China’s inflation for March printed marginally higher to 1.4% y/y verse 1.3%. The lack of inflation pressure is keeping hope for additional easing alive, giving risky asset a boost. The Hang Seng consolidated gains from yesterday record high and stabilized around 13,784 while the Shanghai Composite is also green on the screen, up by 1.27% to 4,024 (both supported by the Chinese inflation figures). Australian equities rose by 0.61% as home loans approvals advanced 1.2% m/m in February verse 3% expected while reading for January was revised up from -3.5% to -1.7% m/m. AUD/USD currently sits on the 0.7688 key support (Fib 38.2% on March selloff), bids should jump in under 0.7660 (low from April 9). On the mid-long run, a support stands at 0.7533 (low from April 2). We expect the Aussie to depreciate further in the following weeks with the first target sets to the psychological level of 0.70.
EUR/USD is sliding slowly but surely, as the euro hit 1.0638 in the US yesterday. The greenback is getting closer to its March 15 low as sellers keep jumping in amid better than expected wholesale inventories (0.3% verse 0.2% consensus) and jobless claims (281k vs. 283k consensus, downward revision to last week to 267k from 268k). On the mid-term run our target is still set to the parity.

Yesterday BoE interest rate decision was a non-event. GBP/USD is treading water this morning after sharp moves yesterday and the break of 2 key supports (1.4803 and 1.4761). The cable is really close to the low from March 19 and should find some bids under 1.4689. Next support stands at 1.4635 (low from March 18). On the mid-long term, the sterling is getting through 1.4814 which is the low from July 2013. We therefore remain bearish on the sterling. WTI crude oil is still digesting the latest reading of US oil inventories and rose up by 0.08% while the Brent was up 1.64% while Iran’s Supreme Leader Ayatollah Khamenei said a deal is not guaranteed as Iran will sign no agreement that immediately lift all economic sanctions.

Today’s key event are the Manufacturing and Industrial Production in UK for February, the consensus are 0.4% and 0.3% m/m respectively. We may see some erratic movements on the news. In Canada, Housing Starts number is due at 12:15GMT and is expected at 175K as home prices in Canada are broadly seen as overvalued while low prices for oil and other commodities ease the pressure on housing activity; however majors hubs like Toronto and Montreal are cooling at a slower pace. The unemployment rate for Canada is expected to came in at 6.9% with a net change of 0k (up from last month’s -1k).
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All quiet in the FX market. Wall Street ended the day in positive ground while traders digested the minutes of the last FOMC meeting. Most US equity indexes depreciated sharply on the minutes release before bouncing back to their initial level; the S&P, Dow Jones and Nasdaq were up by 0.27%, 0.15% and 0.83% respectively. The dovish minutes revealed that the probabilities of a rate hike in June have diminished considerably as several members of the committee thought a progressive tightening wouldn't be guaranteed until later in the year or even in early 2016. More specifically, a few Federal Reserve officials are concerned that low oil prices and strong USD would likely hold inflation down. Oil prices took another hit yesterday and erased gains from last week. WTI is down 3.48% while its counterpart from the North Sea dropped 3.60% to 56.07. Pressure on oil prices shows no signs of weakness as US oil inventories rose 10.95mn barrels last week. EUR/USD is moving with a downward bias and is getting closer to its key support area of 1.0713/55 (low from March 31st and Sept. 2003, Fib 38.2% from March USD selloff) while the hourly RSI indicates the dollar is closed to be overbought. A break of 1.0713 would open the road to further USD appreciation. The next supports lie at 1.0685 and 1.0598 (Fib 38.2% and 23.6% respectively).
In Asia, the Nikkei consolidated gains from the previous session while the Hang Seng appreciated sharply to a max of 14,380, its highest level since November 2010, before stabilizing around 13,800. The rally was due to investors from mainland flooding into Hong Kong. On the short-term, USD/JPY is moving sideways as it get closer to the high from 2 days ago. On the long-term, the targets are 122.03 then 124.12, highs from March 13th and June 2007 respectively, however fresh boost would be needed to clear these levels.

In Europe, traders will be watching Halifax House Price from UK, BoE interest rate decision (11am GMT). Initial Jobless Claims in the US and New Housing Price Index from Canada this afternoon. Across the channel, EUR/GBP is stuck in its declining channel and tries to break the 0.7222/30 key support area while the cable erased gains from yesterday and is trading around 1.4860 this morning, getting closer to its nearest support of 1.4803 (low from April 7), next support stands at 1.4761 (hourly Fib 23.6% from mid-March) . The UK elections are weighting on the sterling as traders object to taking directional positions and seem to favor waiting until the end of the elections to take more risk.
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News of Greek banks downgrades, lack of details in Greek reform plan and soft US data failed to discourage risk seekers. Asia’s regional indices’ were broadly higher as the Nikkei rallied up 1.91%. The Hang Seng rose 0.65% and the Shanghai composite was up slightly to 0.11%. In the forex markets, EURUSD was able to breakout of yesterday consolidation pattern, rallying to 1.0791. USDJPY bounced between 119.50 to 119.77 with no directional impulse despite US treasury 2-year yields rising marginally. USD was weaker verse EM FX. USDCNY Fixed lower to 6.13960. AUDUSD and NZDUSD were weaker against the greenback (increased speculation that the RBA cuts interest rates). Australia’s trade deficit widened to 1256mn in February, below the expected deficit of 1300mn. New Zealand’s commodity prices increased as the ANZ commodity price climbed 4.6% in March from February revised rise of 4.2%. With select Asian markets already closed heading into the long weekend, liquidity has become thin. Crude prices dropped as attention returned to Iran-US nuclear talks, as the prospects for an agreement and an increase in Iranian crude exports put pressure on prices.

Heading into the holidays, Greek Prime Minister Alexis Tsipras failed to secure a financial bailout. That means Athens will have scramble to get cash to pay pensions and salaries to make a €460 million debt repayment to the IMF on 9th April. In brighter news, the ECB agreed to increase the amount of capital Greek banks can borrow under the emergence lending assistance (ELA) program. The ECB increased the amount the Greek central banks could lend to domestic banks to €71.8bn from €71.1bn (following a €1.2bn increase last week). The ECB forced Greek banks to turn to the ELA after suspending an exemption that had allowed banks to use junk-rated government bonds as collateral for access to standard ECB lending. These loans hold a higher interest rate and any default will be on the Greek central banks’ balance sheet not the ECB. ECB President Draghi denied he is using financial leverage to force Greek into an agreement with creditors. EURUSD marginally recover to 1.0788 just short of minor resistance at 1.0845. Failure to extend bullish momentum will result in a retest 1.0458 March low. In the European session, the ECB is expected to release its Account of the March monetary policy meeting. Emboldened by ECB QE and solid euro area manufacturing PMI data European equity markets should continue to outperform peers. In the UK, march construction PMI is expected to come in at 59.8 from 60.1 prior read.



Yesterday, US data was weaker than expected. ADP employment report indicated job expansion of 189k in March, below the 225k consensus. US ISM manufacturing index fell to a 2-year low at 51.5 in March. US treasury curves steepen slightly on the weak numbers but eventually shrugged off the soft number. Friday’s March US Employment report will also be diligently observed. Markets expect nonfarm payrolls to increase 250k m/m and the unemployment rate to remain unchanged at 5.5%. Fed Chair Yellen could provide more clarity on the USD monetary policy speech today. We remains constructive on the USD and see dips as opportunities to reload longs.
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In the Asian session, the big story was the strong performance of Chinese shares. While the majority of Asian equity markets underperformed Shanghai and Shenzhen were higher by 1.4% and 1.8% respectively (Hang Seng rose 0.71%). In particular, the Shanghai composite looks to close above 3800 key psychological resistance. The catalyst for optimism over China stocks was the China’s official PMI unexpectedly rising above the 50 threshold to 50.1 in March from 49.9, verse expectations for decline to 49.7. Most sub-indices’ improved, yet new orders index slowed by 0.2 to 50.2 and new export orders index dropped by 0.2 to 48.3. Elsewhere, China’s non-manufacturing PMI moderated to 53.7 in March from 53.9 in February. There is growing evidence that Beijing’s proactive stimulus response is now starting to pay-off in growth. The PBoC USDCNY fix was slightly higher to 6.1434 from 6.1420. We remain constructive on the CNY, based on expectation that policy makers will provide excessing response to slowing growth and attempts to manage currency volatility. However, in a potential setback in CNY aspirations, US Treasury Secretary Jack Lew stated that the USA believed the CNY had not become freely traded enough to be included IMF basket of global currencies (SDR). Six world powers and Iran negotiations went past the 31st March deadline, unable to achieve an accord on Tehran's nuclear program. But the extension indicates positive developments in discussions. Brent crude was marginally softer falling to $54.78 from $56.
In Japan, BoJ March Tankan survey indicated a weak and slowing recovery. Manufacturing firms provided no improvement regardless of low oil prices and weak JPY. Large manufacturing firms read was flat at 12 and outlook failed to meet expectations coming in at 10 verse 16 expected but up from 9 in Feb. Meanwhile, non-manufacturers indicated improvement in their sentiment up 2 pt to 19. We anticipate that decelerating growth and inflation will demand another stimulus boost. Yet the long term effectiveness looks limited. The start of Japans fiscal year and weak Tankan sent Nikkei down 0.41% which spilt over to JPY. USDJPY was range bound falling to 119.45 before bouncing to 120.02. USDJPY support at 118.90 should contain downside moves. GBPJPY was choppy, initially dropped to 177.40 then rallying to 178.48 before stabilizing around the 178.00 handle, yet demand was weak indicating further downside risk. Elsewhere, Australia’s building approvals fell 3.2% m/m in February (verse -4 exp) from a revised increase of 5.9% in January. Also, AIG performance of manufacturing index marginally increased to 46.3 in March from 45.4. AUDUSD rose to 0.7664 on the decent data before reversing earlier gains. With a RBA rate cut back on the table, traders will be focused on 0.7560 March low.


