USD Higher As Trump Defuses Political Tensions

News and Events:

Trump’s speech drives dollar rebound

The greenback extended gains across the board amid Donald Trump’s use of a more pacifying tone during his address before Congress. The dollar index surged 0.60% during the Asian session as it tested 101.73, but was unable to break the resistance implied by the high from February 15th. Equity markets also welcomed Trump’s speech as Asian regional exchanges were trading in positive with the Nikkei rising 1.44%. In Hong Kong the Hang Seng was up 0.21%, while in mainland China the Shanghai Composite was up 0.16%. US futures also climbed higher as the S&P futures rose 0.33%, while the ones on the Nasdaq were up 0.31%.

Despite the market’s positive response, investors remain sceptical that Trump will in fact deliver what he has promised. Indeed, zero progress has been made with the president continuing to avoid providing any insight regarding his tax cut plan. Instead he simply reiterated his pledge to spend “big” on infrastructure. At this point Trump is simply buying time as he slowing understands that there is a whole world of difference between talking and taking action. For now, it seems as though investors are satisfied with his call to end “trivial fights” – but for how long?

South Korea’s exports jump to 5-year high

Exports surged 20.2%y/y in February, the fastest pace since February 2012, amid strong demand from its main trading partners, namely China (+28.7%y/y). Exports to the US, the country’s second largest trade partner were up 1.7%y/y after shrinking for two consecutive months. This is definitely good news for export-oriented countries such as South Korea as it tends to confirm that global demand is finally picking up after a rough couple of years. The won did not react much overnight – mostly due to the fact that South Korea is celebrating its Independence Movement Day and financial markets are closed – the news was already widely anticipated by market participants after a clear hint last week from the finance minister. USD/KRW rose more than 1% to 1,144 as investors remained exclusively focused on Trump’s Congress address.

Today’s Key Issues (time in GMT):

