A Quiet Economic Calendar Leaves Stats from Germany and the EUR in Focus

Earlier in the Day:

It’s was a particularly quiet start to the week on the economic calendar this morning. There were no material stats to provide the majors with direction through the Asian session.

The lack of stats will leave the majors in the hands of chatter from the National People’s Congress that got underway last Friday.

From the weekend, trade data from China set the tone, however.

In February, China’s U.S Dollar trade surplus widened from $78.17bn to $103.25bn. Economists had forecast a narrowing to $60.00bn.

Year-on-year, exports jumped by 60.6%, following an 18.1% increase in January. Economists had forecast a 38.9% surge.

Imports rose by 22.2%, following a 6.5% increase in January. Economists had forecast a 15.0% jump.

For the Majors

At the time of writing, the Aussie Dollar was up by 0.26% to  $0.7706, with the Kiwi Dollar up by 0.21% to $0.7182. The Japanese Yen was down by 0.05% to ¥108.36 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. German industrial production figures for January are due out later this morning.

Forecasts are EUR positive, though only marginally. A fall in factory orders in December suggests some uncertainty ahead of the release.

While we can expect sensitivity to the numbers, however, recent manufacturing PMIs should limit the impact of any weak numbers.

At the time of writing, the EUR was up by 0.08% to $1.1925.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction.

The lack of stats will leave the Pound in the hands of market risk sentiment on the day.

At the time of writing, the Pound was up by 0.06% to $1.3849.

Across the Pond

It’s also a particularly quiet day ahead on the economic calendar. A lack of stats will leave the Dollar in the hands of FOMC member chatter and news from Capitol Hill.

At the time of writing, the Dollar Spot Index was down by 0.05% to 91.934.

For the Loonie

There are no material stats to provide the Loonie with direction. The lack of stats will leave the Loonie in the hands of China trade data from Sunday and chatter from the National People’s Congress.

At the time of writing, the Loonie was up by 0.17% to C$1.2637 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD and NZD/USD Fundamental Weekly Forecast – Higher-Risk Currencies Could Benefit from COVID Relief Bill

The Australian and New Zealand Dollars finished lower last week as remarks from Federal Reserve Chair Jerome Powell, a sharp rise in U.S. Treasury yields, robust U.S. jobs growth and a drop in risk sentiment weighed on the higher risk currencies.

Last week, the AUD/USD settled at .7681, down 0.0023 or -0.29% and the NZD/USD closed at .7163, down 0.0070 or -0.97%.

Weekly Recap

In Australia, the Reserve Bank of Australia (RBA) re-committed to keep three-year yields at 0.1% until its employment and inflation objectives are met, which policymakers don’t expect until 2024 at the earliest.

Australia’s economy expanded at a much faster-than-expected pace in the final quarter of last year and all signs are that 2021 has started on a firm footing too helped by massive monetary and fiscal stimulus.

The economy accelerated 3.1% in the three months to December, data from the Australian Bureau of Statistics (ABS) showed on Wednesday, higher than forecasts for a 2.5% rise and follows an upwardly revised 3.4% gain in the third quarter.

Australian retail sales rose by less than expected in January as a coronavirus lockdown in the city of Brisbane kept shoppers at home, continuing the see saw pattern of sales in recent months.

Sales rose 0.6% in January, from December, missing market forecasts of a 2.0% gain, preliminary data from the Australian Bureau of Statistics (ABS) showed on Friday.

Australia recorded the biggest monthly trade surplus in history as the economy continued to rack up records in a marked rebound from last year’s deep recession.

The ABS said the trade balance of goods and services was a record $10.1 billion in January and was up more than $3 billion compared with December. This was the result of a 6% jump in exports, while imports declined 2%. Economists had forecast a surplus of around $6 billion based on preliminary data released last month.

In New Zealand, New Zealand’s Central Bank Governor said on Thursday that central banks globally are prepared to over-shoot inflation targets as they battle rapidly falling prices and a dislocation in labor markets.

Orr said the world is no longer focused on the fear of returning to the problems of high inflation that led central banks to under achieve on their inflation targets for so long.

“The single biggest challenge in the world at the moment is rapidly falling prices, deflation and dislocation in the labor markets,” Orr said at the New Zealand Economic Forum in the University of Waikato.

Weekly Forecast

The key report this week is out of the United States. On Wednesday, the government will report its February consumer inflation figures. The Consumer Price Index (CPI) is expected to come in at 0.4%, up from 0.3% and the Core CPI is expected to show a rise of 0.2%, up from 0.0%.

The potential market moving event this week occurred over the weekend when the U.S. Senate passed a $1.9 trillion coronavirus relief package on Saturday as Democrats rushed to send out a fresh round of aid.

We expect to see a volatile response to this news, but ultimately the direction will be determined by the movement in Treasury yields. Higher yields will drive the Aussie and Kiwi lower, lower yields will put pressure on the U.S. Dollar.

Traders aren’t sure how to approach the news. The bulls believe more fiscal stimulus will heat up the economy, driving up interest rates and the U.S. Dollar. The bears are looking at another flood of dollars into the financial markets and higher U.S. debt levels.

In my opinion, we could see profit-taking, position-squaring and short-covering this week as traders prepare for the release of the U.S. Federal Reserve’s monetary policy decisions on March 17. A shift in risk sentiment into higher-yielding assets will also be supportive for the Aussie and Kiwi.

NZD/USD Forex Technical Analysis – Friday’s Late Session Recovery Could Fuel Follow-Through Rally

The New Zealand Dollar fell to its lowest level against the U.S. Dollar since January 18 on Friday after a U.S. government report showed a bigger-than-expected jump in non-farm payrolls. The steep break was a continuation of the selling pressure triggered on Thursday by remarks from Federal Reserve Chair Jerome Powell.

Despite losing ground shortly after the release of the jobs report, the Kiwi finished off its low as a rebound in U.S. equity markets signaled renewed demand for riskier assets. This could lead to a follow-through rally next week as investors begin positioning themselves ahead of the Fed’s March 17 policy announcements.

On Friday, the NZD/USD settled at .7163, down 0.0024 or -0.33%.

Rising Treasury yields continue to exert upward pressure on the U.S. Dollar. However, rates fell sharply throughout the session on Friday, giving the New Zealand Dollar a late session boost. If this move continues on Monday, look for the Kiwi to retrace some of last week’s losses.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down when sellers took out .7158. It was reaffirmed when the main bottoms at .7136 and .7106 were penetrated. The selling pressure stopped just above the January 18 main bottom at .7096.

The main trend will change to up on a move through .7465. This is highly unlikely, but there is room for a short-term correction or the formation of a closing price reversal bottom.

The minor trend is also down. A trade through .7307 will change the minor trend to up. This will also shift momentum to the upside.

The main range is .7003 to .7465. The NZD/USD is currently trading on the weak side of its retracement zone at .7180 to .7234. This area is now potential resistance.

The minor range is .7465 to .7099. Its retracement zone at .7282 to .7325 is a new potential upside target zone.

Daily Swing Chart Technical Forecast

The early direction of the NZD/USD on Monday is likely to be determined by trader reaction to .7180.

Bearish Scenario

A sustained move under .7179 will indicate the presence of sellers. If this move creates enough downside momentum then look for a potential break into .7099 to .7096.

