Euro and Pound Consolidate, But Staying Weak

Market overviews

US stocks were hammered again overnight and selling continues in Asia. But major currency pairs and crosses are trading in tight range, digesting recent moves. Euro and Sterling are recovering some grounds while Aussie is paring gains. Gold is consolidating below 2k handle but the retreat is shallow. WTI crude oil is holding firm in consolidation above 120. There is little that suggest a change in overall directions in the markets so far and more downside is still in favor for Euro and Pound.

Technically, a major focus to us is USD/JPY would break out from recent range of 114.40/116.33. An upside break out is mildly in favor given that the pair is continuously supported by 55 day EMA. However, once the persistent support was taken out firmly, the selling could be intense, and we might see USD/JPY diving towards 110.95 support in rather quick manner.

In Asia, at the time of writing, Nikkei is down -1.25%. Hong Kong HSI is down -0.45%. China Shanghai SSE is down -1.99%. Singapore Strait Times is down -0.75%. Japan 10-year JGB yield is up 0.0164 at 0.163. Overnight, DOW dropped -2.37%. S&P 500 dropped -2.95%. NASDAQ dropped -3.62%. 10-year yield rose 0.027 to 1.751.

Australia NAB business confidence rose to 13, getting back on track

Australia NAB business confidence rose from 4 to 13 in February. Business conditions rose from 2 to 9. Looking at some details, trading conditions rose from 8 to 10. Profitability condition rose from 2 to 5. Employment condition rose from -1 to 8.

“Overall, the February survey shows that the economy is quickly getting back on track as the Omicron wave recedes,” said said NAB Group Chief Economist Alan Oster. “The outlook is fairly strong with supply disruptions and cost pressures now the major challenge facing businesses.”

Japan bank lending grew 0.4% yoy in Feb, slowest since 2012

Japan bank lending grew 0.4% yoy in February, below expectation of 0.6% yoy. That’s the slowest rate since May 2012. Lending by major banks dropped -1.3% yoy, biggest decline since August 2021. Regional banks’ lending rose 1.7% yoy, smallest increase in more than a decade.

“We must keep an eye out on how developments in Ukraine could affect corporate funding through rising crude oil prices,” a BOJ official told a briefing.

Also released, labor cash earnings rose 0.9% yoy in January, above expectation of 0.2% yoy. Current account surplus narrowed to JPY 0.19T in January, below expectation of JPY 0.33T.

Looking ahead

Germany industrial production, Italy retail sales and Eurozone GDP will be released in European session. Later in the day, US and Canada will both release trade balance.

GBP/JPY Daily Outlook

Daily Pivots: (S1) 150.68; (P) 151.46; (R1) 151.87; More…

Intraday bias in GBP/JPY stays on the downside for the moment. Decline from 158.04, which is seen as the third leg of the consolidation pattern from 158.19, should target 148.94 support next. On the upside, break of 155.20 resistance is needed to indicate completion of the decline. Otherwise, outlook will be mildly bearish in case of recovery.

In the bigger picture, price actions from 158.19 are seen as developing into a consolidation pattern to up trend from 123.94 (2020 low). Downside should be contained by 38.2% retracement of 123.94 to 158.19 at 145.10 to bring rebound. Firm break of 158.19 will resume the up trend to long term fibonacci level at 167.93. However, sustained break of 145.10 will raise the chance of trend reversal and target 61.8% retracement at 137.02.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
23:30 JPY Labor Cash Earnings Y/Y Jan 0.90% 0.20% -0.20% -0.40%
23:50 JPY Bank Lending Y/Y Feb 0.40% 0.60% 0.60% 0.50%
23:50 JPY Current Account (JPY) Jan 0.19T 0.33T 0.79T 0.81T
00:01 GBP BRC Like-For-Like Retail Sales Y/Y Feb 2.70% 4.70% 8.10%
00:30 AUD NAB Business Confidence Feb 13 3 4
00:30 AUD NAB Business Conditions Feb 9 3
05:00 JPY Leading Economic Index Jan P 104.5 104.8
05:00 JPY Eco Watchers Survey: Current Feb 38.1 37.9
07:00 EUR Germany Industrial Production M/M Jan 0.50% -0.30%
09:00 EUR Italy Retail Sales M/M Jan 1.10% 0.90%
10:00 EUR Eurozone GDP Q/Q Q4 F 0.30% 0.30%
10:00 EUR Eurozone Employment Change Q/Q Q4 F 0.50% 0.50%
11:00 USD NFIB Business Optimism Index (CAD) Feb 97.5 97.1
13:30 CAD International Merchandise Trade Jan -87.5B -0.1B
13:30 USD Trade Balance (USD) Jan -87.5B -80.7B
15:00 USD Wholesale Inventories Jan 0.80% 0.80%