• Feb Manufacturing PMI, exp 51,7, last 51,4, rev 51,7 NOK / 08:00
• Feb Markit Spain Manufacturing PMI, exp 55,8, last 55,6 EUR / 08:15
• Feb PMI Manufacturing, exp 55,5, last 54,6 CHF / 08:30
• Feb Markit/ADACI Italy Manufacturing PMI, exp 53,5, last 53 EUR / 08:4
• Feb F Markit France Manufacturing PMI, exp 52,3, last 52,3 EUR / 08:50
• Feb F Markit/BME Germany Manufacturing PMI, exp 57, last 57 EUR / 08:55
• Feb Unemployment Change (000’s), exp -10k, last -26k, rev -25k EUR / 08:55
• Feb Unemployment Claims Rate SA, exp 5,90%, last 5,90% EUR / 08:55
• Feb F Markit Eurozone Manufacturing PMI, exp 55,5, last 55,5 EUR / 09:00
• Feb Barclays Manufacturing PMI, last 50,9 ZAR / 09:00
• 2016 GDP Annual YoY, exp 1,00%, last 0,80%, rev 0,70% EUR / 09:00
• 2016 Deficit to GDP, exp 2,40%, last 2,60%, rev 2,70% EUR / 09:00
• Feb Markit UK PMI Manufacturing SA, exp 55,8, last 55,9, rev 55,7 GBP / 09:30
• Jan Net Lending Sec. on Dwellings, exp 3.7b, last 3.8b, rev 3.7b GBP / 09:30
• Jan Mortgage Approvals, exp 68.7k, last 67.9k, rev 68.3k GBP / 09:30
• Jan Money Supply M4 MoM, last -0,50% GBP / 09:30
• Jan M4 Money Supply YoY, last 6,20% GBP / 09:30
• Jan M4 Ex IOFCs 3M Annualised, last 3,50%, rev 3,10% GBP / 09:30
• Feb Danish PMI Survey, last 59,9 DKK / 10:00
• Feb 24 MBA Mortgage Applications, last -2,00% USD / 12:00
• Jan MLI Leading Indicator MoM, last 0,60% CAD / 12:00
• Feb 27 CPI WoW, last 0,10% RUB / 13:00
• Feb 27 CPI Weekly YTD, last 0,80% RUB / 13:00
• Feb P CPI MoM, exp 0,60%, last -0,60% EUR / 13:00
• Feb P CPI YoY, exp 2,10%, last 1,90% EUR / 13:00
• Feb P CPI EU Harmonized MoM, exp 0,60%, last -0,80% EUR / 13:00
• Feb P CPI EU Harmonized YoY, exp 2,10%, last 1,90% EUR / 13:00
• 4Q Current Account Balance, exp -$9.75b, last -$18.30b CAD / 13:30
• ECB’s Weidmann Speaks in Ljubljana EUR / 13:30
• Jan Personal Income, exp 0,30%, last 0,30% USD / 13:30
• Jan Personal Spending, exp 0,30%, last 0,50% USD / 13:30
• Jan Real Personal Spending, exp -0,10%, last 0,30% USD / 13:30
• Jan PCE Deflator MoM, exp 0,50%, last 0,20% USD / 13:30
• Jan PCE Deflator YoY, exp 2,00%, last 1,60% USD / 13:30
• Jan PCE Core MoM, exp 0,30%, last 0,10% USD / 13:30
• Jan PCE Core YoY, exp 1,70%, last 1,70% USD / 13:30
• Feb Markit Canada Manufacturing PMI, last 53,5 CAD / 14:30
• Feb F Markit US Manufacturing PMI, exp 54,5, last 54,3 USD / 14:45
• Bank of England Bond Buying Operation GBP / 14:50
• mars.01 Bank of Canada Rate Decision, exp 0,50%, last 0,50% CAD / 15:00
• Central Bank Weekly Economists Survey (Table) BRL / 15:00
• Feb ISM Manufacturing, exp 56,2, last 56 USD / 15:00
• Feb ISM Prices Paid, exp 68, last 69 USD / 15:00
• Feb ISM New Orders, last 60,4 USD / 15:00
• Feb ISM Employment, last 56,1 USD / 15:00
• Jan Construction Spending MoM, exp 0,60%, last -0,20% USD / 15:00
• Feb 24 DOE U.S. Crude Oil Inventories, exp 3000k, last 564k USD / 15:30
• Feb 24 DOE Cushing OK Crude Inventory, exp -400k, last -1528k USD / 15:30
• Bundesbank’s Beermann Speaks in London EUR / 15:30
• Feb New Car Registrations YoY, last 10,08% EUR / 17:00
• Fed’s Kaplan Speaks in Dallas USD / 18:00
• U.S. Federal Reserve Releases Beige Book USD / 19:00
• RBNZ Governor Wheeler Speaks NZD / 20:00
• Feb Commodity Price Index YoY, last -9,10% BRL / 23:00
• Feb Commodity Price Index MoM, last -1,13% BRL / 23:00
• Jan Formal Job Creation Total, exp -35575, last -462366 BRL / 23:00

The Risk Today:

EUR/USD remains trapped in a sideways range below 1.0600. Hourly resistance is given at 1.0679 (16/02/2017 high) while hourly support can be found at 1.0521 (15/02/2017 low). The technical structure suggests deeper consolidation. In the longer term, the death cross late October indicated a further bearish bias. The pair has broken key support given at 1.0458 (16/03/2015 low). Key resistance holds at 1.1714 (24/08/2015 high). Expected to head towards parity.

GBP/USD has broken trend support area defined by 1.2426 (17/0272017 low). Hourly resistance is given at 1.2582 (09/02/2017 high) while support area is given around 1.2400. Key support is given at 1.2347 (07/02/2017 low). The pair is still lying below strong resistance given at 1.2771 (05/10/2016 high). The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.

USD/JPY is showing limited short -terms buying interest after reversing off base lows. Key resistance is given at 115.62 (19/01/2016 high). The technical structure suggests further weakness around support given at 111.36 (28/11/2017 low). We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).

USD/CHF continues to improves after testing 1.0021 support. Hourly resistance is implied by upper bound of the uptrend channel. Key resistance is given at a distance at 1.0344 (15/12/2016 high). Expected to see further strengthening. In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.