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Dollar higher into US session. 0.9490 in USD/CHF watched

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    ActionForex.com
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    Dollar rises broadly entering into a rather busy US session. 

    ECB will announce rate decision at 12:45 GMT. But focus is on Mario Draghi’s press conference at 13:30 GMT.

    US will release challenger job cuts, jobless claims.

    Canada will release housing starts, building permits, new housing price index.

    Also BoC governor Stephen Poloz will speak.

    And, Trump will formally sign the order for steel and aluminum tariff. Canada and Mexico are expected to get temporary exemptions.

    Based on CHF’s broad based weakness, 0.9490 in USD/CHF will be a level to watch.

    Euro’s pre-ECB retreat just shallow

      By
      ActionForex.com
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      Euro trading generally lower today ahead of ECB. But it’s clearly just paring some of this week’s gain as traders turn cautious. EUR remains the strongest one for the week and the month. And over the last four hours, it has indeed regained some ground, showing that the retreat is rather shallow.

      There is only one important thing to note today, whether ECB will change forward guidance and drop easing bias. We believed that ECB won’t do anything today and leave the options for June meeting. There are just too many uncertainties out there, including US trade tariffs and Brexit negotiation. ECB will keep the open to extend the EUR 30b a month asset purchase program after September.

      Here are some suggested readings on ECB:

      German factory orders -3.9% mom, Swiss unemployment rate at 2.9%

        By
        ActionForex.com
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        German factory orders Feb: -3.9% mom vs exp -1.6% mom vs prior 3.0% mom

        Swiss unemployment rate Feb: 2.9% vs exp 2.9% vs prior 3.0%

        Little reaction to the data as markets await ECB later today. Recent rebound in EUR/CHF suggests pull back from 1.1832 has completed at 1.1445 already. But the corrective pattern from 1.1832 could still extend with another falling leg before completion. Mario Draghi’s message will likely decide whether EUR/CHF will target 1.1832 first, or 1.1445 again first.

        Canada and Mexico to be temporarily excluded from steel and aluminum tarrifs, CAD rebounds

          By
          ActionForex.com
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          Trumps is set to ignore all the oppositions from Republicans and business leaders and sign the order for steel and aluminum tariffs on Thursday afternoon at the White House. It’s being planned to hold at 3:30pm ET in the Roosevelt Room. A top White House trade advisor Peter Navarro said “the proclamation will have a clause that does not impose these tariffs immediately on Canada and Mexico”. But whether there will be permanent exclusion will depend on NAFTA negotiations. Press secretary also gave similar comments as “there are potential carve-outs for Canada and Mexico based on national security, and possibly other countries as well”.

          Canadian dollar responded quite positively to the news with USD/CAD dipping sharply after failing to take out 1.3000.

          China Foreign Minister Wang Yi warned “justified and necessary response” to trade wars

            By
            ActionForex.com
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            China Foreign Minister Wang Yi pledged to have “justified and necessary response” to trade wars. He said that “A trade war has never been the right way to solve the problem, especially under globalization.” And, these conflicts “will only harm everyone and China will surely make a justified and necessary response.”

            At the same time, released today, China’s trade surplus widened to USD 33.7b in January, or CNY 225b. Both were way better than expectation of USD -8.5b or CNY -71b deficit.

            Exports rose 44.5% yoy. Imports rose 6.3% yoy.

            Australia Jan trade balance: Massive AUD 1.06b surplus

              By
              ActionForex.com
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              Australia recorded massive trade surplus of AUD 1.06b in January, a turnaround from December’s AUD -1.15b trade deficit.

              Exports jumped 4% mom to AUD 33.9b, with 4% rise in non-rural goods, 54% rise in non-monetary gold. Much more than offsetting -8% fall in rural goods.

              Imports, on the other hand, dropped -2% to AUD 32.9b. Consumption goods dropped -7%, non-monetary gold dropped -19%, capital goods dropped 1%.

              AUD/JPY is tentatively drawing strong support from key medium term cluster at 81.48, 50% retracement of of 72.39 (2016) low to 90.29 (2017 high) at 81.34. But the bigger hurdle is on 84.34 support turned resistance for confirming short term bottoming. Otherwise, risk will remain on the downside.