In the European session, we have a slew of PMIs. Final manufacturing PMIs are anticipated to be broadly unrevised from the flash at Euro area 51.9, Germany 52.4 and France 48.2. European periphery could see a slight improvement but scope is limited. However, with a heavy US data scheduled (starting with today’s ADP) and confusion over the Greek reform negotiations, as a driver, European data will take a back seat. The Greek saga continues to drag on and it looks like no deal will be reached before Easter. Despite the breezy, carefree response from Greek and European policy makers (obviously to project a feeling of calm and comradery) Athens will struggle to meet debt repayments starting April 9th to the IMF. Finally, The ECB balance sheet is now ramping (€2246bn) up with heavy TLTRO loan to banks and ECB buying of government bonds. We remain significantly negative on the EURUSD. Yesterdays close below the 21d MA at 1.0780 indicates a bearish move towards 1.0458.
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The last trading day of the quarter has been subdued. In the Asian session, FX markets were dominated by more USD strength as traders further priced in policy divergence. However, due to the short holiday week, trading volumes are already thinning and direction lacking conviction. Regional equity markets were broadly higher with only the Nikkei (down -0.51%), breaking up the green across the screen. US stock futures are pointing to a higher open. Once again it was commodity currencies that led the G10 downwards slide.
AUDUSD dropped from 0.7665 to 0.7620 despite the strong new homes sales data which posted a 1.1% increase. NZDUSD after a brief rally to 0.7511, fell to 0.7473. Again the better than expected data in business confidence (35.8 up from 43.4) did little to generate NZD demand. NZDUSD is now trading below the 65d MA putting the immediate risk of a retest of cycle lows at 0.7200. USDJPY bounced around 120.0 and 120.35 for most of the session with no directional bias. USDJPY base is complete the next bullish target should be 121.20 (3/20/15 high). Oil futures fell as Iran and world powers seem to have moved closer to a deal that could lessen sanctions and open up more Iranian crude to the worlds markets.

In the European, session traders will be watching UK final Q4 GDP growth expected to be unrevised at 0.5% q/q. GBPUSD has been consolidating loses around the 1.4790 areas but our bias is towards further downside. Despite UK accelerating economy, inflation is worryingly low which will keep the BoE from any policy action in the foreseeable future. In the short term growing political risk generating from the upcoming, highly uncertain, election will weigh on the sterling. With GBPUSD comfortable below the short term downtrend at 1.4880 indicates a test of 1.0458 low.

From the Eurozone, expect flash HICP inflation to rise from -0.1% y/y to 0.0% y/y in March. Markets expect euro area unemployment to stay at 11.2% while German unemployment rate to be flat in March at 6.5%. With the markets focus on US data (payrolls) and developments around the Greek reforms negotiations, this data will go unnoticed unless we see a significant surprise. Yesterday, Prime Minister Alexis Tsipras hit the wires again to appeal for a "honest compromise" with creditors but warned that “unconditional” deals would not be accepted. With the Greek debt situation still far from being resolved, our short term bias is to the downside for EURUSD. A close below the 21d MA would indicate a bearish move towards 1.0458.
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The FX markets started the week in a subdued fashion with the USD slightly stronger verse G10 and EM currencies. In Asian equity markets, Chinese stocks were the big gainers with the Shanghai composite up 2.47% aided by PBoC governor pro-growth comments. The Hang Seng and Nikkei rose 1.73% and 0.65% respectively. S&P 500 futures are pointing to a stronger open. Commodity currencies (AUD, NZD, NOK and CAD) were under pressure following falls in Oil. extended loses as fear of supply disruption from military operations in Yemen were exaggerated (but situation remains fluid). Lingering worries over the lack of a tangible bailout solution for Greece will renew USD buying. In Japan, industrial production collapsed -3.4% m/m verse -1.9% expected. The decline was broad-based but critically focused in key export industries. The sharp decline may have been caused by slower demand from China during the New Year. USDJPY remains contained in at 118.95 to 119.50 trading range.
USDCNY fell on the open to 6.21 and the fix was only slighter higher. PBoC governor Zhou Xiaochuan provided markets with reassurance that managing a soft-landing would be the highest priority. China's central banks chief suggested that the countries growth rate had fallen too much and that policy makers had plenty of tools to respond. Governor Zhou mentioned using both interest rates and quantitative measures. He also highlighted declining inflation stating “we need to be vigilant to see if the disinflation trend will continue.” A pro-stimulus comment if there every was one. In regards to foreign exchange which policy makers have become extremely involved with recently (see Weekly Report), Zhou said China will change regulations radically this year. We remains constructive on the CNY based on China massive firepower still unused. China will continue to move in a proactive manner which will revive growth by Q3 2015.

In the European, session the focus will be on developments around the Greek reform proposal to the Eurogroup. With Greece running out of money negotiations are key for Greece to avoid an liquidity event (next Monday a €450m loan payment is due to IMF). Officials on both side stated that weekend talks were positive yet slow. Creditors have demanded that Greece must implement reforms before any of the €7.0bn from the bailout fund is disbursed. The most recent reform proposal looks to put property tax concession at the middle of the new agreement (estimated to raise €2.5bn of €3.0bn needed). However, Greece’s new reform has failed to include changes to labor laws and pension systems which are essential according to creditors to the final bailout program. We remain bearish on the EUR. Rejection at 1.1098 resistance areas suggests a test of 1.0570. Spanish HICP inflation provided a slight turn around at -0.7 from prior read at -1.2%y/y. Swiss KoF surprisingly increased to 90.8 verse 89.1 expected (prior revised to 90.3) decline.

In the US session personal spending & income, PCE deflator and pending home sales will hold traders attention.
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Japanese inflation came in soft as expected. The CPI ex-fresh food (monitored by the BoJ) decelerated faster-than-expected to 2.0% on year to February (vs. 2.1% exp. & 2.2% last). The household spending contracted for 11th straight month after the sales tax have been introduced in April 2014. USD/JPY remained well supported above 119.00 in Tokyo, Nikkei stocks wrote-down 0.95%. The month, quarter and fiscal year end should keep the demand in yen tight and prevent the yen from significantly depreciating before April. USD/JPY offers abound pre-120. On the downside, the daily Ichimoku cloud (118.20/75) should deliver support. EUR/JPY reversed gains unexpectedly and opened below the Ichimoku conversion line on EUR-negative sentiment. We remain on the sidelines given the uncertainties on EUR.
EUR/USD failed to clear resistance above 1.1043 yesterday. After hitting 1.1052, the pair rapidly sold-off and stabilized between 1.0850 / 1.0900. Resistance remains solid at 1.1000/43, the option bets turn positive above this level in anticipation of a relief rally following potential bailout agreement between Greece and the EU. Greece is seriously running out of cash and is looking to agree with creditors to avoid default. The pending uncertainties turn the EUR sentiment mild today. The EUR/GBP bounces lower from resistance at 0.73622/935 (50-dma / Fib 38.2% on Dc’14 – Mar’15 sell-off). Option barriers trail below 0.7350 at today’s expiry.

Numerous failures to clear resistance at 1.50 sent the Cable down to 1.4813/67 range in Asia. The latest YouGov/Sun poll shows Conservatives advance to 36% verse Labour at 34%. The BoE now retreats to the sideline to avoid any involvement in political matters. The pre-election jitters anchor the GBP-complex on the downside and should push the GBP/USD toward 1.4635 (Mar 18th low) and lower.

The gold rally remained capped at $1,220 yesterday (Fibonacci 50% on Jan-Mar downside correction) as news on Saudi Arabia/Yemen tensions gained limited traction. Trend and momentum indicators point the upside, suggesting renewed attempt to yesterday highs. The WTI crude is back at 50$. The normalization in gold and oil prices is certainly due to the low risk of contagion, however the risks have not dissipated yet.

As expected, the SARB kept its interest rate unchanged at 5.75%, USD/ZAR reversed gains and stepped back above 12.00. Although the improvement in the inflation is being curbed by the significant ZAR depreciation, we see no immediate impact on SARB’s policy outlook. The cautious Fed fortunately buys some time for the SARB before proceeding with higher rates. The slowdown in South Africa’s manufacturing and mining production, combined to tighter fiscal discipline, justifies a stable rate outlook before the Fed’s first move and thereafter. With softer Fed however, the supply zone at 12.50+ is the next challenge.

Today, traders watch German February Import Price Index m/m & y/y, UK March Nationwide house Prices m/m & y/y, Swedish February Retail Sales m/m & y/y, Norwegian February Credit Indicator Growth y/y, Retail Sales w/auto fuel m/m and March Unemployment Rate, Italian January Industrial Orders and Sales m/m & y/y, US 4Q (Third) GDP Annualized, Personal Consumption, GDP Price Index and Core PCE q/q and University of Michigan’s March Final Sentiment, Current Situation, Expectations and 1yr , 5-10yr Inflation.
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It has been the second consecutive USD-positive Asian trading session. The majority of the G10 and EM currencies underperformed the US dollar as the market is in effort to determine a bottom in the recent USD slide post-FOMC. Yesterday’s very slight improvement in the US CPI has therefore been a reason enough to revive the USD-bulls. This behavior supports our view that the USD weakness should now be curbing.
EUR/USD advanced to 1.1029 yesterday. Impotent to break above last week’s high (1.1043), the pair eased to 1.0901/38 range in Asia. The sentiment in EUR remains skeptical as no bailout agreement has been reached between Greece and the EU, and the month-end deadline is approaching fast. We see two-sided event risk in Greece talks. The downside risks (failure to service debt, default) have not dissipated yet the market is currently pricing in an arrangement to prevent a “Graccident”. The latter, and the basecase scenario suggests a relief rally after weeks of uncertainty and should have the potential to temporary push the EUR/USD higher. Break above 1.1043 (last week high) will shift the next resistances to 1.1280 (Fib 76.4% on Feb-Mar sell-off), then 1.1534 (Feb 3rd high). In the mid-run however, the divergence between the ECB and the Fed keeps the bias on the downside, with the parity being still the key target. EUR/GBP is now testing the 50-dma / Fib 38.2% resistance at 0.73746/935 area, if broken should pave the way toward the daily cloud cover (0.74922/0.76774).

EUR/CHF trades below what the market has accepted as the SNB’s 1.05/1.10 implicit band, despite the good buying interest in the majority of EUR-crosses. And the decoupling is believed to widen due to safe heaven inflows into the Swiss franc. EUR/CHF legged down to 1.04222 in New York yesterday, in completely de-correlated fashion with other EUR-crosses. The break below 1.05 threshold triggered some stress on the euroswiss futures, up to 100.890 for the first time since the SNB refrained to cut rates on March 19th scheduled meeting. We stand ready for unscheduled SNB intervention should the franc positive pressures rise. The market should easily absorb 15-25 basis point cut given the global macro conditions.

In New Zealand, the trade data fell significantly short of market expectations. The trade surplus printed a poor 50 million NZD in February verse 350 million expected (!) as exports did not pick-up as anticipated (3.92 bn vs. 4.10 bn exp. & 3.70 bn last). The 12-month ytd deficit deepened from -1,409 million NZD to -2,181 million. NZD/USD has certainly topped at 0.7697 as we see exhaustion in positive momentum above 100-dma.

In Brazil, the BCB President Tombini sees no need to reduce the currency swap volumes. The main goal of the swap operations is to temper the volatilities on the FX market and provide a hedge for the real in this volatile environment, rather than to push for an artificial BRL appreciation. The fundamental bias in USD/BRL is positive given the globally strengthening US dollar. We see 3.00/10 area as strong downside challenge and believe that Rousseff has some time to go before gaining back investors trust and pulling capital back in Brazil.