Bullish Scenario

A sustained move over .7180 will signal the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into .7234. Sellers could come in on the first test of this level. Overtaking it, however, could trigger a further rally into at least .7282.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – Economic Data, Monetary Policy, and China in Focus

On the Macro

It’s a quieter week ahead on the economic calendar, with 42 stats in focus in the week ending 12th March. In the week prior, 70 stats had been in focus.

For the Dollar:

It’s a quieter week ahead.

February inflation figures are due out on Wednesday and Friday along with consumer sentiment figures on Friday.

JOLT’s job openings and weekly jobless claims figures will also draw attention on Thursday, however.

With market sensitivity to inflation heightened in recent weeks, expect plenty of influence from the numbers.

The Dollar Spot Index ended the week up by 1.22% to 91.985.

For the EUR:

It’s a busier week ahead on the economic data front.

German industrial production figures are due out on Monday ahead of finalized 4th quarter GDP numbers for the Eurozone on Tuesday.

Barring another revision, the GDP figures, expect Germany’s industrial production figures to have the greater impact.

On Tuesday, German trade data will also draw attention, with the markets focused on demand.

In the 2nd half of the week, industrial production figures for the Eurozone are due out.

Finalized inflation figures for Germany and Spain are also due out but will likely have a limited impact.

On the monetary policy front, the ECB monetary policy decision and press conference on Thursday will be the main event.

With market jitters over a possible shift in policy stemming from reinflation, expect the press conference to be key. Lagarde will need to assure the markets that there will be no shift in policy.

The EUR ended the week down by 1.33% to $1.1915.

For the Pound:

It’s another relatively quiet week ahead on the economic calendar.

In the first half of the week, retail sales figures for February are due out on Tuesday. With little else for the markets to consider, the BRC numbers will influence.

The markets will then need to wait for GDP, manufacturing and industrial production figures on Friday for more direction.

Trade data is also due out but will likely have a muted impact on the Pound.

The Pound ended the week down by 0.66% to $1.3841.

For the Loonie:

It’s a quieter week ahead on the economic calendar.

February employment figures and January wholesale sales figures are due out on Friday.

Employment change figures for February will be the key driver on the day.

On the monetary policy front, the Bank of Canada is also in action on Wednesday.

With the markets expecting the BoC to stand pat, the BoC press conference will be the main area of focus. Once more, inflation will likely be a hot topic…

The Loonie ended the week down by 0.62% to C$1.2659 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a quiet week.

Business and consumer confidence figures for February and March are due out on Tuesday and Wednesday.

While business investment is also key to an economic recovery, expect consumer sentiment figures to have the greatest impact.

The Aussie Dollar ended the week down by 0.26% to $0.7686.

For the Kiwi Dollar:

It’s another quiet week ahead.

Electronic card retail sales figures are due out on Wednesday ahead of Business PMI numbers on Friday.

With little else for the markets to consider, both data sets will influence.

The Kiwi Dollar ended the week down by 0.91% to $0.7167.

For the Japanese Yen:

It is another quiet week ahead.

2nd estimate GDP numbers for the 4th quarter are due out on Tuesday.

Barring a marked revision from 1st estimates, however, the stats should have a limited impact on market risk sentiment.

At the end of the week, BSI Large Manufacturing Conditions Index numbers for the 1st quarter will draw interest.

The markets will be looking for manufacturing conditions to have improved for the 1st quarter…

The Japanese Yen ended the week down by 1.63% to ¥108.31 against the U.S Dollar.

Out of China

It’s a busier week ahead. Over the weekend, trade data for February is due out and will set the tone.

Expect plenty of interest in the numbers following some disappointing private sector PMIs.

Weak figures and we could see concerns over the Chinese economic recovery begin to hit the markets.

On Wednesday, inflation figures for February will also draw attention.

With the National People’s Congress continuing from last Friday, chatter from the Chinese government will also influence market risk sentiment.

The Chinese Yuan ended the week down by 0.36% to CNY6.4970 against the U.S Dollar.

Geo-Politics

U.S Politics

Iran and the Middle East will remain a key area of focus, particularly following last week’s report on the Khashoggi murder.

For Joe Biden and the Democrats, this could prove to be the first test. A breakdown in U.S – Saudi relations would raise questions over stability in the region.

While the Iran nuclear agreement will be a main area of focus, U.S – China relations also remains a key focal point for the markets.

GBP/JPY Vs GBP/USD and USD/JPY – March 6th, 2021

GBP/USD last week fell 236 pips from 1.4015 to 1.3776 while overbought GBP/JPY rose 257 pips from 148.14 to 150.71.

Known since the 1930’s, the Japanese pegged GBP/JPY to UK Gold for not only economic viability but the first incursion to the western world of finance. The standard to hold GBP/JPY to the UK held throughout Bretton Woods. Upon the 1972 free float, GBP/JPY became attached permanently with high +90% correlations to GBP/USD.

All JPY cross pairs followed with high and positive correlations as AUD/USD and AUD/JPY, NZD/USD and NZD/JPY, EUR/USD and EUR/JPY while USD/CAD and CAD/JPY became polar opposites as both permanently correlate negatively. USD/CHF and CHF/JPY traditionally also hold opposite correlations.

The Japanese offered not only a double trade but GBP/JPY and GBP/USD as the same exact currency pairs. The same principle holds true for EUR/JPY and EUR/USD, AUD/USD and AUD/JPY and NZD/USD and NZD/JPY. The double trade is permanent for USD/CAD and CAD/JPY.

Why JPY cross pairs remain overbought into week 6 amd not falling with counterpart currencies is the USD/JPY problem to correlations. While GBP/USD correctly correlates to GBP/JPY at +94%, GBP/JPY also not correctly correlates to USD/JPY at +83%. A further problem exists as GBP/USD correlates to USD/JPY at +46 %. All correlations are not only running positive but this situation is the exact same for AUD/JPY, NZD/JPY, EUR/JPY, CAD/JPY and explains why prices remain high and overbought.

Positive correlations are the result of exchange rate prices and relationships to moving averages since correlations are found within the context of averages. USD/JPY trades above vital 105.70,  GBP/USD above 1.3697 and GBP/JPY above 144.80. Correlations are positive because prices trade above respective high / low averages.

Required to assist GBP/JPY to drop is GBP/USD breaks 1.3697 or USD/JPY trades below 105.70. GBP/JPY then decides to fully correlate to USD/JPY or GBP/USD. GBP/JPY in every instant follows GBP/USD as the 91 year correlation and order of currency markets.

Current GBP/JPY trades 1156 pips above GBP/USD and 2506 pips below GBP/CAD. GBP/JPY larger range from GBP/USD becomes 144.08 and 1.5564. GBP/JPY above is located the 14 year average at 155.38 and the 10 year at 148.36.

Prior to the 2016 interest rate changes by the central banks, the market order to currency pair arrangement existed as GBP/USD, GBP/JPY, GBP/CHF then GBP/CAD.

The new order is arranged as GBP/CHF, GBP/USD, GBP/JPY then GBP/CAD and seen as GBP/CHF 1.2855, GBP/USD 1.3820, GBP/JPY 149.86 or 1.4986 then GBP/CAD 1.7292. Much daylight exists for GBP/JPY to trade freely between GBP/USD and GBP/CAD yet 250 pips traded last week from a distance of 1100 and 2500 pips between exchange rates.

Why GBP/CHF and all currency  pairs arranged as Other Currency / CHF dropped from contention as support is due to the uniqueness to the SNB’s interest rate system. Libor is miles from actual interest rates as first comes Saron, Call Money rates and the most vital Debt Register Claims.

