April 26, 2015 / 11:44 PM / 2 years ago

IFR Markets ForexWatch Asia Regional Daily Briefing

SYDNEY, April 27 (IFR) - News from the weekend
Greek Deputy PM says deal with EU must be made in early May - Reuters
D/PM Dragasakis told a Greek newspaper Saturday that Greece must reach a reform
deal by early May to address Greece's need for cash. Greece must pay the IMF
almost 1bln EUR in May. Greece has said it wants to honor its obligations and
needs lenders to offer something in return. Dragasakis was quoted as saying:
"There is clearly a potential and an imperative need for an interim deal to be
concluded in the first days of May, if not within April." 
     
According to Reuters the decision by the Greek government to battle lenders has
become increasingly unpopular. According to a Kappa Research poll published in
To Vima newspaper Saturday, 72% of respondents said the country must strike a
deal with its creditors versus 23% who were in favor of a clash. Asked by Kappa
what the best options for Athens were in case of an impasse, 44% of Greeks
wanted the government to handle the issue without seeking any kind of a fresh
popular mandate. About 33% were in favor of a referendum, while 19% wanted a
snap election. John.Noonan@thomsonreuters.com
    
German FinMin hints at "Plan B" for Greece - Reuters
German Finance Minister Schaeuble hinted Saturday Germany was preparing for the
possibility Greek default. He didn't spell out that preparations were being
made, but instead compared the planning secrecy associated with the Greek crisis
to the behind the scenes planning for German reunification back in 1989. 
     
The finance minister of Slovenia suggested at Friday's EU meeting that because
talks were leading nowhere, perhaps EZ ministers should starting discussing a
Plan B -- what happens if Greece defaults.  John.Noonan@thomsonreuters.com
    
Headlines from Friday night
* US Durable Goods Mar 4%, f/c 0.6%, -1.4%-prev
* US Non-def Ex-Air Mar -0.5%, f/c 0.3%, -2.2%-prev 
* Greece's Varoufakis agreement w/lenders will be difficult but will happen,
there is no other choice; Greece needs a deal & is ready to compromise 
* European governments have largely failed to reform (EU document)
* Bank of Canada's Poloz Oil price shock soon to be positive overall for Canada 
* MX Ret Sales YY Feb 5.6%, f/c 4.2%, 4.7%-prev
* DE Apr IFO business climate 108.6 vs prev 107.9. 108.4 exp 
* DE Apr IFO Current conditions 113.9 vs prev 112.1 rvsd. 112.4 exp 
* DE Apr IFO Expectations 103.5 vsprev 103.9. 104.5 exp
    
Themes from Friday's trading
 
* The main themes across markets on Friday were another sluggish US data release
that lowered GDP estimates and pushed the USD broadly lower; another day of
equity gains that sent the MSCI All-Country World Index to a lifetime high of
442 and a volatile/mixed day on the commodity markets. 
 
* European stock markets moved modestly higher on Friday - with the London FTSE
rising 0.2% and the German DAX gaining 0.7%. Solid earnings from major European
companies underpinned the market. For the week the FTSE eked out a 0.2% gain and
the German DAX had a weekly gain of 1.0%. 
 
* While the standoff between Greece and the EU continues to draw plenty of media
attention and market talk - it hasn't really impacted market pricing to any
great degree.
 
* Wall Street followed the positive leads from Asia and Europe and the NASADQ
set a fresh all-time high and the S&P had an all-time daily close high. 
 
* Wall Street was underpinned by strong earnings results from tech giants
Google, Microsoft and Amazon and a sign the USD is correcting lower. 
 
* For the week Dow gained 1.4%; S&P rose 1.75% and NASDAQ gained 3.3%.
 
* The inverse correlation between the EUR/USD and German DAX broke down on
Friday, as both made modest gains.
 
* As noted earlier the Greek crisis is a fascinating side-dhow, but the biggest
influence on EUR/USD and USD generally/more broadly is the narrowing yield
spread between US Treasuries and German Bunds.
 
* EUR/USD closed the day 0.5% higher - closing at 1.0875 after touching a three
week high at 1.0900 earlier in the session.
 
* Correlation between USD/JPY and Nikkei also broke down on Friday, as USD/JPY
fell 0.5% due to the easing UST yields following the weak details contained in
the Durable Goods data.
 