The economic calendar of the day: Swiss February UBS Consumption Indicator, French March Business and Manufacturing Confidence and Production Outlook, Spanish February PPI m/m & y/y, Swedish March Consumer and Manufacturing Confidence, IFO March Business Climate, Current Assessment and Expectations in Germany, UK February BBA Loans for House Purchases, US March 20th MBA Mortgage Applications, US February Durable Goods Orders and French February Jobseekers Net Change and Total Jobseekers.
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The USD paired losses in Asia and outperformed the majority of G10 and Eastern European currencies. The emerging Asia extended gains verse the greenback yet the sell-off should start curbing with the Fed officials’ comments in focus. SF Fed’s Williams said yesterday that mid-year rate rise should be appropriate (in line with the first rate hike in June and gradual normalization). US economy can handle strong USD, he added. While Dallas Fed’s Fischer (known to be a hawkish member) repeated that extremely low rates increase the financial instability. All in all, there is a hawkish shift in expectations for the first FF rate hike, to happen in June rather than in September, according to implied probabilities extracted from the rate markets. This means that gains in high yielders could soon come under pressure.
To be released today (at 12:30 GMT), the US consumer prices should remain soft due to weak oil prices in February. However, the soft inflation alone does not seem to worry. In his speech yesterday, Fischer mentioned the inflation is expected to gradually move toward Fed’s 2% target. In the meanwhile, the lower oil prices are good for fueling the economic activity and the lower inflation gives flexibility to Fed-doves to maintain their cautious stance to sustain growth. Risk-on warranted!

Rapidly into the EM: the USD/TRY eased to 2.5405, a rebound back to 1.5725 will get the price back to January-March uptrend channel. The USD/ZAR eased to the Fibonacci 50% on Feb-Mar rally, levels below the 50% Fib are seen as fragile walking into SARB meeting (Thu). The USD/BRL fell to 3.1307 as the S&P affirmed country’s investment grade rating. This is important for the short/mid-run capital allocations in portfolios. With the 1-week realized volatility above 32% however, the challenge should stay strong at 3.00/10 area.

An important issue this week is the Greek / EU negotiations. Even if Tsipras and Merkel did not come to a conclusion yesterday, the EUR/USD is better bid, at least on efforts that are being put into discussions. The ECB President Draghi spoke to European Parliament Committee in Brussels yesterday. EUR/USD advanced to 1.0971 as Draghi said the ECB will reinstate the Greek waiver if the review is successful. We still keep in mind that Greece should service 2 billion euro debt on Friday (besides paying salaries to government workers and pensions) and can do it only by rolling over its treasury bills as the ECB stopped funding the Greek banks in February. This gives the Greek banks the choice between participating to fund raising to save Greece, or to let it default. The second scenario could harm the recent EUR gains, if avoided a EUR/USD break above 1.1043 (last week high) will shift the next resistances to 1.1280 (Fib 76.4% on Feb-Mar sell-off), then 1.1534 (Feb 3rd high). In the mid-run however, the divergence between the ECB and the Fed keeps the bias on the downside, with the parity being still the key target.

Across the Channel, the GBP/USD faces offers at 1.50+ before the inflation read (at 09:30 GMT). Soft inflation should send the GBP/USD lower on concerns that Carney will be tempted to keep the rates at low levels for a longer period of time as strong pound reinforces the disinflationary pressures. In addition, the pre-election talks anchor the market on the sell side. Offers pre-1.50 should be cleared for a fresh bullish reversal signal.

We are heading into a data-full day. The focus of the will be the inflation figures in the UK (Tue), the US (Tue). In both countries, the consumer prices should have softened further on weak oil prices in February. As the lower oil prices are good for fueling the economic activity, the lower inflation gives flexibility to central banks to maintain their dovish policy stance to sustain growth. The dovish Fed being already priced in, the impact of soft inflation should lead to a negatively skewed GBP/USD through the day.
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The US dollar got hammered in New York before the FOMC-week’s close. The majority of the G10 and EM currencies outperformed the USD as the Fed-hawks were left unsatisfied with lower Fed normalization path, although the Committee dropped the word “patient” from its statement at last week’s meeting. The Fed dots median forecast shifted significantly lower, from 1.125% to 0.625%, suggesting either a later start in normalization (from September), or an early but gradual hike in rates (from June). In both scenarios, the market will benefit from cheap liquidity conditions longer than formerly expected. Good news for the equity futures. The S&P 500 futures make a fresh attempt above $2,100, Dow Jones and Nasdaq futures start the week higher (0.83% and 0.57% at the time of writing).
EUR/USD advanced to 1.0883 in Asia with strong supply zone at 1.0869/1.1043 (Fib 38.2% on Feb-Mar sell-off / post-FOMC reaction high). We are now heading into the last week of March and no bailout agreement has been made between the EU and Greece yet. Greek PM Tsipras and German Chancellor Merkel will meet today. Any positive news should overwhelm EUR-bears and seriously challenge the resistance zone. EUR/GBP remains well bid above the 21-dma (0.72211). Potential relief regarding the Greek situation should revive purchases. The next resistance is seen at 0.73890/0.73935 (50-dma / Fib 38.2% on Dec’14/Mar’15).

In the UK, the lower-than-expected budget deficit added on broad based USD sell-off (post-FOMC downside correction) and sent the Cable up to 1.4990 in Asia. The trend and momentum indicators remain comfortably bearish however, decent vanilla calls are seen at 1.4900/1.4980 and 1.5035 exceptionally this Monday. For the rest of the week, barriers are building at 1.50+ suggesting limited follow through short-term bullish attempts. With pre-election jitters and higher volatilities, the GBP market should remain anchored on the downside. GBP/USD traded on little volume in Asia. In the mid-term, eyes are set to 1.45 in the continuation of 8-month downtrend. The GBP/USD 1-month 25-delta risk reversals retreat to -143.75 points as traders prefer hedging the GBP-negative risks before May 7th elections.

USD/JPY and JPY crosses traded mixed in Tokyo. USD/JPY opened below the Ichimoku conversion line (120.49) and nears Jan-Mar uptrend channel’s base (119.67). Lower US yields and approaching fiscal year-end in Japan should cap the upside pre-122.03 (Mar 10th high) and reinforce the bearish move toward the Ichimoku cloud cover (118.46/71). Option barriers trail below 120.50

The focus of the week will be the inflation figures in the UK (Tue), the US (Tue) and in Japan (Fri). The consumer prices should have softened further on weak oil prices in February. As the lower oil prices are good for fueling the economic activity, the lower inflation gives flexibility to central banks to maintain their dovish policy stance to sustain growth. This appears to be a win-win situation, yet the risk of a quick inflation rebound, once the oil prices will start stabilizing, is not being priced in prudently.

We have a light economic calendar today. Traders watch Swiss February M3 Money Supply y/y, UK March CBI Trends Total Orders and Selling Prices, Chicago Fed’s February National Activity Index, US February Existing Home Sales m(m and Euro-zone March (Advance) Consumer Confidence Index.
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The FX traders continue consolidating the post-FOMC USD weakness. The US 10-year yields recover to 50-dma (1.9608%), as the sovereign yield curve declines on the back end compared to last Friday levels. Lower US yields cap the upside attempts in USD/JPY, however the pair closed / opened above the Ichimoku conversion line (120.67). Step below this level should face support at 120.00/120.10 (optionality /Ichi baseline) before heading toward the daily cloud cover (118.43/71). On the upside, fresh boost is needed to clear resistance at 122.03, stops are touted above. Option markets are supportive with vanilla bids trailing from 121.15 to 122.00+. No surprise came out of the BoJ minutes overnight. In their February Board meeting, lawmakers voiced concerns over higher volatilities in JGB market and lower risk tolerance. Views on inflation split, showed the minutes. EUR/JPY sits on Fibonacci 61.8% on 2012-2014 rally (128.52). Technicals turn neutral, markets are more comfortable with EUR/JPY longs as the pair approaches the conversion line (129.39). The persistent EUR risks are still an important barrier however, as Greece is running out of time before the deadline on their repayments. EU leaders ask for more concrete and convincing reforms / proposals to achieve agreement on bailout.

EUR/USD gave back post-FOMC gains and traded in the tight range of 1.0650/95 in Asia. The sentiment in EUR remains strongly negative. The wide trading range is seen at 1.0458/1.0865 before any clarity is seen on Greek situation. We remain seller on upside attempts and refrain from long EUR positioning across the board. EUR/GBP converges toward its 21-dma (0.72279). The market is skewed positive in short-term EUR/GBP, buyers abound at 0.70/0.72. Next key resistance is set to 0.73935/0.74000 (Fibonacci 38.2% on Dec’14 - Mar’15 sell-off / 50-dma).

GBP/USD opens ranged following highly volatile 48 hours of post-FOMC trading. There is no appetite in sterling whatsoever as the election jitters anchor the market on the downside. The latest YouGov / Sun poll prints 35% support for Conservatives, 33% for Labour. The UK publishes its public finances in February. Higher public borrowing hence wider budget deficit would be a good reason for refreshed GBP-bears targeting 1.45 (psychological level), then 1.4231 (May 2010 low).

Canada releases February inflation figures before the week-end. Although the inflation expected to have improved on month, the disinflationary trend and the low inflation levels give the BoC the flexibility to remain dovish despite the persistent selling pressures on the Loonie (thanks to fresh lows in oil prices this week). Post-FOMC move has sent the USD/CAD down to Jan-Mar ascending base and 50-dma (1.2450), the correction has been rapid however. Any disappointment in inflation read today (softening inflation) should give a fresh boost to CAD-bears and pave the way for fresh highs (above 1.2835).

Else, the USD/BRL hits fresh 12-year high (3.3058) before the IPCA-15 data and anti-corruption proposals pre -weekend. While 1.25% acceleration in nationwide consumer prices on month to mid-March is already priced in, the political focus dominates the BRL market. We see the anti-corruption proposals hardly satisfying the market and stand ready for new street protests this weekend. Traders will certainly be reluctant to hold long-BRL positions over the weekend, so that we should see further weakness before the week close.