JPY cross pairs overall contain downside moves from GBP/JPY at 300 pips and 200 for AUD/JPY and NZD/JPY.

USD/JPY for the week is not only light years overbought but the 5 year average is located at 109.01. A good target is found at 106.65.

GBP/JPY big break lower is located at the 10 year average at 148.38. A break then GBP/JPY trades 146.00’s easily.

GBP/USD this week opens between 1.3768 and 1.3840. Below 1.3768 challenges most vital 1.3697, above 1.3840 then GBP/USD travels much higher.

GBP/CHF and GBP/CAD run good and positive correlations at +93% and +96 % for GBP/CAD. For GBP/NZD and GBP/AUD remain problems as correlations run negative at -43% and -64% for GBP/AUD.

GBP/JPY

Included are GBP/JPY moving averages from 5 day to 253 days. The averages are perfect and derived from the ECB. The first number is the day average followed by trading days then the average.

A 20 day average is actually 15 days, a 50 day average is actually 36 days. Trading day averages to factor perfectly start at the beginning of every year then the numbers increase as days trade. A 50 day average is most stable as it only trades 36 to 50 days.

A 5 day average begins Monday at 2 days, then 3 for Tuesday and Wednesday and 4 for Thursday. A full 5 day average only trades on Fridays.

5 Day     5             149.2391

10 Day  9             149.1325

20 Day  15           148.3808

50 Day  36           145.2691

100 Day               71           142.5398

200 Day               143       139.9417

253 Day               180       139.1231

As GBP/JPY trades lower then the averages drop.

Targets

Targets are not only known miles ahead but targets stack to watch trades unfold.

Current targets: 149.7549, 149.8496, 149.5086, 148.1852, 146.0887, 143.7901, 143.0356.

The ECB and most central banks factor exchange rates to 6 decimal places and 4 for USD/JPY and JPY cross pairs and I follow the ECB exactly.

AUD/USD and NZD/USD Fundamental Daily Forecast – Stubborn Longs Taken Out on Friday – Retracement Time?

The Australian and New Zealand Dollars finished lower on Friday, but well off their lows as traders reacted to mixed signals in the U.S. financial markets. The choppy price action was fueled by trader reaction to a much stronger than expected U.S. Non-Farm Payrolls report.

On Friday, the AUD/USD settled at .7681, down 0.0040 or -0.51% and the NZD/USD closed at .7163, down 0.0024 or -0.33%.

Confusing Aussie and Kiwi speculators on Friday was the U.S. jobs report, which drove U.S. Treasury yields higher as well as the U.S. Dollar, and a sharp recovery in U.S. equity markets, which drove up demand for riskier assets.

Traders first drove the AUD/USD and NZD/USD lower as yields and the greenback spiked higher. However, by the end of the trading session, the strong performance in the U.S. stock market pushed the currencies off their lows.

US Dollar Jumps as Domestic Jobs Growth Beats Expectations

The U.S. Dollar jumped against the Australian and New Zealand Dollars on Friday after data showed jobs growth beat expectations in February, backing up the view of Federal Reserve officials who have said that a recent rise in U.S. government bond yields is justified by an improving economic outlook.

The jobs improvement came amid falling new COVID-19 cases, quickening vaccination rates and additional pandemic relief money from the government, putting the labor market recovery back on firmer footing and on course for further gains in the months ahead, according to Reuters.

Non-Farm Payrolls surged by 379,000 jobs last month, after rising 166,000 in January. In December, payrolls fell for the first time in eight months. Economists polled by Reuters had forecast February payrolls increasing by 182,000 jobs.

10-year Treasury Yield Jumps to 2021-High of 1.62% Before Pulling Back

The 10-year U.S. Treasury yield jumped Friday after the February jobs report topped expectations, sending the benchmark yield to its highest level this year, before retreating as the day wore on.

The yield on the 10-year Treasury note was trading up at 1.56% near the close after hitting an intraday high of 1.626%. The yield on the 30-year Treasury bond fell to 2.29%.

The rise in yields made the U.S. Dollar a more attractive investment on Friday.

Risk Sentiment Returns Despite Jump in Rates

U.S. stocks rose sharply on Friday as the rally in bond yields eased, while the stronger-than-expected jobs report boosted optimism for a faster economic recovery. This move helped the Australian and New Zealand Dollars recover from their lows.

Stocks that would benefit from a rapid economic comeback jumped in the wake of the jobs report. The S&P 500 Energy Sector popped 3.9%, posting its best day since November. Financials and materials rose more than 2% each.

The price action also suggests that Federal Reserve Chair Jerome Powell was right when he said on Thursday that the rise in bond yields was justified because of an improving economy.

The Aussie and Kiwi could benefit over the near-term if demand for riskier assets returns, however, gains could be limited if the U.S. Dollar remains firm because of higher Treasury yields.

The recovery may have already started on Friday with the Aussie and Kiwi’s bounce from their lows. We could see counter-trend movement over the near-term ahead of the Fed’s March 17 monetary policy announcements.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Day Trade and Currency Markets Next Week

Only on rare trade days is a price path vanquished. Upon a rare break, the market offers free money as a price must tade back to the respected price path.

From 1.3915, GBP was located between 1.3912 to 1.3921 while 1.4017 fell short of 1.4019 and 1.4028. Long targets this week achieved better progress than downside shorts. Why is because of the deep nuance of a currency and any market price. Downside prices to all financial instruments factors vastly different than upside targets and most particularly to day trades. Weekly and long term target trades computes differently from a day trade.

GBP/USD’s drop from Powell at 1.4017 to 1.3882 violated 1.3886 by 4 pips. The day trade held despite ECB’s entry into markets.

GBP/USD this week is characterized as a range trade due to rises from from lower ranges and up target failure to trade fully to exact points. Quite a dangerous situation as the full potential to price paths failed to materialize. Normally this is an early warning to stand clear especially when 7 other currencies exist to trade and also if USD/CAD is off kilter to GBP/USD. Both pairs define overall currency markets as perfect opposites.

No stops or charts are required for day trades as price paths are known in advance and informs specifically to entries and targets. No mysteries exist as central banks are never wrong to freely offered day trades.

EUR/USD broke 1.2050 then 1.2020 and traded 106 pips to 1.1914. EUR/USD is now established as a short only strategy. NZD/USD as bottom currency becomes the defining pair by a break of 0.7138. A break lower brings down the house to non USD pairs, specifically GBP and AUD/USD at current 0.7652. NZD/USD bottom price today is located 0.7136 so crucial for NZD/USD to break 0.7138 later today after ECB or Monday.

DXY not only broke reported 91.43 and traded 60 pips higher to 92.03 but the break higher assist rises to all USD pairs and specifically USD/CAD as the laggard to USD to not cross higher at 1.2775. USD/CHF broke 0.9054 and traded 0.9309 highs while CAD/ZAR crossed above 11.88 to trade currently 12.0632.

USD/JPY broke above 105’s yet USD/JPY is off sync to USD, currently overbought and not worth trade consideration long into the future.

DXY now ranges from 91.43 to 92.78 and next hurdle is located at 94.39 to range 92.78 to 94.39.

The factor to USD/CAD is the result of Canada’s TSX Composite as Correlations are more specifically opposite and closer to USD/CAD’s price far more than WTI. Consider an average daily move for the TSX begins at 90 points and normally trades far more than 90 and much more than the DAX.