* The 2-yr Treasury yield eased 2bps to 0.51% and the 10-yr yield fell 3bps to
1.91%. For the week the 2-yr yield gained 1 bp and the 10-yr yield rose 6bps.
 
There were some big moves in key commodities on Friday.
 
* Iron ore soared 5.95% to 57 - the highest fixing since March 27 or nearly a
month. For the week iron ore gained a whopping 12.4%. 
 
* NYMEX Crude fell 1.0% despite another drop in the US rig count. NYMEX Crude
still managed a 3.0% gain for the week - and it has made a higher weekly close
for six straight weeks. 
 
* NY Copper gained 2.0% on Friday but the strong day didn't prevent a 1.1% loss
for the week.
 
* Gold fell to a one month low at 1,174 at one stage on Friday before closing at
1,178 - down 2.2% on the day. The move lower was despite the fact the USD fell
on Friday. Traders are putting the fall in gold down to investors getting out of
gold plays and back into equities. 
 
* It appears the lack of investor fear and lack of global inflation are factors
convincing some of the long-term gold bulls to get out of the way. 
 
* Despite the press playing up potential crises in Greece, Middle East and
Ukraine - the VIX index fell again on Friday - edging down to 12.29 from 12.48.
It was the lowest weekly close on the VIX in nearly a year. 
 
* The huge gain in iron ore and calming volatility helped AUD become the second
best performing currency Friday. AUD/USD closed up 0.6% at 0.7828; highest daily
close in a month. AUD/NZD continued its recovery - closing near 1.0300 after
trading as high as 1.0312. The cross gained 0.6% Friday and is up 2.6% since
Tuesday's close.
 
* While surging iron ore helped support the AUD - the fall in the WTI crude
price and gold resulted in the CAD being the worst performing currency on
Friday. USD/CAD closed 0.3% higher at 1.2180.
 
* GBP was the best performing currency on Friday - with GBP/USD rising 0.9% to a
six week high at 1.5188. GBP is being supported by ongoing short covering that
picked up momentum following Wednesday's more hawkish than expected BOE
Minutes. 
 
* The US dollar index closed at 96.92 - down 0.36% from Thursday's close. For
the week the DXY fell 0.62.
Wrap-up 
It wasn't much of a weekend in terms of key impacting news - so Monday morning
might be a bit quiet. The Greek drama/crisis continues to steal headlines, but
the markets aren't reacting to the Greek news in a sustained way at least. If
you faded the moves caused by Greek headlines - you would be well ahead. 
      
There are a few signs the USD might be set for a correction lower. The huge rise
in the US dollar that started around mid-2014 coincided with huge falls in crude
oil and iron ore prices. Both oil and iron ore look technically bullish for the
short-term at least. We might see a USD correction lower that will last until
the market finally makes up its collective mind as to when the Fed will commence
its long awaited tightening cycle. 
      
The RBA won't be overjoyed by the improving outlook for AUD. The rise in some of
the key commodities in recent days - will not be enough to relax the RBA efforts
to rebalance the Australian economy and support non-mining sectors of the
economy. A lower AUD/USD is part of that strategy. Don't be surprised if the
messaging from the RBA becomes increasingly dovish. 
       
For the AUD/USD not to establish a foothold above 0.8000 at some stage - the
market will need to believe the RBA will ease rates in May and not be hesitant
to push the cash rate below 2.0% at subsequent meetings. Otherwise AUD/USD will
naturally move higher due to the insatiable appetite for yield and if the market
starts to believe key commodities have bottomed out and volatility remains at
extremely low levels - AUD starts to become attractive as part of carry trade
strategies during the Northern Summer months. John.Noonan@thomsonreuters.com
    
ASIAN CURRENCY OUTLOOK
* USD/AXJ closed for the part slightly lower Friday night in a soft USD session 
* Soft US durable goods data had analysts' marking lower US GDP estimates
* USD/AXJ sidelined with players looking ahead to a plethora of c/s meetings
* Greece news remains confusing but those who fade moves come out on top
* Month end ahead whilst Friday rings the bell for global PMI day
 
USD/KRW traded a 1077.8-1080.7 range in Asia on Friday; last at 1079.4. The
Kospi closed down 0.6%.
 