Today’s economic calendar: German February PPI m/m & y/y, French 4Q (Final) Wages, ECB January Current Account Balance, UK February Public Finances and Public Sector Net Borrowing, Italian January Current Account Balance, Canadian February CPI m/m & y/y and January Retail Sales m/m.
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The FX traders continue consolidating the post-FOMC USD weakness. The US 10-year yields recover to 50-dma (1.9608%), as the sovereign yield curve declines on the back end compared to last Friday levels. Lower US yields cap the upside attempts in USD/JPY, however the pair closed / opened above the Ichimoku conversion line (120.67). Step below this level should face support at 120.00/120.10 (optionality /Ichi baseline) before heading toward the daily cloud cover (118.43/71). On the upside, fresh boost is needed to clear resistance at 122.03, stops are touted above. Option markets are supportive with vanilla bids trailing from 121.15 to 122.00+. No surprise came out of the BoJ minutes overnight. In their February Board meeting, lawmakers voiced concerns over higher volatilities in JGB market and lower risk tolerance. Views on inflation split, showed the minutes. EUR/JPY sits on Fibonacci 61.8% on 2012-2014 rally (128.52). Technicals turn neutral, markets are more comfortable with EUR/JPY longs as the pair approaches the conversion line (129.39). The persistent EUR risks are still an important barrier however, as Greece is running out of time before the deadline on their repayments. EU leaders ask for more concrete and convincing reforms / proposals to achieve agreement on bailout.
EUR/USD gave back post-FOMC gains and traded in the tight range of 1.0650/95 in Asia. The sentiment in EUR remains strongly negative. The wide trading range is seen at 1.0458/1.0865 before any clarity is seen on Greek situation. We remain seller on upside attempts and refrain from long EUR positioning across the board. EUR/GBP converges toward its 21-dma (0.72279). The market is skewed positive in short-term EUR/GBP, buyers abound at 0.70/0.72. Next key resistance is set to 0.73935/0.74000 (Fibonacci 38.2% on Dec’14 - Mar’15 sell-off / 50-dma). 
GBP/USD opens ranged following highly volatile 48 hours of post-FOMC trading. There is no appetite in sterling whatsoever as the election jitters anchor the market on the downside. The latest YouGov / Sun poll prints 35% support for Conservatives, 33% for Labour. The UK publishes its public finances in February. Higher public borrowing hence wider budget deficit would be a good reason for refreshed GBP-bears targeting 1.45 (psychological level), then 1.4231 (May 2010 low).

Canada releases February inflation figures before the week-end. Although the inflation expected to have improved on month, the disinflationary trend and the low inflation levels give the BoC the flexibility to remain dovish despite the persistent selling pressures on the Loonie (thanks to fresh lows in oil prices this week). Post-FOMC move has sent the USD/CAD down to Jan-Mar ascending base and 50-dma (1.2450), the correction has been rapid however. Any disappointment in inflation read today (softening inflation) should give a fresh boost to CAD-bears and pave the way for fresh highs (above 1.2835).

Else, the USD/BRL hits fresh 12-year high (3.3058) before the IPCA-15 data and anti-corruption proposals pre -weekend. While 1.25% acceleration in nationwide consumer prices on month to mid-March is already priced in, the political focus dominates the BRL market. We see the anti-corruption proposals hardly satisfying the market and stand ready for new street protests this weekend. Traders will certainly be reluctant to hold long-BRL positions over the weekend, so that we should see further weakness before the week close. 
Today’s economic calendar: German February PPI m/m & y/y, French 4Q (Final) Wages, ECB January Current Account Balance, UK February Public Finances and Public Sector Net Borrowing, Italian January Current Account Balance, Canadian February CPI m/m & y/y and January Retail Sales m/m.
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The FX traders continue consolidating the post-FOMC USD weakness. The US 10-year yields recover to 50-dma (1.9608%), as the sovereign yield curve declines on the back end compared to last Friday levels. Lower US yields cap the upside attempts in USD/JPY, however the pair closed / opened above the Ichimoku conversion line (120.67). Step below this level should face support at 120.00/120.10 (optionality /Ichi baseline) before heading toward the daily cloud cover (118.43/71). On the upside, fresh boost is needed to clear resistance at 122.03, stops are touted above. Option markets are supportive with vanilla bids trailing from 121.15 to 122.00+. No surprise came out of the BoJ minutes overnight. In their February Board meeting, lawmakers voiced concerns over higher volatilities in JGB market and lower risk tolerance. Views on inflation split, showed the minutes. EUR/JPY sits on Fibonacci 61.8% on 2012-2014 rally (128.52). Technicals turn neutral, markets are more comfortable with EUR/JPY longs as the pair approaches the conversion line (129.39). The persistent EUR risks are still an important barrier however, as Greece is running out of time before the deadline on their repayments. EU leaders ask for more concrete and convincing reforms / proposals to achieve agreement on bailout.
EUR/USD gave back post-FOMC gains and traded in the tight range of 1.0650/95 in Asia. The sentiment in EUR remains strongly negative. The wide trading range is seen at 1.0458/1.0865 before any clarity is seen on Greek situation. We remain seller on upside attempts and refrain from long EUR positioning across the board. EUR/GBP converges toward its 21-dma (0.72279). The market is skewed positive in short-term EUR/GBP, buyers abound at 0.70/0.72. Next key resistance is set to 0.73935/0.74000 (Fibonacci 38.2% on Dec’14 - Mar’15 sell-off / 50-dma). 
GBP/USD opens ranged following highly volatile 48 hours of post-FOMC trading. There is no appetite in sterling whatsoever as the election jitters anchor the market on the downside. The latest YouGov / Sun poll prints 35% support for Conservatives, 33% for Labour. The UK publishes its public finances in February. Higher public borrowing hence wider budget deficit would be a good reason for refreshed GBP-bears targeting 1.45 (psychological level), then 1.4231 (May 2010 low).

Canada releases February inflation figures before the week-end. Although the inflation expected to have improved on month, the disinflationary trend and the low inflation levels give the BoC the flexibility to remain dovish despite the persistent selling pressures on the Loonie (thanks to fresh lows in oil prices this week). Post-FOMC move has sent the USD/CAD down to Jan-Mar ascending base and 50-dma (1.2450), the correction has been rapid however. Any disappointment in inflation read today (softening inflation) should give a fresh boost to CAD-bears and pave the way for fresh highs (above 1.2835).

Else, the USD/BRL hits fresh 12-year high (3.3058) before the IPCA-15 data and anti-corruption proposals pre -weekend. While 1.25% acceleration in nationwide consumer prices on month to mid-March is already priced in, the political focus dominates the BRL market. We see the anti-corruption proposals hardly satisfying the market and stand ready for new street protests this weekend. Traders will certainly be reluctant to hold long-BRL positions over the weekend, so that we should see further weakness before the week close. 
Today’s economic calendar: German February PPI m/m & y/y, French 4Q (Final) Wages, ECB January Current Account Balance, UK February Public Finances and Public Sector Net Borrowing, Italian January Current Account Balance, Canadian February CPI m/m & y/y and January Retail Sales m/m.
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The FX traders continue consolidating the post-FOMC USD weakness. The US 10-year yields recover to 50-dma (1.9608%), as the sovereign yield curve declines on the back end compared to last Friday levels. Lower US yields cap the upside attempts in USD/JPY, however the pair closed / opened above the Ichimoku conversion line (120.67). Step below this level should face support at 120.00/120.10 (optionality /Ichi baseline) before heading toward the daily cloud cover (118.43/71). On the upside, fresh boost is needed to clear resistance at 122.03, stops are touted above. Option markets are supportive with vanilla bids trailing from 121.15 to 122.00+. No surprise came out of the BoJ minutes overnight. In their February Board meeting, lawmakers voiced concerns over higher volatilities in JGB market and lower risk tolerance. Views on inflation split, showed the minutes. EUR/JPY sits on Fibonacci 61.8% on 2012-2014 rally (128.52). Technicals turn neutral, markets are more comfortable with EUR/JPY longs as the pair approaches the conversion line (129.39). The persistent EUR risks are still an important barrier however, as Greece is running out of time before the deadline on their repayments. EU leaders ask for more concrete and convincing reforms / proposals to achieve agreement on bailout.
EUR/USD gave back post-FOMC gains and traded in the tight range of 1.0650/95 in Asia. The sentiment in EUR remains strongly negative. The wide trading range is seen at 1.0458/1.0865 before any clarity is seen on Greek situation. We remain seller on upside attempts and refrain from long EUR positioning across the board. EUR/GBP converges toward its 21-dma (0.72279). The market is skewed positive in short-term EUR/GBP, buyers abound at 0.70/0.72. Next key resistance is set to 0.73935/0.74000 (Fibonacci 38.2% on Dec’14 - Mar’15 sell-off / 50-dma). 
GBP/USD opens ranged following highly volatile 48 hours of post-FOMC trading. There is no appetite in sterling whatsoever as the election jitters anchor the market on the downside. The latest YouGov / Sun poll prints 35% support for Conservatives, 33% for Labour. The UK publishes its public finances in February. Higher public borrowing hence wider budget deficit would be a good reason for refreshed GBP-bears targeting 1.45 (psychological level), then 1.4231 (May 2010 low).

Canada releases February inflation figures before the week-end. Although the inflation expected to have improved on month, the disinflationary trend and the low inflation levels give the BoC the flexibility to remain dovish despite the persistent selling pressures on the Loonie (thanks to fresh lows in oil prices this week). Post-FOMC move has sent the USD/CAD down to Jan-Mar ascending base and 50-dma (1.2450), the correction has been rapid however. Any disappointment in inflation read today (softening inflation) should give a fresh boost to CAD-bears and pave the way for fresh highs (above 1.2835).

Else, the USD/BRL hits fresh 12-year high (3.3058) before the IPCA-15 data and anti-corruption proposals pre -weekend. While 1.25% acceleration in nationwide consumer prices on month to mid-March is already priced in, the political focus dominates the BRL market. We see the anti-corruption proposals hardly satisfying the market and stand ready for new street protests this weekend. Traders will certainly be reluctant to hold long-BRL positions over the weekend, so that we should see further weakness before the week close. 
Today’s economic calendar: German February PPI m/m & y/y, French 4Q (Final) Wages, ECB January Current Account Balance, UK February Public Finances and Public Sector Net Borrowing, Italian January Current Account Balance, Canadian February CPI m/m & y/y and January Retail Sales m/m.
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The USD has been squeezed heavily as the FOMC delivered a cautious statement at the end of its two day meeting. As widely expected, the Fed dropped its call for “patience”, yet the pace of rate normalization is now expected to be significantly slower. The Fed dots median forecast has been lowered from 1.125% previously to 0.625% (this is far below expectations), shifting the majority’s call the first rate hike to September. It is noteworthy to mention that a June hike is still possible and might be preferred. The frequency of action would then be lower in line with an “early and gradual” normalization, rather than a “late and steeper” action. The US indices rallied with S&P500 back above $2,100, Dow Jones futures traded to $18,070 on expectations of longer low rate environment. The US 10-year yields eased to 1.8975%, giving the opportunity for G10 and EM currencies to take a deep breath.
USD/JPY hit Jan-Mar uptrend bottom (119.30) and rebounded to 120.75 in Tokyo. Lower US yields will certainly prevent the fresh highs in USD/JPY in the short-run. Resistance is seen pre-122.03. A daily close below the conversion line (120.67) should pave the way to Ichimoku cloud cover (118.37/71).

