Japanese Yen remains the strongest major currency for the week on risk aversion. On the one hand, sentiments were weighed down by terrorist attack in Russia. On the other hand, markets are getting cautious ahead of the summit between US president Donald Trump and China President Xi Jinping. Dollar follows Yen as the second strongest one but it’s losing some momentum against Euro. Commodity currencies are generally lower today with Aussie leading the way down on the perceived dovish RBA statement. In other markets, Gold seems to benefit from risk aversion and jumped to 1263.7 but lost momentum quickly. WTI crude oil is struggling around 55 day EMA around 50.67.
Trump and Xi to meeting later this week
US trade deficit narrowed to USD -43.6b in February, better than expectation of USD -46.0b. Exports rose 0.2% to USD 192.9b while imports dropped -1.8% to 236.4b. Trade with China contributed to nearly 70% of the deficit. US president Donald Trump and China president Xi Jinping will meet later this week. Trade relationship and issues on North Korea will be the focuses in the talk between the leaders.
Some economists anticipated that the result of the meeting will set the tone for US-China relationship for the next few years. While it’s generally believed both leaders wouldn’t want to spoil the meeting, nothing solid could be achieved other than some minor economic concessions from China. Also released in US session, Canada trade balance came in at CAD -1.0b deficit in February.
Brexit committee urged assessment on "no deal"
In UK, Prime Minister Theresa has warned that "no deal is better than a bad deal" for Brexit. A report by a cross-party MPs’ Brexit committee criticized that such claim is "unsubstantiated" before an economic assessment of "no deal" is completed. In addition, the report urged that the parliament must have a vote before Brexit without a deal.
UK construction PMI dropped 0.3 to 52.2 in March, below expectation of 52.5. Markit noted that "March data revealed a slowdown in growth across the UK construction sector, led by a weaker rise in residential building activity." Also, that provides an indication that the cooling UK housing market has started to act as a drag on the construction sector."
Released from Eurozone, retail sales rose 0.7% mom in February.
Aussie lower after RBA
Australian dollar’s decline accelerates today after RBA left cash rate unchanged at 1.50% as widely expected. RBA sounded more concerned on employment as it noted that "some indicators of conditions in the labour market have softened recently." On the other hand, the central bank continued to struggle between soaring property prices and subdued inflation. We expect RBA to leave its monetary stance unchanged throughout the year. More in RBA Torn Between High Housing Prices And Subdued Inflation.
Also from Australia, trade surplus widened to AUD 3.57b in February. Meanwhile, Japan monetary base rose 20.3% yoy in March.
USD/JPY Mid-Day Outlook
Daily Pivots: (S1) 110.64; (P) 111.11; (R1) 111.37; More….
Intraday bias in USD/JPY remains on the downside for the moment. As noted before, corrective fall from 118.65 is still in progress and is possibly resuming. Break of 110.10 will confirm this bearish case and target 50% retracement of 98.97 to 118.65 at 108.81. On the upside, break of 112.19 resistance is needed to confirm near term reversal. Otherwise, outlook will stay mildly bearish in case of recovery.
In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. The impulsive structure of the rise from 98.97 suggests that the correction is completed and larger up trend is resuming. Decisive break of 125.85 will confirm and target 61.8% projection of 75.56 to 125.85 from 98.97 at 130.04 and then 135.20 long term resistance. Nonetheless, sustained trading below 55 week EMA (now at 111.16) will extend the consolidation from 125.85 with another fall through 98.97 before completion.
Economic Indicators Update
| GMT | Ccy | Events | Actual | Forecast | Previous | Revised |
|---|---|---|---|---|---|---|
| 23:50 | JPY | Monetary Base Y/Y Mar | 20.30% | 23.20% | 21.40% | |
| 1:30 | AUD | Trade Balance (AUD) Feb | 3.57B | 1.75B | 1.30B | 1.50B |
| 4:30 | AUD | RBA Rate Decision | 1.50% | 1.50% | 1.50% | |
| 8:30 | GBP | Construction PMI Mar | 52.2 | 52.5 | 52.5 | |
| 9:00 | EUR | Eurozone Retail Sales M/M Feb | 0.70% | 0.50% | -0.10% | 0.10% |
| 12:30 | CAD | International Merchandise Trade (CAD) Feb | -1.0B | 0.7B | 0.8B | -0.4B |
| 12:30 | USD | Trade Balance Feb | -43.6B | -46.0B | -48.5B | -48.2B |
| 14:00 | USD | Factory Orders Feb | 0.90% | 1.20% |