Stock markets as risk assets are all not only falling but contain far more downside. The TSX drop will assist USD/CAD higher.

WTI traded 4 points yesterday Vs USD/CAD 118 pips. Wednesday WTI traded 3 points to USD/CAD 67 pips. Long term, USD/CAD may share decent correlations to WTI but short term and to day trades, correlations break down and hover weakly between negative and positive.

GBP/USD Day Trade

GBP/USD is located in a dangerous location below 1.3818. Correct is GBP/USD trades to 1.3831, 1.3852 and break above 1.3888 then comes 1.3949 and 1.3958.

My currency arsenal contains 476 currency pairs and always open to suggestions for a specific currency or currencies to trade.

U.S Nonfarm Payrolls Puts the Dollar Back in Focus as China’s National People’s Congress Begins

Earlier in the Day:

It’s was a particularly quiet start to the day on the economic calendar this morning. There were no material stats to provide the majors with direction through the early part of the Asian session.

The lack of stats will leave the majors in the hands of China Premier’s Li Keqiang speech later this morning, as the National People’s Congress gets under way.

For the Majors

At the time of writing, the Aussie Dollar was down by 0.18% to  $0.7712, with the Kiwi Dollar down by 0.14% to $0.7180. The Japanese Yen was flat at ¥107.98 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. German factory orders for January are due out later this morning.

Forecasts are EUR positive. With manufacturing sector activity picking up at the turn of the year, an unexpected slide would pressure the EUR further.

At the time of writing, the EUR was down by 0.04% to $1.1964.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction.

The lack of stats will leave the Pound in the hands of market risk sentiment on the day.

At the time of writing, the Pound was down by 0.06% to $1.3886.

Across the Pond

It’s another busy day ahead on the economic calendar. Following the weekly jobless claims figures on Friday, labor market figures for February will be in focus later today.

February’s unemployment rate and nonfarm payrolls will be the key drivers late in the day.

Away from the economic calendar, chatter from Capitol Hill will also influence.

On Thursday, the Dollar Spot Index rallied by 0.75% to end the day at 91.631. FED Chair Powell’s speech from late Thursday delivered the upside on the day.

For the Loonie

It’s a relatively busy day ahead. January trade data and February’s Ivey PMI figures are due out later today.

With little else for the markets to consider in the past week, expect some Loonie sensitivity ahead of next week’s BoC monetary policy decision.

At the time of writing, the Loonie was down by 0.11% to C$1.2681 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Day Trade March 4

Vital high /low points remain intact except for EUR/USD at today’s 1.2050. While 1.2050 is a crucial number from the drop at week’s beginning at 1.2061,  the ultimate change of trend sits at 1. 2020. A dark area exist between 1.2050 and 1.2020. Dark areas exist often to prices and normally its considered neutral zones or vital areas between two vital moving averages.

USD/JPY at 107.00’s trades deeply overbought above 105.46. If USD/JPY continues to trae above 105.00’s then EUR/USD must break lower to lead the non USD pairs lower to include GBP/USD, AUD/USD and NZD/USD.

As reported to the weekly note, GBP/AUD broke  1.7885 and traded 85 pips lower to 1.7810 or 75 pips, an odd number again. GBP/NZD broke lower to 1.9093 from 1.9176 or 83 pips.

DXY’s vital MA at 91.43 traded to 91.36 failed to break higher then dropped to 90.63 or an overall drop of odd number 73 pips.

GBP/USD Day Trade

Yesterday’s target at 1.4010 traded to 1.4005 and as written short was the trade to target 1.3947.  GBP/USD achieved 1,3947 just 2 hours later for +58 pips and actually traded to 1.3945. GBP/USD then spent the next 3 hours in a 1.3944 to 1.3971 range or 27 pips  and no trade was available. The best of the trade short was taken immediately however due to the day trade time, the written word and location of GBP, the only trade was short.

What was traded yesterday and traded every day is 3 news announcements for Europe, UK and the United States at 8:30. Day traders last chance to profit is 8:30 then day trades end at 9:00 until the new market time change in 2 weeks. Trades will then run from 2:30 am to 10:00 and meld directly into ECB at 10 am. The overall trade everyday is the GBP/USD Vs USD/GBP relationship. Was yesterday’s high at 1.4005 the result from GBP/USD or USD/GBP.

Today GBP/USD Day Trade

At 2 hours into today’s trade, GBP/USD traded 1.3967 to 1.3939 or 28 pips. Note 1.3939 as yesterday’s vital point to short and trade lower. While yesterday’s 1.3939 held significance, today it doesn’t exist as vital to the overall price path as support, resistance or trade level.

Here’s today’s GBP/USD

1.3886, 1.3892, 1.3903,1.3904, 1.3912, 1.3921, 1.3930, 1.3939, 1.3948,

Above: 1.3965, 13974, 1.3983, 1.3992, 1.4001, 1.4010, 14019 and 1.4028.

Yesterdays’ 1.3885 as a vital point to target lower becomes most important to the downside. As stated many times, prices don’t trade but rather they shift as a structural change.  GBP/USD holds a cluster at 1.3904 and 1.3903 and should serve as today’s long point to target first 1.3921.

Support and resistance imports for today 1.3904, 1.3921 vs 1.3992 and 1.4028.

While 1.3903 and 1.3904 serves as solid support, both points match to USD/CAD 1.2611 and 1.2612. If GBP/USD breaks lower at 1.3904 and 1.3903 then USD/CAD will trade higher from 1.2611 and 1.2612 to target 1.2629 and 1.2636. Brek of 1.2644 then higher and GBP/USD lower must cross 1.3959.

NZD/USD Forex Technical Analysis – Sustained Move Over .7234 Could Trigger Surge into .7337 – .7367

The New Zealand Dollar, which is often traded as a proxy for global growth because it is closely tied to commodities, is recovering from early losses on Thursday. Relatively calm Treasury and global stock markets are helping to generate some positive investor sentiment.

Earlier in the session, Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr emphasized that central banks were deliberately looking to push inflation above target to make up for years of underachieving.

Traders said that was one reason New Zealand 10-year yields were up at 1.87%, a chunky 39 basis points above Treasuries.

At 07:26 GMT, the NZD/USD is trading .7266, up 0.0020 or +0.27%.

Look for volatility at 17:05 GMT when Fed Chair Jerome Powell speaks.

NZD/USD investors are anxious to see if Powell expresses concern about a recent volatile sell-off in Treasuries and if there is any change in his assessment of the economy before the Fed’s next meeting ending March 17.

Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but momentum has been trending lower since the formation of the closing price reversal top on February 25.

The main trend will change to down on a trade through .7158. Taking out .7465 will signal a resumption of the uptrend.

The short-term range is .7003 to .7465. Its retracement zone at .7234 to .7179 is support. Traders have been trying to build a support base at .7234 the last five sessions.

The minor range is .7465 to .7209. Its retracement zone at .7337 to .7367 is the primary upside target. Counter-trend sellers could come in on a test of this area.

Daily Swing Chart Technical Forecast

The early price action suggests the direction of the NZD/USD on Thursday will be determined by trader reaction to the main 50% level at .7234.

Bullish Scenario

A sustained move over .7234 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into the minor retracement zone at .7337 to .7367.

Bearish Scenario

A sustained move under .7234 will signal the presence of sellers. This could trigger the start of a labored break with potential downside targets coming in at .7209, .7179 and .7158.

