Aussie plummets and Euro climbs on US Tillerson’s ousting.
China data to influence AUD bids at 02:00 GMT.

The EUR/AUD pair climbed in Tuesday’s New York market on political turmoil from the White House, and the pair is trading near 1.5770 in the overnight session. 

Donald Trump spooked markets when he suddenly fired his Secretary of State, presumably after too many disagreements regarding foreign policy with North Korea, Iran, and China. Along with Gary Cohn’s recent resignation as Trump’s top economic advisor, Tillerson’s firing is shaking market confidence in the White House.

Wednesday will bring German CPI at 07:00 GMT and the headline year-on-year numbers for February are expected to come in at the previous reading of 1.2%. After that will see a speech from the European Central Bank’s President, Mario Draghi, at 08:00 GMT. Draghi is expected to touch on trade war fears, with recent trade tariffs from the US taking over headlines.

Before that will be Chinese Retail Sales, Industrial Production, and Foreign Direct Investment will be dropping at 02:00 GMT and a beat for figures could have a knock-on effect on the AUD.

EUR/AUD Technicals

The pair’s spike on Tuesday has drawn the pair away from the 34 EMA and back into bullish territory. The EUR/AUD is still off March’s high of 1.5978 but a floor could be priced in from here if Euro buyers maintain the pace of bidding. Support is coming from the 8-day EMA at 1.5760 and the 34-day EMA at 1.5675, while resistance sites at the top of February’s consolidation zone near 1.5815 and March’s high of 1.5978.

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Forex today was giving us more concerns about the internal affairs of the White House and the revolving door of top personnel with headlines that Secretary of State Tillerson had been fired. 

The DXY  traded on the offer between 89.591 – 90.112 while the US 10yr treasury yield fell from 2.88% to 2.84% following the US CPI data and the political turmoil headlines, while 2yr yields held steady at 2.25%. The Fed fund futures continued to price three more hikes by end-2018 (and another hike in 2019). CPI showed headline consumer prices rising at an annualized 2.2% during February and 0.2% inter-month, but, taking out food and energy costs, CPI only rose 1.8% year/on year and by just 0.2% on a monthly basis vs 0.3% prior. 

As for other currencies, EUR/USD entered the US open  -0.04% and rose from 1.2340 to 1.2400, responding mostly to the CPI data and the Tillerson headlines after an initial soft spell in the European markets weighed by funding costs, although n the 1.23 handle and well above the 55DMA at 1.2258 key support area. The euro made a session high of 1.2407 for a handover just below the handle at 1.2390 with the  RSIs posing a bullish bias while the 10 & 21-DSMAs comes as supports above the daily cloud.

GBP/USD was subdued below the 1.39 handle in London, supported on dips to 1.3880 while awaiting Hammond’s half-yearly update on the UK public finances. Cable moved over to NY traders looking better bid and traded within a range of 1.3994-1.3887, passed onto early Asia at 1.3973 after Hammond offered a more upbeat assessment of the UK economy than what has been reflected in the price and headlines in the media. 

EUR/GBP was stuck in a 20 pip range in the European markets between  0.8865-0.8885 and ended NY at 0.8867 and 10 pips below the previous session’s close on the previous day.  The BOEWATCH us pricing in 2 rate hikes for 2018; +25bp in May, 1 more in Nov/Dec while the ECB looks to be on hold, potentially tweaking its language towards the fall and setting up to act by the end of the year. 

USD/JPY bids arrived early in European trade as the yen longs get squeezed in the absence of fresh concerns in markets and within an improved risk environment. However, there was a dip to 106.88 before a pick up to 107.27 the high. The dollar sell-off took the pair down to 106.45 for the NY close after that minor intraday fresh high on 107. 

As for the antipodeans, NZD/USD was extending the upside recovery and crossed the descending trendline on the 0.73 handle, poised for higher levels still and was the best performer overnight. The Aussie elicited support pre-0.7856 after retreating from 0.7885 in London in a choppy European session and opened the US shift at 0.7875 where bulls bought the early dip on the back of a decline in US yields and that sell-off in the greenback taking the pair as high as 0.7898 off the bat. However, AUD/JPY as a weight and the pair closed back around 0.7875.

 Key notes from US session:

Funda wrap: White House’s revolving door sends dollar and Tillerson packing

Key events ahead:

Analysts at Westpac offered their outlook for the forthcoming key events as follows: “China releases combined Jan-Feb data on industrial production, retail sales and investment at 1pm Syd. Industrial production will be watched most closely and occasionally has a small impact on AUD.

The US data highlight is February retail sales. January’s report was unexpectedly weak (-0.3% overall), with December revised lower, but this followed a strong few months. Consensus this month is 0.3% m/m overall, 0.4% for the “control group” which excludes food, energy and building materials.”

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Aussie falls as the Yen gains amid broad market safety run.
Tillerson’s ousting by Trump shakes market confidence.

The AUD/JPY tumbled in New York trading on Tuesday after lifting through the first half of the day and heads into Wednesday’s session near 83.70 after bottoming at 83.54 near Tuesday’s end. Markets saw a sudden flight to safety after US headlines confirming Trump fired his Secretary of State Rex Tillerson, taking the top off risk-based assets as broad markets fell.

A floor seems to have been found for now ahead of the Asian trading session, and the Bank of Japan’s (BoJ) Monetary Policy Meeting Minutes along with Machine Orders figures for January are due at 23:50 GMT before the Tuesday rollover.

