Session close (Tuesday, Feb. 27): Settled at 1.2253, down 74.5
Fundamentals: New Federal Reserve Chairman Powell set a strong tone in his first of two congressional hearings. While he didn’t steer widely off course, he was positive on the U.S. economy saying it had strengthened recently. His goal is to prevent it from overheating while continuing to gradually hike rates. He added that “some economic headwinds in previous years have turned into tailwinds.” Referring to fiscal measures such as tax-reform and the spending bill, he said it should not alter their current path. All in all, his comments were perceived to be more hawkish than market expectations.
While some are saying this opens the door to four hikes this year, we do not believe that to be true. The Dollar Index strengthened to the highest level since February 9th while yields also rose. Lost in the day was a very poor Durable Goods read, however, Consumer Confidence was at the highest level since 2000. A move like this on a fundamental basis usually takes 24 hours to digest, so the path of least resistance in the lower should remain slightly lower at minimum. However, this leads into tomorrow’s key Eurozone CPI read at 4:00 am CT. Ahead of that is German Unemployment at 3:00. There is a one-day break before Powell’s testimony continues Thursday. From the U.S we have the second read on Q4 GDP at 7:30 am and Pending Home Sales at 9:00.
Technicals: Today’s price action is due to weigh on the Euro through tomorrow’s session. Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.
Session close: Settled at .9321, down 44
Fundamentals: The yen retreated from its overnight high ahead of the morning despite a stronger than expected read on BoJ Core CPI. The pressure continued early in Powell’s testimony and all major currencies against the U.S. dollar traded lower. However, the yen stabilized later in the session as equity markets continued to see pressure in the face of rising yields. The U.S. 10-year yield finished the session up 1.5% and back to the level it was before selling off on Friday. The S&P lost 1.3% and retreated to settle back at its breakout point of 2747.50. Today’s move in the U.S. dollar is not typically something you see reverse course immediately. Japan Industrial Production and Retail sales are due at 5:00 pm CT. China Manufacturing is at 7:00 pm CT.
Technicals: The yen is not technically broke after a session like this. However, U.S. dollar strength poses a strong headwind over the next 24 hours.
Session close: Settled at .7796, down 53
Fundamentals: After a weak session on U.S. dollar strength, the Aussie has a critical evening. At 6:30 pm CT is Housing and Private Sector Credit data. Most importantly though is the China Manufacturing PMI read at 7:00 pm CT. This will be accompanied by Non-Manufacturing PMI. The metals sector took a hit today, but we will be looking to U.S data tomorrow on whether it will reinvigorate the trade.
Technicals: Price action did make a new swing low and traded to the lowest level since February 14th while closing at the lowest level since February 9th.
Session close: Settled at .78425, down 46
Fundamentals: The Canadian’s trend lower began on weak domestic fundamentals and picked up a bit as the U.S Dollar stabilized. However, it is seeing strong pressures on U.S. dollar strength through today. Raw Materials Price Index data is due tomorrow at 7:30 am CT. Traders should also keep an eye on crude oil and production data from EIA tomorrow, the market is also showing some vulnerability on U.S. dollar strength and would drag the Canadian as well.
Technicals: After undoubtedly closing below major three-star support at .7931-.7949, the path of least resistance has been lower.