EUR/USD shortly tested offers above 1.10 (hit 1.1043). The strong negative bias in EUR/USD however rapidly dried the buying interest, Asian traders pushed the pair down to 1.0758. Consolidation is underway in between 1.0458/1.0870 (Mar 16th low / Fib 38.2% on Feb-Mar drop) area. The mid-term target remains the parity. We see thick area of offers in between 1.0850/1.1000 with rising protest against the ECB. Eurozone citizens criticize the ECB to help the banks, rather than helping people. Combined to unresolved Greek situation, the EUR/USD spike has been an excellent opportunity to strengthen the short positioning. We remain seller on rallies. EUR/GBP cleared resistance at 0.7200/50 area, advanced to 0.72931. Yesterday’s close above the conversion and the baseline keep the appetite on the upside. Especially with broad GBP reluctance on election jitters. Despite stronger positive momentum in EUR/GBP, we remain cautious vis-à-vis the event risk in EUR (Greek insolvability, Grexit).

GPB/USD spiked to 1.5166 post-FOMC and rapidly gave back gains through Asia. The Cable opened downbeat in London, suggesting the USD weakness has been a flash in the pan. We do not expect sustained follow up to upside attempt. Large option barriers at 1.4875/1.4950 should curb the upside today.

Norges bank is expected to cut its deposit rate from 1.25% to 1.0% at today’s meeting, amid Riksbank surprised the market by lowering its rate by an additional 10 basis points to -0.25% yesterday. The DNB pledged to defend the EUR/DKK peg regardless of the size of its FX reserves, while January, February pressures on the EUR/DKK are now put on pension funds and insurance companies’ shoulders, perhaps rushing to safer-heaven investments rather than carrying the EUR risk. Scandinavian currencies will remain subject to inflows from the EUR and will be increasingly part of the currency wars. The NOK/SEK recovered to 1.0544 post-Riksbank. Trend and momentum indicators play against the Nordic cross as oil prices fall to fresh lows, while lower SEK rates should curb the negative trend at 1.0300/21 (Jan 13th low / Fib 38.2% on Dec’14-Jan’15 rebound).

The consensus for the SNB meeting is status quo at today’s meeting. The euroswiss futures advanced to 110.890 with open interest spike at 66710 (vs 36601 average over the past 15-days). The money market pricing confirms that the anxiety on more negative rates will remain in the headlines as long as selling pressures on EUR are not ready to dissipate, regardless of more negative SNB rates at today’s meeting. The SNB is suspected to purchase sizeable amount of EUR to maintain the EUR/CHF within its implicit 1.05/1.10 range. The growth and inflation forecasts in 2015 have been revised significantly down from 2.1% to 0.9% and from 0.2% to -1.0% respectively.

Today’s economic calendar: Swiss February Trade Balance, Exports & Imports m/m, SNB rate decision, Euro-zone 4Q Labor Costs, US 4Q Current Account Balance, US March 14th Initial Jobless & March 7th Continuing Claims, Philadelphia Fed’s March Business Outlook and US February leading Index.
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Today’s key event is the FOMC decision due at 18:00 GMT, limited price action should be seen across the FX markets globally. Traders make the final adjustments to their positioning, with USD broadly higher in Asia. This is because the Fed is expected to drop its call for “patience” at this month meeting, which will be perceived as a concrete step toward a rate normalization. While the hawkish Fed expectations are already priced in across the money and currency markets, there is greater chance of seeing a more significant reaction on the stock indices. After last week’s depressed market, the S&P futures recovered timidly to $2,081 yesterday, Dow Jones futures gapped lower (after the unusual jump at yesterday’s trade), while Nasdaq has outperformed its US peers by advancing steadily to$ 4,384, still below the 21-dma.
WTI crude legged down to fresh low of $42.44 following the slide to fresh lows that has already started in New York yesterday. The fresh weakness in crude pushes the oil industry into deeper panic. Royal Dutch announced to disassemble ¼ of its platforms in the North Sea, while 1/3 to ¼ of BP’s UK fields are uneconomic said the CEO of the group. Fighting for its market share, the Saudi Arabia already prints deficit, while the US continues producing 9.4 million barrels per day, through a constant uptrend. The panic in oil prices keep oil producer currencies downbeat. USD/NOK extends gains to 8.3323, combined to Norway’s shrinking trade balance to 21 billion NOK from 27.1 billion a month ago. Norges Bank is expected to lower the deposit rates from 1.25% to 1.00% on March 19th meeting. The wider divergence between the Fed and the Norges Bank suggests steady advance toward 2000-2001 range of 8.50/9.50 range.

USD/CAD tests 1.2800+ offers, while USD/RUB trades ranged given the limited RUB transactions overseas.

There is nothing new on the EUR-complex. The EUR sentiment remains comfortably negative, both on hawkish Fed expectations and Greece seeking liquidity provision at EU summit. In Frankfurt, street protests against the ECB are in European headlines! Uncertainties should keep the EUR market anchored on the downside. EUR/USD sales are touted below 1.05, EUR/GBP faces solid offers at 0.7200/0.7250 (including option barriers, Fibonacci 23.6% on Dec’14 – Feb’15 sell-off and the 21-dma). EUR/JPY hovers around 128.52 (Fib 61.8% on 2012-2014 rally). Large option barriers are placed at 130+.

In Japan, the trade deficit narrowed well above expectations in February, from -1-179.1 billion (revised) to -424.6 billion yen. Exports to US rose 14.3%, to China slumped by a significant 17.3% confirming FinMin Aso’s warnings yesterday (on China being a downside risk to Japan recovery). USD/JPY remained ranged in Tokyo (121.26/41) alongside with the 10-year US yields narrowing just above 2.0%. The major focus is the FOMC decision today. Hawkish Fed carries potential for an easy cross above 122.03 (Mar 10th high). Option bets are supportive above 121.50 for today expiry. A post-FOMC close below 120.97 (Ichimoku conversion line) should however anchor the market below March highs.

The New Zealand’s current account deficit narrowed less than expected, the CA-to-GDP ratio fell to -3.3% from -2.6% in the 4Q. The weakness in dairy prices continues, with lower volumes and the GDT index down by another 8.8% at the latest Fonterra auction. NZD/USD remains downbeat, the negative bias keeps the 0.72 support in focus, and stops are eyed below.

The economic calendar of the day: Italian January Trade Balance, UK January Unemployment rate and Weekly Earnings, UK February Jobless Claims Change and Claimant Count Rate, Euro-zone January Trade Balance and Construction Output m/m & y/y, Credit Suisse’s ZEW Survey on Expectations in Switzerland, US March 13th MBA Mortgage Applications, Canadian January Wholesale Trade sales m/m and later on New Zealand’s 4Q GDP q/q & y/y.
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The BoJ maintained the pace of its annual monetary base increase unchanged at 80 trillion yen, while the core inflation (at 0-0.5% range) is seen as depressed. Japan FinMin Aso mentioned China as a downside risk to Japanese recovery, while adding that one-two year period is not enough to modify the mindset in an economy after 20 years of struggle against deflation. According to Reuters survey, 55% of Japan firms would continue pushing wages higher, however, ’14-’15 combined salary increases would not be sufficient to cover April’14 sales tax hike. Hence the obstruction is well beyond the Japanese household mindset! JPY crosses traded mixed, the Nikkei stocks advanced by 0.99%. USD/JPY remained ranged at 121.25/52 in Tokyo. Trend and momentum indicators remain marginally bullish, primarily subject to FOMC positioning. Vanilla calls trail above 120.80/121.00 for today’s expiry, yet fresh boost is needed to clear 121.85/122.04 supply zone. The Fed may be that fresh boost, if as expected, it removes its call for “patience”. The US 10-year yields stabilize at 2.05% / 2.10% as the FOMC starts its two-day policy meeting today.
EUR/USD consolidates losses, the Greek/EU agreement remains a pending issue. Eurozone’s February final CPI figures are due today, the consensus is +0.6% improvement on month and stable headline inflation at -0.3% and core inflation at 0.6% on year. The sentiment remains comfortably negative with limited room for recovery before Mar 18th FOMC verdict. Resistance is seen at 1.0712 /25 (Fib 23.6% on Feb-Mar drop / optionality). We see open-end downside with explicit global mid-term target set at the parity. The divergence between the Fed and the ECB will keep the bias negative, yet an immediate EUR-unwind is contingent on Fed decision tomorrow.

The minutes of the latest RBA meeting revealed that a rate cut has been considered (we never doubted it), yet the committee decided to wait for more data. Nobody knows how long the RBA will remain on hold or will there be any need for additional rate cut; it also depends on relative rate divergence across the globe. A concrete step from the Fed toward policy tightening will push AUD/USD toward Stevens’ 75 cent target and lower, and will certainly postpone a potential RBA action on rates.

Central Bank of Turkey gives verdict today and is expected to maintain the status quo amid President Erdogan and government softened their aggressive call for lower rates last week. While traders remain skeptical due to non-null event risk (maybe a tiny 25 basis point cut as twinkle to politicians?), a non-action should revive short-term TRY bulls. On USD/TRY, the support is presumed at 1.5840 (Mar 12/13 double bottom) as hawkish FOMC bias should keep the USD appetite tight. The visibility thereafter is limited and it all depends whether the Fed will stop calling for “patience” (base case scenario) or not.

GBP/USD recovers reticently as latest polls suggest the advance of the Labour party over Tories (Populus poll: Labour 32%, Conservatives 29%, ComRes poll: Labour 35%, Tories 33%). We attach little importance on poll results given their highly volatile results. Yet warn traders on potential rise in GBP volatilities walking into May 7th general elections. Uncertainties should anchor the GBP down verse USD. Election jitters thicken 1.50 barriers on the option markets.

Today, traders focus on EU27 New Car Registrations in February, Spanish 4Q Labour Costs y/y, Norwegian February Trade Balance, Euro-zone 4Q Employment q/q & y/y, German March ZEW Survey for Current Situation and Expectations in Germany, Expectations in the Euro-zone, Euro-zone February CPI m/m & y/y, Canadian January Manufacturing Sales m/m, US February Housing Starts and Building Permits m/m.
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It has been all but a calm Sunday in Brazil. Following the street protests by over a million citizens, the government promised to present a package of anti-corruption within days. We are long gamma in BRL as higher volatilities will not be easy to dissipate before a satisfactory solution is offered to citizens in Brazil. The 1-month USD/BRL implied volatility advances to 21.9%, the 1-month risk reversals have spiked to 336 points.
The WTI crude started the week downbeat, sold-off from $45 to $43.57 as Chinese Premier Li said it will not be easy to achieve 7% growth in 2015. Buying interest is presumed above $40 as nuclear talks with Iran start today in Lausanne, Switzerland. Should the Iran sanctions start waning, it will only happen gradually.