USD/SGD traded a 1.3350-1.3436 range in Asia on Friday; last at 1.3370. The
Straits Times index closed up 0.3%.
 
USD/MYR traded a 3.5720-3.6090 range in Asia on Friday; last at 3.5800. The KLSE
index closed up 0.9%.
 
USD/IDR traded a 12910-12950 range in Asia on Friday; last at 12910. The Jakarta
Interbank Spot Dollar Rate (JISDOR) was set at 12941. The IDX Composite closed
down 0.0%.
 
USD/PHP traded a 44.19-25 range in Asia on Friday; last at 44.245. The PSE index
closed up 0.7%.
 
USD/THB traded a 32.42-515 range in Asia on Friday; last at 32.51. The Set
closed up 0.7%.
 
USD/TWD traded a 30.816-31.037 range in Asia on Friday; last at 30.82. The Taiex
closed up 1.2%.
 
USD/CNY was set in Asia on Friday at 6.1241 slightly lower than the previous
6.1281 fix. OTC USD/CNY traded a 6.1935-6.1996 range; last at 6.1950. OTC
USD/CNH last at 6.1941; range 6.1899-6.1962. The 1-yr NDF was last quoted in
Asia at 6.2710-6.2730. The Shanghai Composite closed down 2.0%.
 
USD/INR traded a 63.21-645 range in Asia on Friday; last at 63.56. The Sensex
index closed down 1.1%.
    
Economic Data Releases (GMT)
Nil
 
Looking Ahead - Events, Other Releases (GMT)
Nil
    
The week ahead - Greece still distracts but central banks will be key The latest
chapter of the Greek sovereign debt drama will likely receive a lot of attention
in the week ahead. Greece has some debt repayments to make in the first two
weeks of May and there isn't any sign yet that Greece and the EU are making
progress towards agreeing to another 11th hour deal to kick the can further down
the road. The market hasn't really priced in any worst case scenarios regarding
Greece - for it is still expected by most that there will be a deal at the last
second to avoid a default and/or Grexit. 
 
Central banks Fed, BOJ, RBNZ and Riksbank meet next week. Normally the FOMC
meeting will get all of the attention, but this meeting isn't accompanied by a
press conference by Fed Chair Yellen - so there aren't any surprises expected.
The recent run of sluggish US data might be noted in the Fed statement, but most
feel they will leave the language and message in the statement very close to the
last one. The BOJ meeting will be closely eyed - as some analysts expect the BOJ
to strike a more dovish tone with the regional elections out of the way. RBNZ is
expected to stay on hold - but after dovish comments made last week by the RBNZ
last week many expect the c/bank to clearly show an easing bias in their
interest rate projections. Riksbank is expected to remain on hold, but retain an
easing bias. There will also be close attention paid to a speech by RBA Governor
Stevens on Monday - as the rising AUD might be worrying the RBA. 
    
John Noonan's Technical view as at Sunday 26th April 
 
Equities
S&P  The strong price action in the latter part of last week took the S&P to a
fresh all-time high and has reignited the short-term trend higher. The 5, 10 and
20-day moving averages are lined up in a bullish formation and pointing higher.
 The ascending 20-dma around 2092 should be solid support on pullbacks. A close
below 2,090 would warn the trend is is quickly losing momentum. {Last 2,118}
 
DAX isn't trending - even though the short-term moving averages are in a bearish
formation. There needs to be a close above the 20-dma at 12,007 to set the DAX
on course for the April 13 and all-time high at 12,388. A double-bottom has
formed around 11,680 and a break below that level would warn of a larger
correction towards the 38.20 of the 2015 low/high at 11,242.{Last 11,811}
 
ASX  Just when the ASX looked ready to trend lower - the huge rally on Friday
changed the technical picture. The 5, 10 and 20-day moving averages are lined up
in a bearish formation, but the 5-day is now pointing higher. The close above
the 20-day and 50-day moving averages on Friday was bullish and the next target
is the series of highs between 5,950 and 6,000. Support has formed at 5895/5900
where the 10, 20 and 50 day moving averages converge. A fall below 5890 returns
the pressure to the downside. {Last 5,933} 
    
Commodities
Gold tested key fibo support at 1174 on Friday before bouncing. The 1174 level
is the 61.8 of the 1,142/1,224 move and a break below targets another run below
1,150. The 5, 10 and 20-day moving averages have started trending lower and only
a break above the 20-dma at 1,198 would ease the downward pressure. {Last 1,179}
 