Taking out .7158 will change the main trend to down, and this could trigger the start of s steep correction.

For a look at all of today’s economic events, check out our economic calendar.

Eurozone Retail Sales and U.S Jobless Claims Keep the EUR and Dollar in Focus

Earlier in the Day:

It’s was a quieter start to the day on the economic calendar this morning. The Aussie Dollar was in action in the early part of the Asian session.

For the Aussie Dollar

Retail sales and trade data for January were in focus this morning.

In January, retail sales increased by 0.5%, month-on-month, partially reversing a 4.1% slide from December.  This was a downward revision from a prelim 0.6% rise.

According to the ABS,

  • Food retailing increased by 1.6%, with household goods retailing up by 0.1% in January.
  • Other retailing increased by 1.4%
  • Clothing, footwear, and personal accessory retailing fell by 3.6%, however, weighed by a 6.1% slide in clothing retailing.
  • Department store sales fell by 0.4%, with cafes, restaurants, and takeaway food services down by 0.8%.

In January, Australia’s trade surplus widened from A$6.785bn to A$10.142bn. Economists had forecast a narrowing to A$6.500bn.

According to the ABS,

  • Goods and services credits increased by A$2,316m (6%) to A$39,849m.
    • General merchandise exports increased by A$2,613m (9%), supported by a sharp increase in the export of non-rural goods.
    • Rural goods exports fell by 8m.
    • Net exports under merchanting fell by A$6m, with non-monetary gold exports falling by A$142m.
  • Debits fell by A$694m (2%) to A$29,707m.
    • General merchandise imports fell by A$577m. Heavy declines in the imports of consumption goods (AS$330m) and intermediate and other merchandise goods (A$229m) weighed.
    • Non-monetary gold imports fell by A$135m.

The Aussie Dollar moved from $0.77658 to $0.77767 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.04% to $0.7778.

Elsewhere

At the time of writing, the Kiwi Dollar was up by 0.07% to $0.7251, while the Japanese Yen was down by 0.05% to ¥107.06 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s another busy day ahead on the economic calendar. Key stats include Eurozone retail sales and unemployment figures for January.

German construction PMI figures for February are also due out but will likely have a muted impact on the EUR.

At the time of writing, the EUR was down by 0.11% to $1.2050.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. February’s construction PMI is due out later this morning.

We don’t expect too much influence on the Pound, however, which will remain in the hands of market risk sentiment.

At the time of writing, the Pound was down by 0.16% to $1.3932.

Across the Pond

It’s busier day ahead on the economic calendar. Factory orders and the weekly jobless claims figures will likely have the greatest influence.

Unit labor costs and nonfarm productivity numbers for the 4th quarter are also due out but should have a muted impact on the Dollar.

At the time of writing, the Dollar Spot Index was up by 0.11% to 91.049.

For the Loonie

It’s a quiet day ahead. Labor productivity numbers for the 4th quarter are due out later today.

We don’t expect too much influence from the numbers, however.

Market risk sentiment and impact on crude oil prices will remain the key driver ahead of the BoC monetary policy decision next week.

At the time of writing, the Loonie was down by 0.04% to C$1.2660 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD and NZD/USD Fundamental Daily Forecast – Underpinned by Risk Sentiment, Capped by Rising Yield Fears

The Australian and New Zealand Dollars are trading mixed early Wednesday after data out of China and Australia failed to generate any meaningful upside momentum.

Despite economic data from China and Australia, the price action suggests investors are still eyeing the movement in U.S. Treasury yields for direction. Bullish investors are hoping that lower Treasury yields help to restore some calm to global markets and reignite demand for riskier assets.

At 09:11 GMT, the AUD/USD is trading .7826, up 0.0004 or +0.04% and the NZD/USD is at .7292, down 0.0002 or -0.03%.

It’s All About Bond Yields

On Tuesday, lower U.S. bond yields sapped some of the U.S. Dollar’s allure, helping to boost the commodity-linked currencies.

Bonds have been at the center of a storm in financial markets in recent weeks, following a dramatic jump in yields globally – but led by Treasuries – in defiance of central bankers’ insistence on patience in normalizing monetary policy as economies recover from the COVID-19 pandemic, according to Reuters.

Additionally, fiscal stimulus has fueled market expectations for a rapid recovery, with President Joe Biden close to passing a $1.9 trillion spending package.

Essentially, risk sentiment is controlling the currency market at this time. So in addition to the movement in the bond yields, Aussie and Kiwi investors are also watching the impact of higher rates on global equity markets.

If the bond selling resumes then stocks will fall with them as yields rise. This move would crush the Aussie and Kiwi by driving the U.S. Dollar sharply higher.

Australian Economy Storms Ahead as COVID Recovery Turns ‘V-shaped’

Australia’s economy expanded at a much faster-than-expected pace in the final quarter of last year and all signs are that 2021 has started on a firm footing too helped by massive monetary and fiscal stimulus.

The economy accelerated 3.1% in the three months to December, data from the Australian Bureau of Statistics (ABS) showed on Wednesday, higher than forecasts for a 2.5% rise and follows an upwardly revised 3.4% gain in the third quarter.

Despite the best ever back-to-back quarters of growth, annual output still shrank 1.1%, underscoring the havoc wreaked by the coronavirus pandemic and suggesting the policy support will still be needed for the A$2 trillion ($1.57 trillion) economy.

“The ‘V-shaped’ nature of the recovery is everywhere to see – economic growth, the job market, retail spending and the housing market,” said Craig James, Sydney-based chief economist at CommSec.

James expects the economy to rebound 4.2% in 2021.

Daily Forecast

Traders showed little reaction to the Australian GDP report and the lull in volatility this week could prove fleeting if an improving U.S. economy reignites bond selling, with closely watched monthly payroll figures due on Friday.

For a look at all of today’s economic events, check out our economic calendar.

Service Sector PMIs Put the EUR and USD in Focus, with ADP Nonfarms to also Influence

Earlier in the Day:

It’s was a particularly busy start to the day on the economic calendar this morning. The Aussie Dollar, Kiwi Dollar, and the Japanese Yen were in action this morning. Economic data from China was also in focus in the early part of the day.

For the Kiwi Dollar

Building consents rose by 2.1% in January, following a 5.1% jump in December.

According to NZ Stats,

  • The annual number of new homes consented in the year ended January 2021 was 39,881, up 5.8% year-on-year.
  • January’s number fell just 144 short of a Feb-1974 all-time high 40,025 for any 12-month period.

The Kiwi Dollar moved from $0.72933 to $0.72821 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.03% to $0.7392.

For the Aussie Dollar

The Australian economy was in focus.

In the 4th quarter, the economy expanded by 3.1%, following 3.3% growth in the 3rd quarter. Economists had forecast growth of 2.5%.

Year-on-year, the economy contracted by 1.1%, coming in ahead of a forecasted 1.8% contraction. In the 3rd quarter, the economy had contracted by 3.7%.

According to the ABS,

  • Household spending increased by 4.3% as a result of easing COVID-19 restrictions.
  • Private investment rose by 3.9%, contributing 0.7 percentage points to growth.
  • Compensation to employees rose 1.5% as a result of a rise in employment and hours worked.
  • Agricultural production jumped, supported by favorable weather conditions

The Aussie Dollar moved from $0.78251 to $0.78337 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.15% to $0.7832.