Failure in oil recovery is certainly not good news for the loonie, that hit fresh 6-year high amid Friday’s job report. The Canadian labor market has been through a soft month in February, with unemployment rate up to 6.8% (from 6.7% exp. 6.6% last) and participation rate little changed (from 65.7% to 65.8%). Canada lost 1’000 jobs (vs. -5K exp. & 35.4K last), with however 34’000 full-time jobs added verse 34’900 part-time jobs off. USD/CAD advanced to fresh 6-year high of 1.2824. Trend and momentum indicators remain comfortably positive on the combination of lower oil and hawkish Fed expectations before March 17/18th FOMC meeting. Option markets are supportive of an extension toward 1.30.

EUR/USD hit fresh low of 1.0458 in Asian open. The sentiment in EUR remains comfortably negative as Greek uncertainties persist. Large put expiries at 1.0500/75 should anchor the market down. There is opportunity to sell the rallies before the FOMC meeting, corrective upside moves under constant pressure. EUR/GBP trades water between 0.70950/0.71357. With fading GBP-appetite, a close above 0.7190 (MACD pivot) should push the pair in short-term bullish consolidation zone to meet offers at 0.72486/0.72600 (Fib 23.6% on Dec’14-Mar’15 sell-off & 21-dma).

JPY crosses were mixed in Tokyo, Nikkei stocks did little (-0.04%). USD/JPY remained ranged between 121.16/48 with decent support from the option market between 120.00/121.50 area. EUR/JPY consolidates below 128.53 (Fib 61.8% on 2012/2014 rally), the sentiment in AUD/JPY turns flat (MACD at the zeroline).

Russian Central Bank eased the key rate from 15% to 14% as expected on Friday. The rate cut had little negative impact on RUBgiven the still-very-high rates and restrained RUB trading outside Russia.

The economic calendar today: Swiss February Producer and Import Prices m/m & y/y, Swiss January Retail Sales y/y, Canadian January International Securities Transactions, US March Empire Manufacturing, US February Industrial Production and Capacity Utilization, US February Manufacturing (SIC) Production, US March NAHB Housing Market index, US January Net Long-term TIC Flows and Total Net TIC Flows.
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The USD remains broadly in demand as traders continue adjusting positions to hawkish Fed expectations on next week’s FOMC meeting (Mar 17/18th). USD/JPY traded better bid in Tokyo, alongside with Nikkei stocks 1.39% higher on the session. BoJ’s Kuroda said the inflation should rise with wages and improvement in inflation expectations. With higher US yields, USD/JPY should continue challenging 122 offers on the upside. Large vanilla bids will give support above 120.00/50 before the week close. EUR/JPY recovers slightly as sell-off in EUR/USD and EUR/GBP curbs. The EUR-negative sentiment remains strong however. Resistance builds stronger pre-130.
Market is solidly negative on EUR/USD, bullish attempts find sellers. We hear talks on further cut on deposit rates to allow the ECB to widen its pallet for bond purchases (as ECB is not allowed to buy bonds yielding more negative than the deposit rate). The EUR/USD will step into the FOMC week without having resolved the Greek issue. Tensions between Greece and Germany mount adding to downside pressures. EUR/GBP pares losses (after Mar 11th 0.70143 low) as GBP/USD extends weakness to 1.4846. With stronger bearish momentum, the break below 1.4814 (Jul’13 low) should happen in smooth fashion. Decent option barriers at 1.4980/1.50 will weigh on the Cable at today’s expiry.

USD/CAD tests the January highs (1.2799) as weakness in crude oil continues. Trend and momentum indicators are marginally positive, suggesting a potential interest for new 6-year highs if market expectations for poor labor data materializes. Combined to hawkish Fed positioning, decent vanilla bids are waiting above 1.27 before March 18th FOMC decision.

In a report released yesterday, Fitch stated that 3.75 levels in USD/BRL would bring exporters to their competitive position before 2004 as the inflation hit companies’ cost structure over the past decade. We remain cautious on these comments as lower real would reinforce the steepening in inflation trend in Brazil, which in turn, should further weigh on the currency. Is improvement in competitiveness really part of the picture given the tight relation between inflation and the exchange rate? USD/BRL extends gains to 3.1714, sturdier bullish momentum and strong USD appetite will certainly prevent traders from holding BRL-long position through the week-end. The key resistance stands at 3.2420 (May’04 high).

The Russian Central Bank gives policy verdict today. The consensus is a rate cut from 15% to 14%, or more. The rate cut should trigger limited sell-off in RUB given the still-very-high rates and restrained RUB trading outside Russia.

The economic calendar today: Italian February Final CPI y/y, Italian January Government Debt, UK January Construction Output m/m & y/y, Canadian February Unemployment and Participation rate, Canadian February Existing Home Sales m/m, US February PPI m/m & y/y, University of Michigan’s March preliminary Sentiment Index and 1-yr/5-5yr Inflation Expectations.
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As widely expected, the RBNZ maintained its official cash rate unchanged at 3.50% and revised lower its growth and inflation forecasts. The NZD is still seen overvalued, yet satisfactory at current levels. The kiwi lost 18.5% over the past 8 months against the US dollar. NZD/USD rebounded from 0.7200 to 0.7383 post-RBNZ. Sentiment should turn positive should 0.7385/0.7400 barriers are cleared before the week close. The negative impacts of baseless news on Fonterra’s baby milk contamination continues weighing on dairy exports.
The USD appetite continues dominating the FX markets. The US 10-year yields finds support above 2%, while the DXY index tests 100 for the first time since March 2003. The rising risk is the Fed keeping its “patient” rhetoric at next week’s meeting. Then the relief rally should immediately reverse short-term dynamics in G10, high-beta and EM currencies that have been struggling at deepening oversold conditions since last week’s NFPs.

EUR/USD could hardly fall faster after Mario Draghi’s (unsurprising) comments on the QE. The pair hit 1.0495 overnight as buyers are obviously outweighed by fundamental and speculative shorts. With the broad target set to parity, traders should continue find opportunities in rallies to strengthen their short-EUR/USD positioning.

As suspected, 0.70 support remains challenging for EUR/GBP-bears. As the GBP-negative sentiment spills over the market on pre-election talks, GBP/USD eases to 1.4893, lowest since Jul’13. The bias remains on the downside with vanilla puts trailing below 1.4950/80 area. The key support stands at 1.4814 (Jul 9th 2013 low).

USD/CAD tested fresh 6-year highs (1.2799) as the WTI crude legged down to $47.33 in New York yesterday. The MACD (12, 26) stepped in bullish zone suggesting fresh interest in USD/CAD longs. Vanilla calls trail above 1.2650/1.27 and should give support before Friday’s labor data. The expectations are soft, therefore keeping the divergent BoC/Fed bets in charge for further loonie weakness verse USD.

In Brazil, the BCB minutes are due today and investors focus on bank’s comments about the accelerating consumer prices. The minutes will likely fall short of BCB hawks, while the central bank will doubtlessly leave the door open for further Selic rate hike given that it has little option other than conducting an aggressive, tight monetary policy to make sure to not lose control over the inflation diverging significantly from the BCB’s target. Indeed, the concerns on Rousseff’s ability to restore a fiscal discipline, the substantial depreciation in BRL combined to hawkish Fed expectations require tighter monetary policy, as the economic slowdown remains a major issue. There is the dilemma. The Congress postponed vote on the budget bill to March 17th.

Today traders focus on German, French and Spanish February Final CPI m/m & y/y, Swedish February Unemployment Rate, UK January Trade Balance, Euro-Zone January Industrial Production m/m & y/y, Canadian 4Q Capacity Utilization Rate and February Teranet/National Bank HPI m/m & y/y, Canadian January New Housing Price Index y/y, US February Retail Sales m/m, US March 7th Initial Jobless & February 28th Continuing Claims, Us February Import Price Index m/m & y/y, US January Business Inventories, US 4Q Household Change in Net Worth and US Monthly Budget Statement.
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Forex News and Events

The UK’s industrial and manufacturing production contracted by 0.1% and 0.5% in January, respectively. The unexpected slowdown in manufacturing output is mostly due to 9.5% drop in electronics after large defense industry contract inflated figures in December. The industrial production slowed by 0.1% as computer and electronics production fell 0.5%. The manufacturing output gap is due to one-time event, therefore should have limited impact on market optimism vis-à-vis UK’s economic recovery.

GBP/USD rebounded from 1.5037 post-data. The main input in GBP weakness is the election talks. Tories advance verse Labour party should keep the GBP-complex under pressure. As the Cable managed to hold ground above 1.5027/29 (Mar 9/10th support), the bullish harami formation is still valid. The upside attempts should however find buyers on sustained USD-appetite. Offers are presumed at 1.5180/1.5252 (Fibonacci 38.2% / 50% on Jan-Feb pick-up). The next support stands at 1.4952 (Jan 23th low).



EUR grinds lower as EU officials meet in Athens

EUR/USD extended weakness below 1.0600 amid President Draghi said the QE damped long-term sovereign yields, improved the market-based inflation expectations and will help the ECB to meet its price stability mandate. The spread between long maturity core and peripheral yields (with Greek exception) keep narrowing as the ECB started buying sovereign debt since Monday (Mar 9th). Selling pressures on EUR/USD are not ready to dissipate with EU officials meeting in Athens today to find a solution for Greek’s potential insolvability. Greece needs to gather 6.5 billion euros to service its debt within three weeks and will receive 7 billion euros needed to repay its upcoming debt and interests only, and if only, it agrees on bailout terms with the commission, the ECB and the IMF. Traders remain seller on rallies with the immediate target seen at 1.05. In the mid-run, the divergence between the Fed and the ECB policy outlooks paves the way toward the parity. The fundamental EUR/USD short positions are building stronger to counter short-term corrective attempts before 1.10 threshold.

Despite the falling appetite in GBP-longs, EUR/GBP clears bids at 0.70/0.72 area. We see bigger challenge at 0.70 support as the UK polls print 33% support for Tories verse 31% for the Labour party (YouGov/Sun poll). And the Conservatives advantage over their rivals should weigh on GBP-complex walking into May 7th general elections. Break of 0.70 support will shift the mid-run target to 0.6550 (2004-2007 support).

EUR/TRY took a dive to 2.7763 on the proficient combination of Draghi’s speech, Greek uncertainties and narrower Turkish current account deficit (-2bn verse -2.75bn and -6.81bn last). Following an open below the 200-dma (2.8303), the 21 and 100 dma (2.8142 / 2.7887) were rapidly pulled out in Istanbul. The MACD (12, 26) stepped in the red zone, suggesting short-term bearish reversal. For high risk profile traders, very short-maturity carry positions become interesting. With the one-week realized volatility spike to 16.75% however, the risk of a carry unwind should be considered at all times a short EUR/TRY position is opened. The risk of reversal is preeminent especially in case the agreement with Greece is reached! The 1-month EUR/TRY risk reversals remains above 300 points warning that despite the advantageous rate spread, the high TRY risk may prevent the lira from gaining significant positive traction.