Iron Ore For the first time in nearly a year - the moving averages in iron ore
is lined up in a bullish formation and have started trending higher. Iron ore
was fixed above the 50-day MA (55.92) for the first time since August last year
and that reading should be support now. The next level of major resistance is
the 100-dma at 61.55. {Last 57.00}
 
Lon Copper The 5, 10 and 20-day moving averages are aligned in a bearish
formation, but the close above the 20-dma at 6,015 indicates the price isn't
ready to trend lower. A close below the 50-dma around 5,900 could result in a
drift towards 5,600. {Last 6,030} 
 
NYMEX Crude is trending higher, according to the moving average studies - and
only a break below the 20-dma at 53 would shift pressure back to the downside.
There is some resistance around 59 and a break above that level could see a move
towards former support at 63.75. {Last 57.15}
    
FX
EUR/USD isn't trending and is stuck in a consolidation range. Key resistance is
found at the 55-dma at 1.0947. EUR/USD hasn't closed above the 55-dma since May
9 last year when EUR/USD was trading at 1.3800. A close above the 55-dma targets
resistance between 1.1000/60 where EUR/USD topped out five times late
March/early April of this year. Key support is found at 1.0520 with a break
below that level reigniting the trend lower and target of parity. {Last 1.0875}
 
USD/JPY opened and closed last week around the same level - so it is obvious
there is no trend in place. It has been the case a few times over the past two
week - USD/JPY breaks below the base of the daily Ichimoku cloud only to rally
late in the day to close just above it. The base of the I-cloud comes in at
118.95 and USD/JPY managed to close 4 pips above it. A daily close below cloud
base targets the 61.8 fibo of the 115.83/122.05 move at 118.20. {Last 118.99}
 
AUD/USD has started to trend higher - according to the short-date moving average
studies. There is stubborn resistance ahead of 0.7850 - but if that level gives
way it initially targets the key 100-dma around 0.7885. AUD/USD has remained
below the 100-dma since September last year when it was trading around 0.9250.
Support is at the 20-dma at 0.7680/85 and a break below that level would shift
the pressure to the downside. {Last 0.7828} John.Noonan@thomsonreuters.com
    
OVERNIGHT TRADED RANGES--------------- INTRADAY RANGES -- Close 2100GMT
NDFS OPEN   HIGH   LOW     LAST        CURRENCY   HIGH     LOW    CLOSE
IDR  13030  13060  13030   13030-13060 USD/JPY   119.67  118.82  118.99
INR  64.01  64.28  63.96   64.19-22    EUR/USD   1.0900  1.0784  1.0875  
KRW  1079.5 1079.6 1076.5  1077-1078   EUR/JPY   130.12  128.85  129.32
MYR  3.5880 3.5850 3.5680  3.5750-80   GBP/USD   1.5188  1.5028  1.5188
PHP  44.31  44.30  44.28   44.26-29    USD/CAD   1.2188  1.2103  1.2180
TWD  30.81  30.82  30.63   30.70-72    AUD/USD   0.7841  0.7765  0.7828
CNY  1-mth  6.1415 6.1380  6.1375-85   NZD/USD   0.7610  0.7543  0.7597
CNY  6-mth  6.2015 6.1980  6.1975-00   USD/SGD   1.3436  1.3310  1.3325
CNY  1-yr   Dealt  6.2710  6.2690-20   USD/THB   32.595   32.42   32.57 
 
Equities  Close   Change  %Change  UST(Yields)    Close    Previous
DJIA      18080      +21    +0.12  10-year        1.91%      1.96%
S&P 500    2118       +5    +0.23  2-year         0.51%      0.53%
NASDAQ     5092      +36    +0.71  30-year        2.61%      2.65%
FTSE       7071      +17    +0.25  Spot Gold($) 1179.20    1194.80
DAX       11811      +87    +0.75  Nymex          57.30      57.50
Nikkei    20020     -167    -0.83  Brent          65.40      64.80
 
 
    
    
    
 
 
    
    
 
 
    
    
    
    
     
    
    
    
    
    
    
    
    
    
    

 (Peter Whitley, Senior Foreign Exchange Analyst)

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