Morning brief for April 6
Traders were toiling like galley slaves overnight as there were plenty of economic releases that led to some intraday moves. ADP payrolls showed a gain of 263K vs consensus 184K. It is a great result for the current point of the business cycle, and since the correlation between official and ADP prints has improved in the past months, we might wait for something like “the data beats market expectations” from Friday’s NFP.
Non-manufacturing ISM was worse than expected. Then, there was the FOMC Minutes showing that the Fed is going to trim its $4.5 trillion balance sheet well into the end of this year, or even earlier. This was interpreted as implying less need for Fed’s rate increases as a phasing down of the reinvestment policy can act as a de facto tightening.
There was also a disappointing headline in the news. Senate Majority Leader Paul Ryan said that the House, Senate and Mr. Trump are definitely not on the same wavelength with regard to tax policy. So, It would take more time for policymakers to decide on the tax reform than on the repeal of Obamacare bill (which is still not resolved). The English of this is there won’t be any repeal of healthcare, no wall, no lower corporate tax rates in the near-term. It seems that we will have to arm ourselves with lots of patience.
This session will be as busy as previous one (mid-week time, what else to expect from it). There will be the much-hyped first meeting between Xi and Trump. The US President might touch upon China’s currency manipulations and unfair trade policy, or might not if we believe on his bare word addressed to FT journalists (in the recent interview, Trump told that he would prefer not to talk about tariffs at the upcoming meeting with Xi). North Korea is likely mentioned – especially after yesterday’s missile test.
EUR/USD ticked up in the course of Tokyo session from 1.0667 to almost 1.0690. The downward pressure is still present though, another drop towards the 1.0595 support is not ruled out until prices manage to test 1.0730/1.0770 levels successfully. Euro watchers will be waiting for the ECB President Draghi’s speech which is due at 9:00 pm MT time.
Aussie/greenback outlook is neutral for the present moment. The quotes are trading around 1.0765. The immediate pressure is still on the downside towards 0.7615. A break of resistance at 0.7650 will allow us to talk about a further upsurge towards 0.7660. The Australian economic calendar is light. The pair is likely driven by USD fundamentals today.
Kiwi was one of those who little changed on the session, although it did take a shot to rise higher. NZD/USD is now ranging within 0.6975 – 0.6995 levels.
USD/JPY was lower on the session from 112.20 to 111.65. The support at 111.50 is still intact. If it is broken the quotes will slide towards the restraint at 110.00. The technical outlook will change from neutral to bullish if prices go out of their 110.00/112.20 consolidation range.
USD/CAD dropped to 1.3295 in the course of this week due to the recent rally in oil prices. Brent oil futures hit $55.06 yesterday but then skipped some points after US government reported a sudden increase in US crude inventories. Loonie watcher should focus their attention on Canadian building permits coming out at 12:30 pm today.