News from Australia: The RBA still watches the inflationary situation like a hawk (pun intended) but they appear to be prepared to take the foot of the gas having pushed rates higher twice this year. The board considers the tightening to have been substantial since the middle of last year and have taken note of early signs of a slowing in demand. As such they are going to take a pause to observe how this year’s hikes impact on the economy. However, they’ll be less than happy with news that the Rubicon Japan Trust has warned that it may not be able to meet its A$30mn margin call due tomorrow. This is down to the recent explosive strength in the Yen which is being funded from Aussie Dollars. There are moves to refinance the debt but it seems as if the recent excessive market noise has come close to claiming another victim.
News from Japan:
Japan has kept up the rhetoric on exchange rates though has amended the template a little. While maintaining that current movements are “excessively volatile” finance minister Nukaga has also added that Japan continues to monitor currency movements in cooperation with U.S. and European authorities. It is possible to interpret this as providing a threat of concerted intervention. That it will be used to battle with the market to reverse the Dollar’s fortunes is unlikely but such a move could generate a more sizeable correction which could see better numbers come out of the States.
The following economic releases are due today:
Q4
Swiss Industrial Production (YoY) +8.2% January
Italian Trade Balance – Total EUR -3410mn
Italian Trade Balance – EU EUR 697.5mn February
U.K. CPI (MoM) +0.8%
U.K. CPI (YoY) +2.5%
U.K. CPI Core (YoY) +1.4%
U.K. RPI (MoM) +0.8%
U.K. RPI (YoY) +4.2%
U.K. RPI excl mortgage (YoY) +3.7%
U.S. PPI (MoM) +0.4%
U.S. PPI (YoY) +6.8%
U.S. PPI Excl food & energy (MoM) +0.2%
U.S. PPI Excl food & energy (YoY) +2.1%
U.S. Housing Starts 995K
U.S. Building Permits 1023K The FOMC are due to announce their interest rate decision
A state of nervous calm has entered the market. It clearly remains bearish and the downside can generally be considered as the most vulnerable. Market liquidity is not at its fullest and that can spell sharp and erratic moves. Emphasis should still be on a cautious approach.
If there is any more vulnerable currency pair it is probably Dollar-Yen but even if the downside is seen take it in stages. Following yesterday’s debacle there may be a little more two-way trading while the market adjusts itself to the sharp change in levels. Euro-Yen still looks as if it has further to go down but there is chance of an earlier correction higher before the next leg that should reach back down close to the 149.22 low. Tentatively I do see some signs of potential basing. However, I’d rather take the upside in stages also for now as it seems very unlikely that there is going to be any sustained move higher at this stage and there seems very little the Fed can do tonight that will be Dollar bullish. That is except intervene – but that seems unlikely at this stage though it is a possibility that should be kept in the back of minds. Thus, take it carefully again today and watch for breaks and the implications.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 98.06-42 1.5880-01 0.9955-85 2.0130-69
Res: 97.55-73 1.5790-14 0.9866-95 2.0044-88 Spt: 96.67-84 1.5710-50 0.9770-85 1.9928-66
Spt: 95.71-25 1.5580-10 0.9703-40 1.9867-84 | 