Sqore Trade Ideas:
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The Risk Today

EURUSD EUR/USD continues to fall breaking strong support at 1.0765/75. Support lie at 1.0336 (31/03/2003 low). Hourly resistances for a short-term bounce can be found at 1.0717 (intraday high) and 1.1033 (06/03/2015 high). In the longer term, the symmetrical triangle favours further weakness towards parity. As a result, any strength is likely to be temporary in nature. Key resistances stand at 1.1534 (03/02/2015 high) and 1.1679 (21/01/2015 high). Key supports can be found at 1.0765 (03/09/2003 low).

GBPUSD GBP/USD is consolidating near the support implied by recent lows at 1.5027. The short-term technical structure is negative as long as prices remain below the hourly resistance at 1.5317 (17/02/2015 low) and 1.5398 (03/03/2015 high). A key support stands at 1.4952. In the longer term, the recent rise is seen as an oversold rebound, whose upside potential should be capped by the key resistances at 1.5620 (31/12/2014 high) and 1.5826 (27/11/2014 high). A strong support stands at 1.4814.

USDJPY USD/JPY improved yesterday. A break of the resistance at 121.85 would likely put an end to the recent short-term corrective phase. Major resistance stands at 124.14 . Hourly supports can be found at 121.15 (intraday high) and 120.66 ( rising channel top). A long-term bullish bias is favored as long as the key support at 110.09 (01/10/2014 high) holds. Even if a medium-term consolidation is likely underway, there is no sign to suggest the end of the long-term bullish trend yet. A gradual rise towards the major resistance at 124.14 (22/06/2007 high) is therefore favoured. A key support can be found at 115.57 (16/12/2014 low).

USDCHF USD/CHF remains strong as can be seen by the new highs above the resistance at 1.000. Monitor the resistance at 1.0240. Hourly supports can now be found at 0.9831 (24/12/2015 low) and 0.9732 (06/03/2015 low). In the longer-term, the bullish momentum in USD/CHF has resumed after the removal of the EUR/CHF floor. The break of the key resistance at 0.9554 (16/12/2014 low) opens the way for a further rise towards the other key resistance at 1.0240 (14/01/2015 high). A key support can now be found at 0.9374 (20/02/2015 low, see also the 200-day moving average).
Resistance and Support:
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The USD remained broadly offered across the board as Dallas Fed’s Fisher said the emphasis on wages is dangerous, while the inflation should bounce with stabilizing energy prices. Therefore it would be better, according to him, to proceed with an early and gradual normalization, rather than a late and steeper action. The US 10-year yields hover around 2.20%, the DXY index reaches 98.196. The S&P500 added $8 in New York following Friday’s dip to $2,037.27. The recovery is seen limited at February highs ($2,120) before next week’s FOMC meeting (Mar 18^th) as hawkish Fed expectations mount.
USD/JPY pulls out December top, advances to fresh 7-year high (122.03) in Tokyo on sustained US yields and broad USD appetite. With strengthening positive momentum, we see room for further upside. Next resistance stands at 124.14 (2007 high). Large vanilla bids should give support above 120.50/121.00 for today expiry. EUR/JPY and AUDJPY perform mixed as EUR and AUD weakness counter the JPY debasing. EUR/JPY consolidated between 131.37/87 as AUD/JPY tests 21-dma (93.047) on the downside. A break below should send the MACD in the red territories and signal short term bearish consolidation for the pair.
EUR/USD extends weakness to 1.0785. Sentiment remains strongly negative with fundamental shorts building stronger. The market focus is already set to parity. As resistance thickens pre-1.10 psychological level, the deep oversold conditions (RSI at 20%) suggest that a correction would be healthy before further weakness. EUR/CHF volatilities are again very low suggesting that the SNB is perhaps intervening to keep the level at about 1.0680/07 (21-dma). The euroswiss futures advance to 110.77 on expectations that the SNB may go more negative on rates.
The Antipodeans were the biggest losers verse USD overnight. According to NAB, the business confidence fell to lowest in February since July 2013 while business conditions remained subdued. AUD/USD legged down to 0.7632 (also impacted by Fonterra issue), the MACD (12, 26) stepped in the red zone. Break below 0.7626 (Feb 3^rd low) should increase selling pressures before Thursday’s labor data. Option barriers are placed at 0.7700/50 area. The NZD-complex was squeezed as police said to investigate a threat of contamination on baby formula. While tests showed no evidence of contamination, the recovery to NZD sell-off has been limited. NZD/USD fell to 0.7277. Stronger push to 0.72 is eyed.
USD/CAD advances to 1.2648 as WTI stepped back below $50. Friday’s jobs data may reveal further deterioration in jobs market and revive speculations for additional 25 bp cut on April 15^th meeting. Break above 1.2698 (MACD pivot & Feb 11^th high) should call for fresh 6-year highs (> 1.2800).
Else, USD/BRL extended gains to fresh highs (3.1321), overnight interbank deposit futures spiked to 13.90 as traders price in higher borrowing costs in Brazil. The BCB is now expected to proceed with further policy tightening, while protests mount against a sweet combination of probe scandals, Rousseff and Congress inability to agree on budget, economic slowdown and fastening inflation. At this point, Rousseff is comfortably far from getting market’s support behind her. The BRL sell-off continues with next key resistance set at 3.2420 (May 2004 high).
Today, traders watch Swiss February Unemployment Rate, French January Industrial and Manufacturing Production m/m & y/y, Spanish January Retail Sales m/m & y/y, Norway January CPI m/m & y/y, Italian January Industrial Production m/m & y/y, US February NFIB Small Business Optimism, US January Wholesale Inventories and Wholesale Trade Sales m/m, US January JOLTS Job Openings.
 
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The week starts with further EUR/USD weakness as Asia sent the pair down to 1.0823 amid the US printed strong jobs figures in February. The nonfarm payrolls (295K) overbeat the market expectations (235K), the unemployment rate fell to 5.5% (from 5.7% last) with slight decrease in participation rate (from 62.9% to 62.8%). The wages, however, grew by unsatisfactory 0.1% on month (vs. 0.2% exp. & 0.5% last). The US 10-year yields advanced to 2.2575% for the first time since Dec 26th on speculations for an earlier Fed normalization. We continue seeing the first FF rate hike on June the earliest.
The divergence between the hawkish Fed and the ECB, which starts its monthly 60 billion euro sovereign purchases today, should keep the selling pressures tight on EUR/USD with parity envisaged in mid-run. In shorter-term, despite post-Draghi/NFP oversold conditions, the sentiment in EUR remains broadly negative as Greek Finance Minister Varoufakis meets his EZ counterparts to seek solution to unlock funds to enable the country to service 6.5 billion euro debt due within next three weeks. Option barriers trail below 1.10.

EUR/GBP tests bids at 0.72 and below (rebounded from 0.71820 on Friday). Given the mounting political tensions in the UK, offers at 0.70/0.72 should however counter the downside pressures in EUR.

In Japan, the economic data disappointed at week’s start. The 4Q final GDP grew 1.5% q/q annualized verse 2.2% expected, the private consumption accelerated 0.5% (vs 0.3% exp.) while business spending unexpectedly contracted 0.1% (vs. +0.2% exp.). In addition, the current account surplus narrowed from 187.2 billion to 61.4 billion yen in January. Dovish BoJ speculations lent support to USD/JPY above 120.61 in Tokyo, former resistance at 120.47/48 should now give support for a push to fresh 7-year highs (above 121.85 hit on Dec 8th).

The Chinese exports surged 48.3% on year to February, imports slumped 20.5%. The trade surplus increased from 60.03 to 60.62 billion dollars. Although the Lunar New Year should have boosted the latest trade figures, the foreign demand rose 15% since the beginning of the year, which is good news for China recovery. Good news from China didn’t halt the AUD/USD slide however. The aussie opened the week down to 0.7684 verse USD. A daily close below 0.7685 (MACD pivot) should signal bearish reversal bringing back in focus the mid-term target at 75 cents.

In the EM, USD/ZAR crossed above 12 for the first time since 2002 post-NFPs, while South African net foreign reserves declined to 41.92 billion dollar in February. Higher USD, reinforced by its negative impact on gold prices is certainly not good news for the rand and the central bank’s reserves at times they will be the most needed. With the fiscal consolidation lowering the expectations of a rate hike anytime soon, we see strengthening base at 11.40/12.00 (region including 21,50 and 100-dma at 11.7013/11.6079 and 11.4241 respectively). On a similar pattern USD/BRL advances to 3.0718 and USD/TRY hits fresh all-time-high (1.6475) as idiosyncratic political tensions add to global EM debasing.

Today’s economic calendar: German January Trade Balance, Exports and Imports m/m, SNB’s sight deposits, Swedish January Household Consumption m/m & y/y and Canadian February Housing Starts.
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Today’s key event is the US jobs data. Amid good ADP read on Wednesday, the consensus for the NFP is a strong 235K (vs. 257K last month) with lower unemployment rate (5.6% vs. 5.7% last) and higher wages in February. The US 10-year bonds stabilize at about the 100-dma (2.1162%), sign of increased expectations for the Fed rate hike to happen sooner rather than later (June is the earliest we see).
USD/JPY advanced to 120.40 in New York yesterday (a stone’s throw lower than Feb 11/12^th double top (120.47/48). The bias remains positive with good USD appetite. US jobs data will determine whether it is time to pull out the resistance and challenge Dec’14 high (121.85). Large vanilla calls above 119.80/120.00 should limit the downside before the week’s closing bell.
USD/CHF extended gains to 0.9750, EUR/CHF holds ground above the 21-dma (1.07445) still choppy on the upside with globally negative EUR sentiment.

In line with the consensus, the BoE and the ECB maintained status quo in March. While the BoE decision gathered little attention, the ECB President Draghi’s speech triggered price action in the EUR-complex. EUR/USD first rallied to 1.1114 on favorable inflation expectations and economic outlook, then tumbled down to fresh 1-year low of 1.1006 as 1. ECB said the QE may extend beyond Sep’16 if needed, 2. ECB will buy negative yielding bonds up to deposit rate and 3. Greek banks are in good shape yet progress on bailout is needed to avoid a situation where the country would not fulfill the conditions to become eligible and therefore would be left out of the QE program. The sentiment in EUR remains negative while the failure to break below 1.10 psychological support will likely encourage corrective bids before the US NFP read in New York today. A strong read should trigger fresh sell-off in EUR/USD and challenge the 1.10 support for the second consecutive day.

