Articles

• AUD/JPY is on rounds near 79.20 close to European open on Thursday.
• The pair is gradually recovering since February 08 but is still trading beneath the 79.80-85 horizontal-resistance that confined its upside during Feb 05 and 21.
• As a result, the pair needs to surpass 79.85 barrier in order to justify its strength toward targeting 61.8% Fibonacci expansion (FE) of its early January to February moves, near 81.00.
• Though, 79.55 may offer immediate stop during the pair’s upside.
• On the downside, an upward sloping trend-line portraying the pair’s recent recovery, at 78.65, can limit the pair’s near-term declines, a break of which can drag it to 78.30 and 78.00 rest-points.
• It should also be noted that the pair’s downturn past-78.00 may avail 77.40 and 77.00 as follow-on supports.

AUD/JPY 4-Hour chart

• GBP/USD is near 1.3300 while heading towards London open on Thursday.
• The pair failed to hold seven-month high marked on Wednesday as early-day strength of the USD triggered its pullback.
• In addition to Brexit developments, an initial estimate of the US Q4 2018 GDP could direct near-term moves of the pair.

GBP/USD trades a shade lower than 1.3300 ahead of European session on Thursday. The pair surged to the seven months high near 1.3350 during late-Wednesday as UK lawmakers favored the PM Theresa May’s previous motion to place delay of the Article 50 for voting in the parliament. However, the Cable couldn’t hold those gains for long as early-day moves were supportive to the USD. While on-going Brexit saga can continue to direct the pair’s near-term direction, the first estimate of Q4 2018 gross domestic product (GDP) for the US economy could also play an important role during rest of the day.

The GBP/USD pair surged to the seven-month high after the British members of parliament (MPs) overwhelmingly backed the proposal to put the Article 50 delay on the vote, also known as Cooper’s Brexit amendment F.

Though, the Cable failed to hold the 1.3350 figure for long and slipped under 1.3300 as early-day data from Japan, New Zealand, AU and China didn’t go well and pushed investors toward the greenback.

Looking forward, on-going drama in the UK parliament concerning Brexit could offer immediate impulse to the Cable. With the major events likely to take place from March 12, chances are high that GBP may continue portraying optimism based on Theresa May’s recent acts of putting forth the initial proposal which if turned down can escalate voting for ‘no-deal’ Brexit and delayed Article 50.

Also, Advanced estimates of the Q4 2018 US GDP is another important catalyst to watch. The growth figure is expected to soften to 2.3% from 3.4% registered during the previous quarter.

GBP/USD Technical Analysis

In spite of declining below 1.3300, the pair is still above 1.3280 and 1.3230 support levels, which in turn could highlight 1.3200 rest-points.

On the upside, 1.3365 and 1.3400 may please buyers if they cross 1.3300 again.

In the view of the analysts at Citigroup, the US advance GDP figures for the fourth quarter are expected to come in stronger. The US data is due later in the NA session at 1330 GMT.

Key Quotes:

“Q4 growth is setting up to be very strong.

An unexpected narrowing in the trade balance in November.

Our Q4-18 GDP tracker currently stands at 2.5%

However, Q1 growth is likely to slow as tighter financial conditions and the government shutdown exert a drag.

This is by now well expected in markets and between these factors and potential residual seasonality we think investors (and the Fed) will stay in wait-and-see mode until a clearer picture emerges in Q2.”

The NZ Herald carried a report earlier today, citing that New Zealand’s dairy giant, Fonterra, raised its payout to the farmers, in repose to rising Asian demand, but canceled the company’s interim dividend.

Further Details:

Fonterra expects to pay $6.30-6.60 per kilogram of milk solids in the current season from December forecast of $6-6.30/kgMS and $6.69/kgMS in the 2018 season.

It has also scaled back its milk collection forecast by 20 million kg to 1,530 million kgMS, which is still 2% more than the previous season.

Despite downbeat Chinese PMI numbers, the Kiwi manages to trade a touch higher near 0.6850, in the wake of the abovementioned headlines.

China’s manufacturing activity gauge hit a three-year low in February as export orders fell at the fastest pace since February 2009. 

The official Purchasing Managers’ Index (PMI) fell for the third straight month, dropping to 49.2 in February. 

Notably, new export orders sub-index fell to 45.2 from 46.9 in January, according to Nikkei Asian Review. That is the ninth straight monthly drop and the lowest reading since February 2009. 

The declining trendline will likely continue unless the US and China reach a breakthrough trade deal, ending the tariff war.

Gold could fall to $1,300, as the yellow metal established a bearish lower high-lower low with a close below $1,321 yesterday. 