              CAD staying the weakest after BoC, DOW shows resilience

                By
                ActionForex.com
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                The US session is so far rather dull. Canadian Dollar remains the weakest one for the day and the week. Cautious BoC statement gave the Loonie no support. Fresh selling is seen, together with rebound in US stocks. Talking about stocks, they’re rather resilient so far. There are rumors that Trump is going to sign presidential proclamation tomorrow regarding the steel and aluminum tariffs.

                DOW dipped to as low as 24571.50 but recovered. Risk stays on the downside. As we pointed out before, 25000 seems to be tough hurdle. But stocks’ reaction to the Gary Cohn resignation news is rather muted.

                EU’s official response on possible US tariffs for steel and aluminum

                  By
                  ActionForex.com
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                  Here is the official statement published today.

                  European Commission outlines EU plan to counter US trade restrictions on steel and aluminium

                  The College of Commissioners discussed today the EU’s response to the possible US import restrictions for steel and aluminium announced on 1 March. The EU stands ready to react proportionately and fully in line with the World Trade Organisation (WTO) rules in case the US measures are formalised and affect EU’s economic interests. The College gave its political endorsement to the proposal presented by President Jean-Claude Juncker, Vice-President Jyrki Katainen and Commissioner for Trade Cecilia Malmström. Speaking after the College meeting, Commissioner Malmström said: “We still hope, as a USA security partner, that the EU would be excluded. We also hope to convince the US administration that this is not the right move. As no decision has been taken yet, no formal action has been taken by the European Union. But we have made clear that if a move like this is taken, it will hurt the European Union. It will put thousands of European jobs in jeopardy and it has to be met by firm and proportionate response. Unlike these proposed US duties, our three tracks of work are in line with our obligations in the WTO. They will be carried out by the book. The root cause of the problem in the steel and aluminium sector is global overcapacity. It is rooted in the fact that a lot of steel and aluminium production takes place under massive state subsidies, and under non-market conditions. This can only be addressed by cooperation, getting to the source of the problem and working together. What is clear is that turning inward is not the answer. Protectionism cannot be the answer, it never is.”The EU remains available to continue working on this together with the United States.The EU has been and remains a strong supporter of an open and rules-based global trade system. (For more information: Daniel Rosario – Tel.: +32 229 56185; Kinga Malinowska – Tel: +32 229 51383)

                  BoC stands pat, maintain tightening bias but sounds cautious

                    By
                    ActionForex.com
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                    Bank of Canada kept overnight rate target unchanged at 1.25% as widely expected.

                    Some highlights of the statement:

                    • Trade policy developments are an important and growing source of uncertainty for the global and Canadian outlooks.
                    • The Bank continues to monitor the economy’s sensitivity to higher interest rates.
                    • Inflation is running close to the 2 per cent target and the Bank’s core measures of inflation have edged up, consistent with an economy operating near capacity.
                    • Wage growth has firmed, but remains lower than would be typical in an economy with no labour market slack.
                    • While the economic outlook is expected to warrant higher interest rates over time, some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential and inflation on target.
                    • Governing Council will remain cautious in considering future policy adjustments, guided by incoming data in assessing the economy’s sensitivity to interest rates, the evolution of economic capacity, and the dynamics of both wage growth and inflation.
                    • Full statement here

                    There was no elaboration on NAFTA negotiations nor risk of trade war. BoC maintained tightening bias but sounds very cautious.

                    USD/CAD is steadily in consolidation from 1.3000 temporary top.

                    ADP 235k beat expectation 200k, USD/JPY slightly higher

                      By
                      ActionForex.com
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                      USD/JPY slightly higher as ADP job report beat expectation.

                      ADP Feb: 235k vs exp 200K  vs prior 244k

                      But it remains to be seen if USD/JPY could sustain gain.

                      EU draft Brexit negotiation guidelines reject “mutual recognition”

                        By
                        ActionForex.com
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                        European Council President Donald Tusk is putting forward a draft of Brexit negotiation guidelines. The 6-page document was leaked to Politco. A point to note is that the document rules out UK Prime Minister Theresa May’s proposal of “mutual recognition” of standards.

                        It notes that “trade in services … to an extent consistent with the fact that the U.K. will become a third country and the [European] Union and the U.K. will no longer share a common regulatory, supervisor, enforcement and judiciary framework.”