For the Japanese Yen

The Services PMI rose from 46.1 to 46.3 in February, which was up from a prelim 45.8.

According to the February Market Survey,

  • Employment expanded for the first time since Feb-2020. Supported by improved optimism about the year ahead. Optimism hit a 37-month high.
  • New business inflows fell for a 13th consecutive month, with the rate of contraction the sharpest since last May.
  • Foreign demand for services declined at a softer pace than that for total new business.
  • Firms registered a rise in average cost burdens for a 3rd consecutive month, though the increase was marginal.
  • In spite of rising costs, firms reported lower output charges for the 12th month in a row. The rate of decline was also the most marked since Aug-2020.

The Japanese Yen moved from ¥106.731 to ¥106.769 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.12% to ¥106.82 against the U.S Dollar.

From China

Service sector activity was also in the spotlight.

In February, the Caxin Services PMI fell from 52.0 to 51.5.

According to the February Survey,

  • Business activity growth slowed to a 10-month low in February, coinciding with a weaker rise in new business.
  • A fall in new export work weighed on overall new business mid-way through the quarter.
  • Firms reported that the recent resurgence of COVID-19 cases globally weighed on sales growth.
  • New export orders fell for the first time since last October.
  • Firms reduced headcounts for the first time since last July.
  • In spite of falling headcounts, there was little pressure on operating capacities in February.
  • Companies registered a further steep increase in operating costs. Greater purchasing and staffing costs were cited as key inflation drivers.
  • While operating costs were on the rise, firms only partially passed on higher input costs to clients.
  • Optimism was amongst the strongest seen over the past 8-years, supported by hopes of a near-term end to the COVID-19 pandemic.

The Aussie Dollar moved from $0.78314 to $0.78304 upon release of the figures.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. Service sector PMI numbers for Italy and Spain are in focus later this morning.

Finalized service and composite PMIs for France, Germany, and the Eurozone are also due out.

Barring any marked revisions from prelims, expect Italy and the Eurozone’s PMIs to be the key drivers.

Other stats include 4th quarter GDP numbers from Italy. Expect any revisions to influence.

At the time of writing, the EUR was down by 0.04% to $1.2086.

For the Pound

It’s a relatively busy day ahead on the economic calendar. Finalized service and composite PMI numbers for February are due out.

Expect Pound sensitivity to the services PMI in particular.

Away from the economic calendar, however, the UK Annual Budget release will be the main event of the day.

The markets will be looking unwavering support from the government. Anything less and the Pound could come under pressure.

At the time of writing, the Pound was up by 0.01% to $1.3957.

Across the Pond

It’s busy day ahead on the economic calendar. The market’s preferred ISM non-manufacturing PMI figures are due out along with ADP nonfarm employment change numbers.

Finalized Market service and composite PMIs are also due out, though we would expect the stats to have a muted impact on the Dollar.

From elsewhere, chatter from the Senate on Biden’s COVID-19 relief package will also need tracking.

At the time of writing, the Dollar Spot Index was down by 0.01% to 90.776.

For the Loonie

It’s a quiet day ahead, with no material stats to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of the weekly crude oil inventory numbers and market risk appetite.

At the time of writing, the Loonie was up by 0.02% to C$1.2633 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

Technicals on COMDOLLS: AUDUSD, USDCAD & NZDUSD

If we zoom out to the daily chart we clearly see the longer-term downtrend but the Stochastic Oscillator is now heading into oversold.

If we look at our post-COVID Fibonacci we can see just how strong the 50% level was and we are heading to the 61.8% level of support, just below $1,700.

Curiously we see continued USD strength against all currencies except the COMDOLLS, or Commodity based currencies like CAD, AUD and NZD.

If you went long on AUDUSD yesterday, based on our fundamental analysis, you’ve made some pips and, on the technical side, we see a clear bounce off the lower trend line, we are waiting for MACD to cross out of its oversold histogram, and the Stochastic Oscillator to give us some direction.

We see a similar situation with the Canadian Dollar, inversely of course, where we have been in a long-term downtrend.

The recent drop in the price of crude has stalled the strength of the Canadian Dollar but we see a bounce off the lower trend line of WTI and the Stochastic Oscillator just turned from oversold.

The final COMDOLL pair is NZDUSD but the technical indicators for a buy position are not there yet but we will monitor the situation.

AUD/USD and NZD/USD Fundamental Daily Forecast – RBA ‘Remains Committed to the 3-Year Yield Target’

The Australian Dollar extended its earlier losses after Australia’s central bank on Tuesday re-committed to keeping interest rates at historic lows as policymakers battle to stop surging bond yields from disrupting the country’s surprisingly strong economic recovery.

Concluding its March Board meeting, the Reserve Bank of Australia (RBA) kept rates at 0.1% and emphasized that its targets for employment and inflation were not likely to be met until 2024 at the earliest.

At 04:02 GMT, the AUD/USD is trading .7762, down 0.0011 or -0.15%.

RBA Responds to Surge in Three-Year Yields

The central bank has been struggling to deal with a steep selloff in global bond markets that saw local yields spike to two-year peaks in just a couple of sessions, according to Reuters.

“The savage move sent three-year yields as high as 0.188% and threatened to un-anchor them from the RBA’s target of 0.1%. The bank responded with an aggressive A$3 billion ($2.33 billion) bond buying offer last Friday, and followed up with another A$4 billion in Monday’s session.”

RBA Governor Lowe Reiterates Commitment to Target

“The Bank remains committed to the 3-year yield target and recently purchased bonds to support the target and will continue to do so as necessary,” said RBA Governor Philip Lowe.

“The Board remains committed to maintaining highly supportive monetary conditions until its goals are achieved.”

That helped three-year yields edge down a little to 0.14%, though the much more liquid futures market is still implying a yield of 0.265%.

Yields on 10-year bonds also went flying last week to reach as high as 1.973%, before easing back to the current 1.67%. The weekly increase of 43 basis points was the largest since 2001 and followed similar wild moves in U.S. Treasuries.

Short-Term Outlook

RBA officials are clearly upset by the speed of the shift in yields as it risked destabilizing markets. However, some of the rise in yields is justified given the improving economy.

Moving forward, the RBA is going to have to find a way to bridge the deepening divide between traders and the central bank over the pace of the economic recovery, but that could prove to be difficult given that Australia’s success in containing the coronavirus has allowed consumer spending to come roaring back from a lockdown-induced recession.

On Wednesday, a report is expected to show Australian gross domestic product (GDP) grew 2.5% in the December quarter, on top of a 3.3% jump the previous quarter. Housing prices are also climbing at their fastest pace in almost two decades.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD and NZD/USD Fundamental Daily Forecast – Will RBA Resort to ‘Tough Talk’ to Defend Its Credibility?

The Australian and New Zealand Dollars are edging lower early Tuesday as investors await the release of the latest monetary policy and interest rate decision from the Reserve Bank of Australia (RBA).

On Monday, the Aussie and Kiwi recovered some lost ground against the U.S. Dollar, after suffering their biggest plunges in a year at the end of last week amid a hefty sell-off in global bond markets.

At 1:52 GMT, the AUD/USD is trading .7750, down 0.0023 or -0.30% and the NZD/USD is at .7252, down 0.0014 or -0.19%.

The Aussie, Kiwi and greenback have taken cues from the global bond market, where yields have surged in anticipation of an accelerated economic recovery. The aggressive bond selling implies a bet that global central bankers will need to tighten policy much earlier than they have so far been forecasting.

