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Yen Softens in Quiet, Directionless Markets, Dollar Regains Ground

The forex markets are generally quite and directionless for the time being. After very brief selloff yesterday, Dollar is regaining some ground in Asian session today. Sterling is mildly firmer too, but there is no follow through buying. Yen is currently the weaker one together with Swiss Franc and Australian Dollar. In other markets, Gold continues to struggle in tight range, together with oil price.

Technically, one focus today is 130.65 resistance in EUR/JPY. Firm break there will resume larger up trend from 114.42. More importantly, that might be an early sign of upside breakout in Euro, or downside breakout in Yen. For the latter, we’d look at 109.95 minor resistance in USD/JPY to confirm the rebound from 108.99, and double confirm Yen’s weakness.

In Asia, currently, Nikkei is up 0.98%. Hong Kong HSI is up 0.906%. China Shanghai SSE is down -0.01%. Singapore Strait Times is up 0.21%. Japan 10-year JGB yield is down -0.007 at 0.104. Overnight, DOW dropped -0.16%. S&P 500 dropped -0.02%. NASDAQ dropped -0.36%. 10-year yield rose 0.009 to 1.675.

Fed Rosengren sees an unusually strong post-recession recovery

Boston Fed President Eric Rosengren said in a speech, “assuming virus variants do not become especially problematic, we should see an unusually strong post-recession recovery.”

“The combination of accommodative monetary and fiscal policy, and consumers and firms well positioned to renew spending, should result in returning to full employment much more quickly than after the last financial crisis and Great Recession,” he added.

However, “many of the underlying problems that can disrupt financial stability – as at the outset of the pandemic – still need to be addressed.”

Fed Bullard: Stay with very easy monetary policy inside the pandemic tunnel

St. Louis President James Bullard said in a Bloomberg TV interview that “It’s too early to talk about changing monetary policy.” Policymakers want to “stay with our very easy monetary policy while we are still in the pandemic tunnel”. “If we get to the end of the tunnel,” he added, “it will be time to start assessing where we want to go next.”

“When you start to get to 75% vaccinated, 80% vaccinated and CDC starts to give more hopeful messages that we are bringing this under better control and starts relaxing some of their guidelines, then I think the whole economy will gain confidence from that,” Bullard said. “Cases are up right now, that is a little bit concerning.”

Australia NAB business conditions rose to 25, record high

Australia NAB business conditions rose from 17 to 25 in March, hitting a record high. The rise was driven by strong increases in all sub-components. Looking at some details, trading condition rose from 23 to 35. Profitability condition rose from 18 to 26. Employment condition rose from 9 to 16. Forward orders rose from 10 to 17. Business confidence dropped to from 18 to 15, but remains well above its long-run average.

NAB said, “This is a very solid survey result. Businesses are telling us activity continues to increase at a very healthy rate as we have move past the rebound phase in activity with the earlier removal of pandemic-related restrictions. Overall, the recovery over the last year has been much more rapid than anyone could have forecast.”

BoJ Kuroda: There’s quite a lot of positives from a weak yen

BoJ Governor Haruhiko Kuroda told the parliament today that there’s “quite a lot of positives for Japan from a weak Yen”. Companies with overseas profit could have their yen-denominated value increase from a lower yen. Nevertheless, a weak Yen might not boost export as much as the part, because many manufacturers now produce goods locally in the overseas markets.

Though, Kuroda also emphasized the important for exchange rates to move at equilibrium levels. It’s “not as if the weaker the yen the better, or the stronger the better”.

China exports rose 30.6% yoy in Mar, imports rose 38.1%

In March, in USD term, China’s export grew 30.6% yoy to USD 241.1B. Imports rose 38.1% yoy to 227.3B. Trade surplus came in at USD 13.8B, well below expectation of USD 52.0B. From January to March, exports rose 49.0% yoy to USD 710.0B. Imports rose 28.0% yoy to USD 593.6B. Trade surplus was at USD 116.4B.

From January to March, exports to EU rose 56.7% yoy to USD 110.2B. Imports from EU rose 33.0% yoy to USD 73.4B. Exports to US rose 74.7% yoy to 119.2B. Imports from US rose 69.2% to 46.5B. Exports to Australia rose 50.5% yoy to USD 14.1B. Imports form AU rose 20.9% yoy to USD 33.7B.

Looking ahead

UK GDP, production and trade balance will be featured in European session. Germany will also release ZEW economic sentiment. Later in the day, US will release CPI inflation.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.2539; (P) 1.2556; (R1) 1.2584; More…

USD/CAD is still bounded in range of 1.2501/2646 and intraday bias remains neutral at this point. On the upside, break of 1.2363. But overall outlook will stay bearish as long as 1.2742 resistance holds, and eventual downside breakout is expected. On the downside, break of 1.2501 minor support will bring retest of 1.2363 low first.

In the bigger picture, fall from 1.4667 is seen as the third leg of the corrective pattern from 1.4689 (2016 high). Further decline should be seen back to 1.2061 (2017 low). In any case, break of 1.2994 support turned resistance resistance is needed to indicate medium term bottoming. Otherwise, outlook will remain bearish in case of strong rebound.

Economic Indicators Update

22:00NZDNZIER Business Confidence Q1-13-6
23:01GBPBRC Retail Sales Monitor Y/Y Mar20.30%11.90%9.50%
23:50JPYMoney Supply M2+CD Y/Y Mar9.50%9.60%9.60%
1:30AUDNAB Business Confidence Mar151618
1:30AUDNAB Business Conditions Mar2515
3:00CNYTrade Balance (USD) Mar13.8B52.0B103.3B
3:00CNYImports (USD) Y/Y Mar38.10%21.60%22.20%
3:00CNYExports (USD) Y/Y Mar30.60%32.70%60.60%
3:00CNYTrade Balance (CNY) Mar88B330B676B
3:00CNYImports (CNY) Y/Y Mar27.70%10.30%
3:00CNYExports (CNY) Y/Y Mar20.70%139.50%
6:00EURGermany Wholesale Price Index M/M Mar0.60%1.40%
6:00GBPGDP M/M Feb0.60%-2.90%
6:00GBPIndustrial Production M/M Feb0.50%-1.50%
6:00GBPIndustrial Production Y/Y Feb-4.40%-4.90%
6:00GBPManufacturing Production M/M Feb-0.80%-2.30%
6:00GBPManufacturing Production Y/Y Feb-5.10%-5.20%
6:00GBPIndex of Services 3M/3M Feb-2.30%-2.40%
6:00GBPGoods Trade Balance (GBP) Feb-10.4B-9.8B
8:00EURItaly Industrial Output M/M Feb0.60%1.00%
9:00EURGermany ZEW Economic Sentiment Apr79.576.6
9:00EURGermany ZEW Current Situation Apr-52-61
9:00EUREurozone ZEW Economic Sentiment Apr73.274
10:00USDNFIB Business Optimism Index Mar98.295.8
12:30USDCPI M/M Mar0.50%0.40%
12:30USDCPI Y/Y Mar2.50%1.70%
12:30USDCPI Core M/M Mar0.20%0.10%
12:30USDCPI Core Y/Y Mar1.60%1.30%
13:00GBPNIESR GDP Estimate (3M) Mar-2%
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