In Brazil, USD/BRL traded above 3.00 (hit 3.0216) for the first time since 2004 on broad USD appetite. February inflation is due today and is expected to accelerate to 7.56% from 7.14% last. Higher inflation keep the BCB-hawks alert, however the selling pressures in real should remain pre-NFPs. Moving forward, although the political tensions are long-term issue, temporary cool-off will create window for tactical long carry positions (with relatively interesting rate spread amid additional 50 bp hike on Wednesday meeting).

Besides US jobs (February NFPs, unemployment & participation rate, earnings), traders watch the SNB’s FY earnings and February FX Reserves, German and Spanish January Industrial Production m/m & y/y, French January Budget and Trade Balance, Spanish January House Transactions y/y, Swiss February CPI m/m & y/y, Swedish February Budget Balance and Average House Prices, Norwegian January Industrial Production and Manufacturing m/m & y/y, Italian January PPI m/m & y/y, Euro-Zone’s 4Q Gross Fixed Capital q/q, Government Expenditures q/q, Household Consumption q/q and 4Q (Prelim) GDP q/q & y/y, Canadian January Building Permits m£/m and International Merchandise Trade, Canadian 4Q Labor Productivity q/q, US January Trade Balance and Consumer Credit. 
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Today’s key events are the BoE, the ECB verdicts and ECB President Draghi’s press conference (at 12:00, 12:45 and 13:30 GMT respectively). The consensus is status quo on both meetings, while ECB President Draghi’s speech should trigger price action later in the day. The sell-off in the EUR-complex accelerated in New York yesterday, sending EUR/USD down to 1.1026 overnight, a fresh 11-year low. For some, the renewed EUR weakness is due to increased anxiety vis-à-vis the QE that will start by next week, for others the Greek turmoil is still an important weight on EUR’ shoulders. Improved economic outlook from the ECB is the risk for EUR-shorts today, yet the broad bias remains comfortably negative.
Key support sits at 1.10 psychological level; stops and large option barriers trail below.
In the US, the ADP data showed the economy added 212’000 new private jobs in February as last month reading has been significantly revised up to 250K (from 213K). The USD-bulls remain in charge, especially against the EM currencies. USD/TRY hit new all-time-high of 2.5773 as USD/ZAR rallied to 11.8578. USD/BRL tested 3.00 although Brazil Central Bank raised the Selic rate by 50 basis points to 12.75% as expected. Already priced in, the rate hike did little on FX prices. There is good chance that the USD appetite dominates until Friday’s nonfarm payrolls, unemployment and wages announcement. The 10-year US sovereign yields traded above the 100-dma (2.1163%) for the first time since Sep’14.

USD/JPY and JPY crosses were sluggish in Tokyo. USD/JPY offers above 120 remain solid with good option barriers to be cleared. The key resistance remains at 120.47/48 (Feb 11/12^th double top), bids should jump in at 118.77/119.17 area (50/21-dma). EUR/JPY eased to a-month low, the MACD (12, 26) stepped in the bearish zone suggesting high sensibility to EUR-negative sentiment vis-à-vis the ECB/Draghi today. Option barriers trail below 132.80 at today’s expiry.

In Australia, the trade deficit widened above expected to AUD 890mn in January (vs -925mn exp. & -503mn revised in Feb). RBA’s Lowe said the policy changes across the globe put “upside pressures on the value of other currencies where the need for monetary stimulus has been less”. While the higher AUD leads to lower domestic demand, the signals for further stimulus weigh on the AUD-complex. AUD/USD remains offered at 0.7845/60 area. More resistance is eyed at 0.7943/0.8000 (50-dma / Oct’14 – Feb’15 downtrend top).

The Bank of Canada kept the bank rate unchanged at 0.75% in line with consensus. USD/CAD sold-off to 1.2407 (Jan-Feb triangle base). Trend and momentum indicators are supportive of further recovery in loonie whereas the symmetric triangle base building since January 22^nd should lend support before the US and Canada jobs data (due Fri). A break below the base should intensify short covering in CAD as long as the oil prices hold ground.
Traders also watch French 4Q Unemployment Rate, German January Factory Orders m/m & y/y, Swedish January Industrial, Service Production and Industrial Orders m/m & y/y, UK February New Car Registrations, Italian 4Q Final GDP q/q & y/y, German, French, Italian and Euro-zone aggregate Retail PMI in February, US 4Q (Final) Nonfarm Productivity and Unit Labor Costs, US February 28^th Initial Jobless & February 21^st Continuing Claims, US January Factory Orders and Canadian February  PMI index (Ivey).
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The Central Bank actions continue dominating the week’s economic headlines. Following the PBoC rate cut, the RBI lowered the benchmark repo rate by 25 basis points to 7.50% via surprise action in an effort to “compensate the delay in fiscal consolidation” and comply with PM Modi’s budget announcement (surprising: as higher budget deficit would be expected to trigger the opposite reaction). The decision should help USD/INR to strengthen ground at Fibonacci 61.8% retracement 61.7664 on May-Dec’14 rise) as speculations for additional rate cut should reverse the mid-term INR appetite.

In Australia, the GDP growth accelerated to 0.5% q/q in Q4 (from 0.3% revised, vs. 0.6% exp.), the annual growth remained stable at 2.5% end of Q4 (vs. 2.7% prev). AUD/USD slid shortly to 0.7796 (21-dma) in Sydney alongside with sell-off in the stock markets (ASX 200 -0.54%). Short term trend remains positive with slowing momentum however. Resistance is seen solid at 0.7950 / 0.8000 (50-dma / Oct’14 – Feb’15 downtrend top).

The Canadian economy grew 0.3% m/m and 2.8% y/y in December, therefore curbing the annual GDP slowdown, 2.4% q/q annualized in Q4 (vs. 2.0% exp. & 2.8% last). The 3Q growth has been revised up to 3.2% from 2.8% y/y. Figures are perfectly in line with BoC’s 2.5% forecast. While the risk that the negative impact of sliding oil prices may have not been over yet, the expectations for a second consecutive rate action fade. The consensus is a status quo at 0.75% at today’s policy meeting.
USD/BRL advanced to fresh 10-year high of 2.9342 amid rumors that an agreement on Rousseff’s fiscal proposal to roll back tax breaks (estimated at 60 billion BRL) may not be reached. Markets are craving for stronger fiscal conditions in Brazil and Rousseff’s team is given little error margin. Should the political uncertainties keep FX volatilities high, the BCB will have no choice but to continue intervening via its FX swap program to curb renewed political tensions in BRL markets. The BCB is expected to increase its Selic rate by 50 basis points to 12.75% at today’s meeting. The policy tightening will likely cool-off selling pressures on the BRL, while renewed upside pressures should continue pushing the pair toward 3-psychological level pre-US jobs data (ADP due today; NFPs, unemployment and earnings due Friday).

EUR/USD consolidates weakness in tight range of 1.1164/86 in Asia, while GBP/USD retreated to 1.5340/72 band. The ECB and BoE verdicts are due tomorrow. While the sterling pound pares gains on pre-election talks, the EUR-sentiment remains negative with Greek turmoil still in headlines.

Else, the DNB Bank sold DKK 168.7 billion in February to defend EUR/DKK cap (beating 168.5 bn expected) after January’s 106.6 billion sales. The FX reserves rose to a record DKK 737.1 billion end of February (almost 40% of country’s GDP). The DNB’s struggle to weaken DKK is not over as speculator appetite to test the peg persist. For the time being, we do not see risk on the peg.

Traders also watch February Final services PMI across the Euro-zone and the UK and the US, UK February Official Changes, Euro-zone January Retail Sales m/m & y/y, US February 27^th MBA Mortgage Applications, US February ADP employment Change and US Federal Beige Book.
 
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Unexpectedly, the RBA kept its cash rate target unchanged at 2.25% citing that policy easing may still be appropriate in the future and further AUD depreciation should help balancing the growth (seen below trend). The Australian current account balance narrowed faster-than-expected to AUD -9.6bn from AUD -12.1bn (revised) in 4Q.  The RBA is seemingly in effort to keep margin for future maneuver, closely monitoring the inflation, housing and commodity prices. The surprise inaction from the RBA is certainly a strategic “move”, aiming to inject the uncertainty needed in the Australian money markets so that business owners are not pushed to wait for lower rates to boost their activity. AUD/USD hiked to 0.7842 post-announcement (a stone’s throw below yesterday high 0.7845). While the short term trend indicators continue pointing for an upside bias, offers are presumed strong at 0.7955/0.8000 (50-dma / Oct’14 – Feb’15 downtrend channel top & optionality). We keep our mid-term target unchanged at 75 cents verse USD.

Japan monetary base expanded to 278.9 trillion yen end of February. USD/JPY and JPY crosses were mixed. USD/JPY remained limited by offers at 120+ as PM advisor Honda said the BoJ should not overheat the economy. The rise in AUD/JPY post-RBA helped keeping the USD/JPY supported above 119.57. The key short-term resistance is seen solid at 120.47/48 (February 11/12 double top).

In Switzerland, the GDP growth remained stable in 4Q at 0.6% q/q and 1.9% y/y despite expectations for an economic slowdown. The fourth quarter has certainly been the beginning of a challenging period for the Swiss economy, with the first negative rates introduced in December (effective in Jan 22^nd). The most expected economic results are those of Q1, amid the SNB decided to remove the EUR/CHF floor. Therefore, the market reaction remains skeptical to 4Q figures given that the damages caused by the free-float EUR/CHF will be visible only from Q1 data. EUR/CHF sees choppy trading between 1.05/1.10 area on business owners and households’ cautious stance vis-à-vis the fragile appreciation in EUR, especially with the persisting uncertainties regarding the Greek situation.

EUR/USD consolidates weakness before Thursday’s ECB meeting. The bias remains on the downside as traders look to sell the rebounds. The persistent risks on Greek solvability weighs on the EUR-complex while the Greek FinMin Varoufakis said to be confident that Greece will service its March obligations. EUR/USD offers remain thick at 1.1340/1.1445 (21-dma / Fibonacci 23.6% on Dec’14-Jan’15 sell-off).

USD/CAD trades ranged before the GDP read due later today. The fourth quarter GDP is expected to have fallen from 2.8% to 2.0% annualized, while some improvement must have been occurred through December according to optimistic market expectations. USD/CAD hovers around the 21-dma (1.2504) mostly in short-term bearish consolidation zone amid the pair hit 1.2799 on Jan 30^th. Key support to consolidation is placed at 1.2395 (ascending baseline building since Jan 22^nd) as oil prices have hard time to pick up in the short-run. The WTI tests $50.20/50 (21 & 50 dma).

Today’s economic calendar consists of Swiss 4Q GDP q/Q & y/y, German January Retail Sales m/m & y/y, Spanish February Unemployment, UK’s February Construction PMI, Euro-zone January PPI m/m & y/y, Canadian 4Q quarterly GDP Annualized and December GDP m/m & y/y, Canadian January Industrial and Raw Materials Price Index m/m and ISM New York in February.
 
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