The markets are still staying in overall risk-off mode this week so far, with selloff in stocks, gold, oil and cryptos. Commodity currencies are trading broadly lower as as result, led by Aussie. Dollar and Yen are generally firmer, but they’re outshone by the surprisingly resilient Euro, and to a lesser extent Sterling.
Technically, with the addition help of extended rally in EUR/CHF, Euro is making some progresses in turning around. EUR/CAD is now in a near term rebound for 38.2% retracement of 1.4633 to 1.3383 at 1.3861. Sustained break there will raise the chance of medium term bottoming at 1.3383. Nevertheless, EUR/USD will also need to break through 1.0756 resistance to confirm the overall upside momentum in Euro. A break through 1.0470 low in EUR/USD could quickly drag EUR/CAD back to 1.3383 low instead.
In Asia, at the time of writing, Nikkei is down -0.87%. Hong Kong HSI is down -2.83%. China Shanghai SSE is up 0.17%. Singapore Strait Times is down -1.32%. Japan 10-year JGB yield is up 0.0013 at 0.252. Overnight, DOW dropped -1.99%. S&P 500 dropped -3.20%. NASDAQ dropped -4.29%. 10-year yield dropped -0.044 to 3.079.
BoJ Uchida: Important to continue with powerful monetary easing
BoJ Executive Director Shinichi Uchida told the parliament today, “Japan’s economy is still in the midst of recovering from the pandemic’s impact. It is recently under pressure from rising commodity prices… It’s therefore important for the BOJ to continue supporting economic activity with powerful monetary easing.” He also said BoJ has no plan to adjust the 50bps band allowed for 10-year JGB yield to fluctuate around 0%.
Separately, Finance Minister Shunichi Suzuki said after a cabinet meeting, “stability is important and rapid moves as seen recently are undesirable,” referring to Yen’s exchange rate. But he emphasized that any actions would follow the practice agreed with G7 partners.
Also from Japan, overall household spending dropped -2.3% yoy in March, versus expectation of -2.8% yoy.
Australia NAB business confidence dropped to 10 in Apr, conditions rose to 20
Australia NAB business confidence dropped from 16 to 10 in April. Business conditions rose from 15 to 20. Looking at some details, trading conditions rose from 23 to 27. Profitability conditions rose from 12 to 22. Employment conditions were unchanged at 10.
NAB Group Chief Economist Alan Oster said: “Price growth eased somewhat in the April survey after hitting record rates in March, but remained high when looking at the history of the survey, supporting our expectation that inflation will remain elevated in Q2 and likely Q3.
“Still, the strong business conditions including trading conditions and profitability show that the economy is faring quite well and so far, demand is holding up in the face of higher inflation.”
NZD/JPY and AUD/JPY extending correction on risk aversion
NZD/JPY dived lower this week as risk aversion dominated the markets. It is now extending the fall from 87.33 top towards 100% projection of 87.33 to 83.28 from 84.81 at 80.76. Such decline is currently still seen as a correction only. Hence, strong support is expected from 80.76 to contain downside to bring rebound. But break of 84.81 resistance is still needed to confirm completion of the fall, otherwise, risk will stay on the downside.
Similarly, AUD/JPY is also extending the fall from 95.73 and should target 100% projection of 95.73 to 90.41 from 94.00 at 88.68. Strong support is expected from this level to complete the correction. But break of 94.00 resistance is needed to confirmation completion of the correction, or risk will stay on the downside. too.
Looking ahead
Germany ZEW economic sentiment is featured in European session with Italy industrial output too. US will release NFIB business optimism index later in the day.
EUR/AUD Daily Outlook
Daily Pivots: (S1) 1.4992; (P) 1.5099; (R1) 1.5303; More…
EUR/AUD’s rebound from 1.4138 resumed by breaking through 1.5053 resistance. Intraday bias is back on the upside with focus on 1.5354 cluster resistance (100% projection of 1.4318 to 1.5053 from 1.4597 at 1.5332. Rejection by this level will maintain medium term bearishness for another fall through 1.4138 low at a later stage. But firm break of 1.5332/54 will argue that the larger trend is reversing. Next target is 161.8% projection at 1.5786 first.
In the bigger picture, as long as 1.5354 support turned resistance holds, larger down trend form 1.9799 (2020 high) is still expected to continue. On resumption, next target is 61.8% projection of 1.9799 to 1.5250 from 1.6434 at 1.3623, which is close to 1.3624 long term support (2017 low). However, firm break of 1.5354 will indicate medium term bottoming and bring stronger rally back to 1.6434 key resistance.
Economic Indicators Update
| GMT | Ccy | Events | Actual | Forecast | Previous | Revised |
|---|---|---|---|---|---|---|
| 23:01 | GBP | BRC Like-For-Like Retail Sales Y/Y Apr | -1.70% | -0.40% | ||
| 23:30 | JPY | Overall Household Spending Y/Y Mar | -2.30% | -2.80% | 1.10% | |
| 01:30 | AUD | NAB Business Confidence Apr | 10 | 16 | ||
| 01:30 | AUD | NAB Business Conditions Apr | 20 | 18 | ||
| 08:00 | EUR | Italy Industrial Output M/M Mar | -1.40% | 4% | ||
| 09:00 | EUR | Germany ZEW Economic Sentiment May | -42.5 | -41 | ||
| 09:00 | EUR | Germany ZEW Current Situation May | -35 | -30.8 | ||
| 09:00 | EUR | Eurozone ZEW Economic Sentiment May | -41 | -43 | ||
| 10:00 | USD | NFIB Business Optimism Index Apr | 92.9 | 93.2 |