Australian Dollar Investors Look to RBA for Guidance

The Reserve Bank of Australia will hold its monthly policy meeting on Tuesday, and markets are widely expecting it to reinforce its forward guidance for three more years of near-zero rates, while also addressing the market dislocation.

After last week’s rout of the Australian Dollar, the focus is now squarely on the looming policy meeting of the Reserve Bank of Australia (RBA). Late last week as Australian Government bonds were crashing, the RBA stepped up bond buying, and any further warning against rising yields could cap its latest rebound.

Short-Term Outlook

“The market has been in a euphoria for some time and everybody says the dollar will weaken on rising risk appetite. But oil prices dipped yesterday and gold also slipped. If commodity markets are waking up to the reality, then we could see some weakness in commodity-linked currencies,” said Makoto Noji, chief FX strategist at SMBC Nikko Securities.

The jump in bond yields has also shifted the focus to the U.S. economy.

“USD direction is likely to hinge on not only the direction, but also the pace, of global bond moves,” Commonwealth Bank of Australia strategists wrote in research note.

Bond moves are trumping economic data as the driver of foreign-exchange markets, with yields moving “well in advance” of economic fundamentals, they said.

“The risk is tilted to a firmer USD this week because we doubt central banks will intervene in any meaningful way yet.”

The RBA could use some tough language to get the point across that it is calling the shots about the economy, but it’s unlikely to curtail a deepening divide between traders and central banks over the pace of the economic recovery.

Policymakers fear the so-called reflation trade, already rippling through all markets, could seep into economies that have yet to rebound from the coronavirus shock, according to businesstimes.com.

“Reflation now needs a rein, and central banks are fighting the sharp rise in yields,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore. “Their credibility is at stake here too – if they want to maintain accommodative policy they have to act if markets look like they’re running away.”

For a look at all of today’s economic events, check out our economic calendar.

Economic Data from the Eurozone and the Canada Put the EUR and Loonie in Focus

Earlier in the Day:

It’s was another busy start to the day on the economic calendar this morning. The Aussie Dollar and the Japanese Yen were in action this morning, with RBA scheduled to deliver its policy decision later this morning.

For the Japanese Yen

In January, the Job to applications ratio increased from 1.06 to 1.10, coming in ahead of a forecasted 1.06. Unemployment figures also beast estimates, with the unemployment rate holding steady at 2.9%. Economists had forecast a pickup to 3.0%.

Capital Spending fell by 4.8%, year-on-year, in the 4th quarter. In the 3rd quarter, capital spending had fallen by 10.6%.

The Japanese Yen moved from ¥106.822 to ¥106.820 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.10% to ¥106.87 against the U.S Dollar.

For the Aussie Dollar

Building approval and current account figures were in focus this morning.

In January, building approvals tumbled by 19.4%, reversing a 12.0% jump in December. Economists had forecast 3% fall.

According to the ABS,

  • Private sector houses fell 12.2%, while private sector dwellings excluding houses tumbled 39.5%.

In the 4th quarter, the current account surplus widened from A$10.0bn to A$14.5bn. Economists had forecasted a widening to A$13.1bn.

The Aussie Dollar moved from $0.77712 to $0.77702 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.10% to $0.7764.

Elsewhere

At the time of writing, the Kiwi Dollar was down by 0.01% to $0.7264.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. The German economy is back in the spotlight, with Eurozone inflation figures also in focus.

From Germany, retail sales figures for January and unemployment numbers for February will provide direction.

A recent pickup in consumer confidence will need to translate into a rise in spending and an improvement in employment figures.

Expect weak numbers to test support for the EUR.

Later in the day, prelim February inflation figures for the Eurozone are also due out. Market sensitivity has picked up, so expect any further pickup in inflationary pressures to influence.

At the time of writing, the EUR was down by 0.09% to $1.2038.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. There are no material stats from the UK to provide the Pound with direction.

The lack of stats will leave the Pound in the hands of market risk sentiment on the day. In spite of last week’s pullback, downside risks for the Pound will likely remain limited near-term.

At the time of writing, the Pound was down by 0.01% to $1.3923.

Across the Pond

It’s also a quiet day ahead on the economic calendar. There are no material stats due out of the U.S to provide the markets with direction.

The lack of stats will leave the Dollar in the hands of chatter from Capitol hill and FOMC member commentary on the day.

Biden’s COVID-19 relief package has made its way to the Senate, so expect updates from talks ahead of a vote.

With the markets looking to get a sense on where the FED sits vis-à-vis inflation, FOMC member speeches will also begin to garner greater interest.

At the time of writing, the Dollar Spot Index was up by 0.04% to 91.075.

For the Loonie

It’s a busy day ahead. 4th quarter and December GDP numbers are due out later today.

With little else for the markets to consider, expect the numbers to influence.

At the time of writing, the Loonie was down by 0.02% to C$1.2649 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

Manufacturing Sector PMIs Put the EUR and the Greenback in Focus

Earlier in the Day:

It’s was a busy start to the day on the economic calendar this morning. The Aussie Dollar and the Japanese Yen were in action this morning, with economic data from China also in focus.

For the Japanese Yen

The manufacturing sector was in focus early in the day.

In February, Japan’s Manufacturing PMI increased from 49.8 to 51.4, which was an upward revision from a prelim 50.6.

According to the February survey,

  • This was the strongest improvement in the health of the sector since Dec-2018.
  • Production volumes increased for the 1st time since Dec-2018.
  • Output saw a moderate expansion, supporting the uptick in the PMI.
  • Manufacturers reported that a gradual recovery in demand led to increased orders for manufactured goods.
  • New orders expanded for the second month in a row, with the pace of growth the quickest since Oct-2018.
  • Also, new export orders increased for the first time in 4-months in February, supported by strong demand from China in particular.
  • Employment levels continued to fall, however, though the pace of decline was softer than in recent months.
  • Cost burdens rose for a 9th consecutive month, with the rate of input cost inflation accelerating at the fastest pace in 2-years.
  • Optimism across the sector strengthened to the highest since Jul-2017, supported by hopes of an end to the pandemic.

The Japanese Yen moved from ¥106.491 to ¥106.500 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.06% to ¥106.63 against the U.S Dollar.

For the Aussie Dollar

In February, the AIG Manufacturing Index rose from 55.3 to 58.8, the highest level since Mar-2018.

According to the February survey,

  • Five of the six manufacturing sectors reported positive trading conditions in February.
  • The building materials sector recorded its first month of expansion since Aug-2019, supported by government fiscal stimulus.
  • Only the metal products sector continued to report mildly negative conditions in February.

According to the ABS, company gross operating profits slid by 6.6%, quarter-on-quarter, reversing a 3.2% increase in Q3. Economists had forecast a 4.0% decline.

The Aussie Dollar moved from $0.77501 to $0.77527 upon release of the figures that preceded China’s Manufacturing PMI numbers. At the time of writing, the Aussie Dollar was up by 0.57% to $0.7750.

From China

In February, the Caixin Manufacturing PMI fell from 51.5 to 50.9. Economists had forecast for the PMI to hold steady at 51.5.

