Session close (Monday, March 12): Settled at 1.2312, down 101.5 ticks
Fundamentals: The euro finished the session down a penny after comments from ECB President Mario Draghi warned of ‘protectionism’. The euro initially traded more than half a penny higher on the release of their policy statement. Here they most notably changed the verbiage from their willingness to add stimulus measures if the outlook became less favorable to simply extending measures if necessary.
Pressure in the euro also came from the White House solidifying the afternoon press conference to announce the tariffs which were assumed to be less harsh than initially expected and provide an exemption for Canada and Mexico. This caused the dollar to strengthen against all major peers except the Canadian dollar and Mexican peso. Additionally, supply-demand technicals played a great part in today’s move as the bullish/hawkish bias of the ECB was factored in leading up to today. Moving on to tomorrow, there is German Trade Balance and Industrial Production data at 1:00 am CT.
The major focus will be U.S. Nonfarm Payroll report due at 7:30 am CT. Job growth is expected to come in at 200k while Average Hourly Earnings are expected to officially increase at 0.2%. This report brings the most important read on wages ever and will set the tone for the Fed’s rhetoric when they hike rates later this month. Fed Presidents Rosengren and Evans speak at 11:40 am CT tomorrow and with a more hawkish tone from most members of late, Evans, a December hike-dissenter, will be very interesting to listen to.
Technicals: As we discussed the supply-demand technicals above, traders had already bought in anticipation of this ECB meeting. Who could blame them? We have been bullish and the trend is up. The selling ensued after a failure against key resistance.
Session close: Settled at .9418, down 17 ticks
Fundamentals: Traders await the Bank of Japan monetary policy meeting this evening. Last night Japan GDP data crushed expectations, coming in at 1.6% YoY versus 0.9% expected ant 0.4% QoQ versus 0.2% expected. Additionally, there was a strong read on Current Account data. This helped the Yen gain some traction overnight from a poor finish yesterday. However, this was short lived as equity markets edged higher throughout the day. The Bank of Japan will have a balancing act to do this evening. While they plan to dial back their easing measures in one year from now, they are cautious that a rising currency would slow growth.
At the same time, shocking the markets six months from now would do more harm. If the yen strengthens too much, it will put pressure on stocks and banks. We feel that analysts are too worried about a strengthening yen as it is simply a nice rhetoric. This is one reason why we like the long-term prospects of the yen; though tonight may not surprise to the upside, the Bank of Japan will soon enough. Of course, do not forget about Nonfarm Payroll tomorrow which we discussed above.
Technicals: Price action consolidated today ahead of tonight’s BoJ and did not violate any major levels in either direction.
Session close: Settled at .7788, down 28 ticks
Fundamentals: The Aussie spiked briefly last night on a solid domestic Trade Balance read but has struggled to hold price action out above major three-star resistance. The China Trade Balance read had a massive jump in Exports which shows great global growth but Imports, which included demand of Australian goods, disappointed. This was about the time that the Aussie began selling off. Furthermore, the U.S. dollar strengthened throughout the session to add pressure. On a positive note, Australia is said to have the opportunity to earn a tariff exemption. A read on China CPI and PPI tonight at 7:30 pm CT will be crucial to the trade as will tomorrow’s U.S Nonfarm Payroll.
Technicals: Price action struggled to hold ground through today’s session and this opens the door for further weakness.
Session close: Settled at .77455, up 8 ticks
Fundamentals: The Canadian recovered strongly late in the session after it was said President Trump will official announce an indefinite tariff exemption for Canada. Price action spiked early this morning on strong Building Permits data but was met with selling and saw further pressure due to Crude Oil weakness and U.S Dollar strength. The Bank of Canada’s Lane spoke this afternoon and was upbeat on the economy but as expected said that U.S protectionism posses a serious risk. Employment data out of Canada along with the U.S calls for an extremely volatile morning, both are due at 7:30 am CT.
Technicals: Support is building at recent low and the double bottom yesterday.