                        Another point is that financial services is not included in the trade agreement. This certainly disappoints Chancellor Philip Hammond who has been pushing to include it.

                        Also, the “the European Council has to take into account the repeatedly stated positions of the UK, which limit the depth of such a future partnership. Being outside the customs union and the single market will inevitably lead to frictions.

                        Euroarea Q4 GDP finalized at 0.6% qoq, unrevised

                          By
                          ActionForex.com
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                          Euroarea (EA19) Q4 GDP: 0.6% qoq, 2.7% yoy, 2.3% over 2017

                          EU28 Q4 GDP growth: 0.6% qoq, 2.6% yoy, 2.4% over 2017

                          In Q4, Estonia ranked top at +2.2%, followed by Slovenia at +2.0% and Lithuania at +1.4%

                          Greece and Croatia were both at bottom at +0.1%, followed by Italy and Latvia at +0.3%

                          Regarding the components:

                          • EA19: Household consumption expenditure +0.2%, gross fixed capital formation +0.9%, exports +1.9%, imports +1.1%
                          • EU28: Household consumption expenditure +0.2%, gross fixed capital formation +0.9%, exports +1.7%, imports +1.3%

                          IMF Lagarde: Trade war find losers on both sides

                            By
                            ActionForex.com
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                            IMF Managing Director Christine Lagarde on trade wars:

                            • “The macroeconomic impact would be serious, not only if the United States took action, but especially if other countries were to retaliate, notably those who would be most affected, such as Canada, Europe, and Germany in particular.”
                            • “In a so-called trade war, driven by reciprocal increases of import tariffs, nobody wins, one generally finds losers on both sides.”
                            • “There are some countries in the world that do not necessarily respect the World Trade Organization’s agreements, and which impose technology transfers. China is a case in point, but it is not the only country with such practices.”

                            BoJ deputy nominee Wakatabe: Policy should be date dependent, not date-driven

                              By
                              ActionForex.com
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                              BoJ deputy governor nominee Masazumi Wakatabe in upper house confirmation hearing:

                              • “There are various things the BOJ can do under its yield curve control policy. It can strengthen its existing tool kit, or could come up with a new policy.”
                              • “The BOJ shouldn’t be bound by a set timeframe” for meeting the 2% inflation target.
                              • “Its policy should be data-dependent, not date-driven.”
                              • Planned sales tax hike in fiscal 2019 is the important considering on whether more easing is needed

                              Another deputy nominee Masayoshi Amamiya said in the same occasion:

                              • BoJ has ample tools for smooth stimulus exit when time comes.
                              • But there is still a distant to 2% inflation target.
                              • BoJ needs to continue with powerful monetary easing patiently

                              CAD the clear loser this week ahead of BoC

                                By
                                ActionForex.com
                                -

                                No clear winner this week so far. Yen trades generally higher today. But that’s mainly because rebound in Yen crosses lost steam. While Euro is strongest for the week, there is not much follow through buying.

                                Nonetheless. CAD is the clear loser so far, as the weakest for the week and stays pressured today.


                                BoC rate decision is a focus later today. Based on uncertainty around NAFTA and Trump’s steel and aluminum tariffs, there is practically no chance for another hike today. And, further, there is little chance for BoC to sound anything but cautious.

                                EUR/CAD is a pair to watch today as it’s set to take on 1.6103 key resistance (2016 high). Firm break there will resume long term rebound from 2012 low at 1.2126. Next medium term target will be 161.8% projection of 1.3782 to 1.5257 from 1.4441 at 1.6828.

                                Fed Brainard: Mounting tailwinds tip the balance of considerations.

                                  By
                                  ActionForex.com
                                  -

                                  Fed Governor Lael Brainard:

                                  • Economic headwinds are shifting to tailwinds
                                  • There will be “substantial” boost from tax cuts and public spending
                                  • “In the earlier period, strong headwinds sapped the momentum of the recovery and weighed down the path of policy.
                                  • “Mounting tailwinds at a time of full employment and above-trend growth tip the balance of considerations.”
                                  • “With greater confidence in achieving the inflation target, continued gradual increases in the federal funds rate are likely to be appropriate.”

