Morning brief for April 7
The yen, bonds, and gold favored havens in times of stress, strongly bid after big news of the US launching 59 missiles against Syria’s Shayrat air base in response to a deadly chemical attack in a rebel-held area on Tuesday. Investors had already spooked as Trump met Chinese President Xi Jinping or talks over such flashpoints as North Korea and China’s unfair trade policies. The swiftness of the response and unbounded willingness of the US to put an end to 6-year-old bloody massacre caught markets a little off-guard. Russia, the staunch ally of Bashar al-Assad’s regime, called for urgent UN Security Council meeting. According to Russians, US airstrikes could undermine efforts to fight terrorism in Syria.
Most likely political events will play first fiddle in today’s session. But it doesn’t mean that we should discard the impact of today’s US employment report. On Wednesday, we got a strong headline in the ADP employment report for the second consecutive month. Last month it was ahead of market expectations. Official NFP figures were expected to come in much weaker at 200K, but they came higher. From this report, investors wait for additional beats. The market price below 160K will certainly be disappointing for the markets.
USD/JPY dropped to 110.50 from 110.95 that we saw before the news came upon the investors. A further downside below 110.00 is not ruled out. The pair will remain vulnerable unless prices manage to reclaim 111.00. A breakout of 110.00 support will open the way to the downside.
EUR/USD slumped to 1.0630 overnight after ECB President Mario Draghi said that there is no need to deviate from the previous wording on the forward guidance, that it is not a proper time for the reassessment of the bank’s present monetary policy stance. In the Tokyo morning, it managed to gain some strength and edged up to 1.0645 on the relative of USD that came after the US attack.
Aussie lost its ground as the missile news hit and rolled to 0.7515. It might lose some additional points today and slide to 0.7490 if geopolitical stresses related to North Korea and Syria become more elevated. A break of this level would accelerate the downward movement and send prices to 0.7450. If bulls manage to reclaim 0.7610 we expect the restoration of the uptrend.
Kiwi was quite steady. NZD/USD picked up to 0.6975. The immediate resistance can be found at 0.7020. A break of this level will give us a sign that a downward pressure has eased. Meanwhile, the quotes may fall lower towards the nearest support at 0.6950.
USD/CAD slipped a few points and reached 1.3405. Loonie gained a lot from the oil prices rally. Brent oil futures hit $56.00 in the Tokyo morning as investors priced in a Middle East risk premium (oil supply from the Arabic country might shrink in the forthcoming futures because of the military conflicts). Traders should keep an eye on the Canadian and US labor market reports both coming out at 3:30 MT time.