Australia has little data on the docket data except for the Westpac Consumer Confidence survey at 23:30, but Chinese data at 02:00 GMT early Wednesday could see an impact on the AUD. Chinese Retail Sales, Industrial Production, and Foreign Direct Investment figures all drop at the same time. Retail Sales are forecast to come out at 9.8% (previous 9.4%), Industrial Production is expected to see 6.1% (previous 6.2%), and Foreign Direct Investment was last seen at 0.3% for the previous figure.

AUD/JPY Technicals

A shooting star has formed on Daily candlesticks, bouncing neatly off resistance from the 34 EMA at 84.50, while H4 charts show the AUD/JPY cutting short a bullish play from last week’s low of 81.48. Support is currently at the two previous swing lows, near 82.50 and the 82.00 level, with resistance at this week’s early swing high of 84.10 and Tuesday’s high of 84.50.

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RBA’s Kent has been hitting the wires with comments as follows:

No reason why RBA moves have to be 25 basis point increments.
Accommodative monetary policies have encouraged greater risk-taking by both lenders and borrowers.
Important ways in which the monetary transmission mechanism works.

 Current good growth raises risk cpi pressures pick up.
 Markets may be under-pricing risk of faster global growth.

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Analysts at ANZ noted that the national sales volumes have stabilised, down 1% m/m in February 2018 (seasonally adjusted).

Key Quotes:

“Days to sell are flat nationwide and prices are up a touch. But regional divergence continues, with Auckland softer than the rest of the country and Hawke’s Bay leading the charge. House price inflation is up 4%y/y and we expect stable price pressures from here. The market is unlikely to take off due to affordability constraints, credit headwinds and new Government policies.

Key results:

We estimate that seasonally adjusted house sales are broadly stable. While they fell 1%m/m February, they are up 1.7% y/y. Looking through the noise, monthly sales have clearly bounced off the lows seen in September last year but are tracking below 2016 highs.

The time to sell a property is stable at around 37 days (sa) nationwide. The national median number of days to sell was exactly flat, off previous lows of 30.8 days reached in 2016. But days to sell are below their historical average of more than 39 days to sell (sa) – pointing to a market with some continuing slack.

National house prices increased 0.6% (sa) in February. Our preferred measure of house prices – the REINZ House Price Index (HPI) – is up 4% y/y. Looking through monthly movements, house prices are up 3.7% y/y (on a 3-month moving average basis), pointing to a stable, healthy pace of price pressures.

The Auckland market is cool. We estimate Auckland sales volumes increased 1.6% m/m (sa), to be up 3.0% y/y. However, median days to sell is now 43, indicating some slack. This level is well above average, consistent with a market that has well and truly cooled off – with affordability constraints tempering price gains. Auckland house prices (HPI) are up 0.5% m/m, increasing a fairly anaemic 0.7% y/y (3m m.a.).

The rest of the country is showing more signs of life. Sales volumes fell 1.8% m/m and are broadly stable overall. But price pressures are solid, up 0.7%m/m – reaching 6.8% y/y (3m m.a.). Hawke’s Bay region continues to lead the charge, with days to sell at 29 days, well below historical averages of 46. Prices are up a whopping 14.9% y/y (3m m.a.).”

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NZD/USD: best performer.
NZD/USD: above key support and looking for a perch on 0.73 handle. 

NZD/USD has been extending the upside recovery from the 0.7220’s earlier in the month of March and the bird has crossed the descending trendline signifying it is perched higher for longer on the 0.73 handle. Currently, NZD/USD is trading at 0.7326, up 0.01% on the day, having posted a daily high at 0.7337 and low at 0.7323.

NZD was the outperformer on the NY session and it rose from 0.7310 to 0.7355 scoring a three-week high, while the main currency theme overnight was a weaker USD on the back of further change at the White House. Today’s Balance of Payments figures passed by with little focus as follows: New Zealand BoP current account balance (NZD) Q4: -2.77b (exp -2.45b; prev -4.68b), current account GDP ratio YTD Q4: -2.7% (exp -2.6%; prev -2.6%).

From the US session, attention was on the White House and the CPI data that came in lower than the prior and puts the inflationary story on to the shelf for the time being while markets continue to discount a fourth rate hike in 2018 after last week’s wages miss. CPI showed headline consumer prices rising at an annualized 2.2% during February and 0.2% inter-month, but, taking out food and energy costs, CPI only rose 1.8% year/on year and by just 0.2% on a monthly basis vs 0.3% prior. 

More on the Tillerson story here:

Funda wrap: White House’s revolving door sends dollar and Tillerson packing

NZD/USD levels

Technically, the charts have turned bullish but repeated recovery failures on the 0.73 handle have been a theme of late, so closes need to occur above 0.7320 with the 21-D SMA falling in at 0.7200. 0.7360 is the next key upside target in the near term to open a run towards 0.7435 daily high double top.

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“Rexit” might trigger higher oil prices.
Balanced technical picture.

Donald Trump firing Rex Tillerson (Rexit), secretary of State, may threaten the Iranian nuclear deal according to analysts. In 2015, Iran and six other countries signed an agreement which would monitor Iranian nuclear activity. Mike Pompeo the new secretary of State, is known to be fairly critical toward the Iranian nuclear deal and his new position can shake the foundation of the deal. The potential alteration or termination of the deal could disrupt oil supplies and send oil price higher. 

Tomorrow will see the EIA stocks change expected at 1.5m. Earlier on Tuesday, the API weekly crude oil stock came in at 1.156m. 

WTI daily chart

Crude oil is consolidating in a triangle since the start of the year. It is trading above its 100 and 200 period moving average. Support is seen at the 60.00 psychological level and at 58.00 cyclical low. Resistance is seen at 64.30 cyclical high and 66.70 which is the high of the last bull run. A breakout in either direction should provide some directionality as the picture is pretty neutral now. 

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