Daily chart

The bearish lower high-lower low is backed by a negative crossover of the 5- and 10-day moving averages (MAs) and RSI’s break below the support line. So, $1,300 could be put to test in the next week or so. 

On the higher side, a close above $1,332 is needed to abort the bearish outlook. 

Trend: Bearish

Bank of Korea (BOK) Governor Lee Ju-yeol is on the wires now, via Reuters, speaking about the economic and interest rate outlook following the monetary policy decision announced earlier today.

Key Headlines:

To maintain accommodative rate policy.

Today’s decision was unanimous.

Exports fell in value terms due to falling chip prices.

Exports sustaining slight increase in volume.

Fed’s tightening stance seen still intact.

Still hard to predict US-China trade negotiation outcome.

External uncertainties still seen very high.

Not right time to consider rate cut.

Current rate level is already accommodative.

Analysts at TD Securities (TDS) offer their outlook on the AUD/USD pair over the coming months, given that the US dollar now appears overvalued.

Key Quotes:

“Yield advantage the US has over DM has shrunk.

USD had gained on the differentials but is now expensive and is perhaps now vulnerable to the change of direction.

“… dollar is overvalued …. losing the growth and equity support that it had plugging the valuation gap last year”.

“Rates outside of the U.S. are cheap and they will essentially move higher as policy outside the U.S. starts to normalize”.

USD seen lower in a 3 to 6 month horizon.

“If U.S. rates are topping out because the Fed is essentially done, then there’s room for catch-up, which would see the dollar weaken against G-10 currencies”.

Long AUD/USD, citing that the markets are taking the wrong view on the RBA by expecting the Bank to cut instead of hike.”

Following the Bank of Korea’s (BOK) status-quo on the interest rates, the South Korean central bank is out with the key highlights from its monetary policy statement.

Growth forecast to be in line with Jan. Projection.

CPI will fluctuate at below 1% level for some time.

CPI then to run at mid-1% level from H2.

To maintain accommodative policy stance.

Earlier today, the BOK left the key interest rate unchanged at 1.75%, as widely expected.

NZD/USD daily chart

• NZD/USD trades near 0.6840 during early Asian sessions on Thursday.
• On Wednesday, the pair dropped from 0.6900-10 horizontal-resistance comprising highs marked since February 04.
• On a daily chart, 0.6805 acts as immediate support for the pair before dragging it to an eight week long upward sloping trend-line at 0.6770.
• In case prices slide under 0.6770, the pair may take a halt around 0.6755-50 region including 100-day and 200-day simple moving averages (SMAs).
• If at all the quote continue trading southward under 0.6750, chances of its plunge to 2019 low around 0.6705 can’t be denied.
• Meanwhile, 0.6870 can act as immediate resistance for the pair before visiting 0.6900-10 area.
• Though, pair’s rise beyond 0.6910 isn’t a sure signal for its rally as a descending trend-line stretched since June 2018 can challenge the Bulls near 0.6935.
• During the pair’s advances above 0.6935, 0.6970 and 0.7000 may become buyers’ favorites.

NZD/USD 4-Hour chart

• On H4, 0.6720 may offer intermediate halt after 0.6750 and before 0.6705 whereas 0.6670 and 0.6620 can please sellers beneath 0.6705.
• On the upside, 0.6885 can act as a buffer during the pair’s rise towards 0.6900-0.6910

NZD/USD hourly chart

• 0.6815 and 0.6790 can come forward as supports on the break of 0.6735-30 horizontal-region.
• An upside clearance of 0.6910 can have 61.8% Fibonacci retracement of last one week move, at 0.6925, as a follow-on benchmark to watch.

• USD/CNH has recovered from session lows, possibly on the back of a weaker-than-expected China data. 
• China’s manufacturing activity contracted for the third straight month in February. 

The USD/CNH pair is currently trading at 6.6820, having clocked a low of 6.6755 earlier today. 

The recovery from session lows could be associated with the dismal China data released at  01:00 GMT, which showed the manufacturing activity in the world’s second-largest economy contracted for the third month straight in February. 

The manufacturing Purchasing Managers’ Index (PMI) slipped to 49.2 in February, missing the forecasted print of 49.5 by a narrow margin. 

The third straight below-50 reading indicates a sustained deterioration in the activity, despite the government’s stimulus efforts. That, however, is hardly surprising, as the export units have been facing a tough time, courtesy of the US-China trade war. 

Looking forward, the pair could see a stronger oversold bounce, if the resistance at 6.6820 (descending triangle hurdle) is convincingly scaled. 

Technical Levels