According to the February survey,

  • Companies reported slower rises in both output and new work for a 3rd consecutive month.
  • Firms noted that the COVID-19 pandemic had weighed on demand and impacted business operations.
  • New export work fell for a second consecutive month.
  • Total new work expanded at the weakest pace for 9-months, with new export orders falling for a 2nd consecutive month.
  • Rising prices for raw materials and higher transport costs led to a further marked increase in input costs.
  • Factory gate prices rose solidly, as firms looked to partially pass on higher cost burdens to customers.
  • In spite of this, companies were strongly optimistic that output will rise over the next year on hopes of a global economic rebound.

The Aussie Dollar moved from $0.77570 to $0.77493 upon release of the figures.

Elsewhere

At the time of writing, the Kiwi Dollar was up by 0.58% to $0.7275.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. Manufacturing PMI figures for Italy and Spain are due out later this morning, along with finalized numbers for France, Germany, and the Eurozone.

Barring marked revisions to French and German PMI numbers, Italy and the Eurozone’s PMIs will likely have the greatest impact.

Prelim February inflation figures from Italy and Germany will also draw attention as reinflationary fears linger.

At the time of writing, the EUR was up by 0.07% to $1.2083.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. Finalized manufacturing PMI figures for February are due out later today.

Barring a material shift from prelim figures, however, the PMI should have a relatively muted impact on the Pound.

With economic data on the lighter side, the Pound will be in the hands of market risk sentiment on the day.

We continue to see the downside limited, however, with plans to ease lockdown measures positive.

At the time of writing, the Pound was up by 0.37% to $1.3984.

Across the Pond

It’s a relatively busy day ahead on the economic calendar. February’s ISM Manufacturing PMI numbers are due out later today along with finalized Market manufacturing PMI figures.

Expect the ISM numbers to draw the greatest interest.

Away from the economic calendar, chatter from Capitol Hill will also influence. From the weekend, the House of Representatives passed Biden’s $1.9 trillion relief package through to leave it in the hands of the Senate.

The key date for Biden and for the Democrats is 14th March, when existing unemployment benefits expire.

On the geopolitical risk front, there is also Iran in focus.

At the time of writing, the Dollar Spot Index was down by 0.10% to 90.7900.

For the Loonie

It’s a quiet day ahead, with no material stats to provide the Loonie with direction.

The lack of stats will leave manufacturing PMI figures from China and the U.S and market risk sentiment to provide direction.

At the time of writing, the Loonie was down by 0.27% to C$1.2703 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD and NZD/USD Fundamental Weekly Forecast – RBA Shows It Won’t Tolerate Rapidly Rising Yields

The free ride to multi-year highs by the Australian and New Zealand Dollars came to a screeching halt last week as the U.S. Dollar surged on the back of an increase in U.S. bond yields.

Global bonds, and particularly U.S. Treasuries, became the focal point of markets globally last week. Meanwhile, traders moved aggressively to price in earlier monetary tightening than the Federal Reserve, Reserve Bank of Australia and Reserve Bank of New Zealand have signaled.

Last week, the AUD/USD settled at .7704, down 0.0165 or -2.10% and the NZD/USD finished at .7233, down 0.0064 or -0.88%.

The benchmark 10-year Treasury yield surged above 1.6% for the first time in a year. With that news, The Australian Dollar started to retreat from its first high over .8000 since February 2018. While the New Zealand reached .7465 then plummeted the next two sessions.

The Aussie fell sharply despite the market signaling expectations of higher economic growth. It was pressured because the country’s central bank’s yield curve control policy would restrain its bond yields moving much higher. That, in turn, could limit the attractiveness of the currency going forward.

Short-Term Outlook

The steep drop in the Australian Dollar was accompanied by a plunge in Australian Government bonds, which caused the Reserve Bank to hit the panic button. The RBA waded in with more than US$2 billion of unscheduled purchases.

While the response by RBA policymakers appeared to calm bond investors, it’s unlikely to bridge a deepening divide between traders and central banks over the pace of the economic recovery. Policymakers fear the so-called reflation trade, already rippling through all markets, could seep into economies that have yet to rebound from the coronavirus shock.

“Reflation now needs a rein, and central banks are fighting the sharp rise in yields,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore. “Their credibility is at stake here too – if they want to maintain accommodative policy they have to act if markets look like they’re running away.

The RBA is taking the lead in acting as a breakwater for rising yields, a role typically played by the Bank of Japan. Its offer to buy A$3 billion ($3.1 billion) of debt acted to brake the sell-off, with Australia’s three-year bond yield erasing gains.

There are expectations that global central banks will try to contain a further rise in yields, said Kei Yamazaki, a senior fund manager in Tokyo at Sumitomo Mitsui DA Asset Management. He added:  “Fed officials have been tolerating the recent rise in yields, but the current risk-averse market will also prompt them to calm the market verbally,” Bloomberg reported.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD and NZD/USD Fundamental Daily Forecast – RBA Has to Find a Way to Regain Investor Confidence in Policy

The Australian and New Zealand Dollar plunged on Friday after U.S. Treasury yields jumped, as prospects of higher inflation and economic growth increased, making investors doubt that central banks would retain ultra-low interest rates for a longer period.

Overnight, the benchmark 10-year yield touched its highest in a year at 1.614%, causing a sell-off in U.S. equities and other global stock indexes.

The price action suggests bond market investors don’t believe that the Fed or other central banks could continue to keep rates at such low levels in the face of a recovering economy and rising commodity costs. Furthermore, the Aussie and the Kiwi could face additional pressure along with the global equity markets if bond yields continue to rise as investors will be encouraged to rebalance their portfolios.

On Friday, the AUD/USD settled at .7704, down 0.0168 or -2.14% and the NZD/USD finished at .7233, down 0.0153 or -2.07%.

Reserve Bank of Australia Forced to Intervene

The Australian Dollar was whacked on Friday, pushed lower from a multi-year peak at .8007, hit on Thursday, as a rout in bond markets spread to other risk assets, spurring the country’s central bank to intervene to stem a savage selloff in government debt.

The Aussie had been flying high throughout the week as it jumped the .8000 barrier for the first time since February 2018, but reality came back with a vengeance when investors started to dump higher risk commodities and equities.

At one point on Friday, Australian 10-year bond futures were down as much as 23 ticks at an 11-month low of 98.0450, before bouncing to 98.2600. That still left them nursing losses of 30 ticks for the week, the sharpest drop since mid-2015, according to Reuters.

Cash yields spiked as far as 1.970%, levels unseen since April 2019, before easing to 1.74%. Again, they were still up a steep 32 basis points on the week.

The selling pressure became so intense the Reserve Bank of Australia (RBA) launched an unscheduled offer to buy A$3 billion ($2.36 billion) in three-year debt. That seemed to calm markets a little and three-year yields eased back to 0.127% from 0.157%.

Three-year futures pared their early losses but were still down 8 ticks for the week at an implied yield of 0.315%.

Markets were also wagering the RBA might have to hike rates as early as next year, even when policy makers have said no move was likely until 2024 at the earliest.

Short-Term Outlook

“Thoughts turning to rate hikes are understandable given the greater confidence about the economic outlook,” said Peter Munckton, chief economist at Bank of Queensland. “But pricing looks increasingly at odds with stated global central bank policies, which have made it clear that rates will rise later in this economic cycle than they have done over the past twenty-plus years.”

The RBA may be pleased with the steep drop in the Australian Dollar, but it’s probably not happy with the volatility in the domestic bond market. Look for RBA policymakers to address the issue that it will move to tighten monetary policy sooner than expected. It has to find a way to regain control of its policy intentions.

For a look at all of today’s economic events, check out our economic calendar.