                                  RBA Lowe: No strong case for near term hike

                                    By
                                    ActionForex.com
                                    -

                                    RBA Governor Philip Lowe said:

                                    • Australian economy expected to be stronger in 2018.
                                    • “Businesses are reporting stronger business conditions than at any time since before the financial crisis.”
                                    • Economy is “moving in the right direction and interest rates still quite low, it is likely that the next move in interest rates in Australia will be up, not down.”
                                    • But “the board does not see a strong case for a near-term adjustment of monetary policy”, thanks to slow progress in unemployment and inflation.

                                    Regarding the steel and aluminum tariffs of the US, Lowe slammed it as “highly regrettable and bad policy”.

                                    • “History is very clear here. Protectionism is costly. It’s costly to the country that implements the protectionism, and it’s costly to everyone else. It’s just not the right thing to do.”
                                    • “How damaging will this be remains open. If it’s just confined to the current higher tariffs on steel and aluminium, then I think it’s manageable for the world economy.”
                                    • However, “this could turn very badly, though, if it escalates.”

                                    RBA is generally expected to keep rates on hold throughout 2018, except that NAB predicts one hike. Slowing growth in Q4 and risk of trade wars would add to the case for RBA to stand pat.

                                    Markets not too surprised at Gary Cohn’s resignation, DOW ended flat

                                      By
                                      ActionForex.com
                                      -

                                      So it finally happened. White House economic top economic adviser Gary Cohn resigned. It’s reported that the decision was made hours after direct confrontation with Trump regarding the steel and aluminum tariffs. Trump requested Cohn to publicly support the tariff plan. But Cohn, as a free trade advocate, didn’t answer. The meeting with industry executives, arranged by Cohn for persuading Trump not to impose the tariffs, was also canceled.

                                      Cohn said in a statement that  “it has been an honor to serve my country and enact pro-growth economic policies to benefit the American people, in particular the passage of historic tax reform.”

                                      Trump said regarding Cohn that “Gary has been my chief economic adviser and did a superb job in driving our agenda, helping to deliver historic tax cuts and reforms and unleashing the American economy once again.” And,  “he is a rare talent, and I thank him for his dedicated service to the American people.”

                                      Stock markets reaction to the news was quiet muted. DOW continued to struggle around 55 H EMA, closed up 0.04% at 24884.12/. Technically, it’s also in proximity to 25000 handle, 50% retracement of 25800.35 to 24127.47 at 25008.91. This will a key near term hurdle for DOW to overcome.

                                      S

                                      Australia GDP Q4: 0.4% qoq, AUD/USD pressing 55 H EMA

                                        By
                                        ActionForex.com
                                        -

                                        Australia GDP Q4: 0.4% qoq vs exp 0.5% qoq vs prior 0.7% qoq

                                        Australia GDP Q4: 2.4% yoy vs exp 2.5% vs prior 2.9% yoy

                                        From the release: Chief Economist for the ABS, Bruce Hockman, said: “Growth this quarter was driven by the household sector, with continued strength in household income matched by growth in household consumption.”

                                        Full release here

                                        AUD/USD struggling to break 55 day EMA and topped at 0.7814. Rebound from 0.7712 is corrective looking. Focus back on whether 55 H EMA could hold.

                                        25000 too much for DOW? Mnuchin backs tariffs

                                          By
                                          ActionForex.com
                                          -

                                          25000 proves to be too much for DOW? It opened higher and hit as high as 24995.24. But stocks seem to response negatively to Treasurer Steve Mnuchin’s backing on steel and aluminum tariffs. Mnuchin said in House:

                                          • Regarding Trump’s tariffs – “I am supportive of them and I am supportive of the mechanisms that the president has announced,”
                                          • “To the extent that we’re successful in renegotiating Nafta, those tariffs won’t apply to Mexico and Canada.” (same position as Trump)
                                          • “We’re not looking to get into trade wars.”
                                          • “We’re looking to make sure that U.S. companies can compete fairly around the world.”
                                          • He brought up China too. (?!) “President Trump has been very clear: We want to make sure U.S. companies have the same ability to do business in China as Chinese companies have here.”
                                          • And, “our priority at the moment is to renegotiate NAFTA and to focus on our trade relationships with China and have fair and balanced trade with China.”

                                          Facts: China is the 11th imports of steel to US in 2017. India ranked 10 with contribution merely 2%. Canada was top at 16%, Mexico 4th at 9%.

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