Friday 6th March: European Open Briefing

Global Markets:

  • Asian stock market: Nikkei up 1.00 %, Shanghai Composite gained 0.15 %, Hang Seng and ASX both declined 0.10 %
  • Commodities: Gold at $1198 (+0.20 %), Silver at $16.18 (+0.20 %), WTI Oil at $51.10 (+0.65 %), Brent Oil at $60.95 (+0.50 %)
  • Rates: US 10 year yield at 2.117, UK 10 year yield at 1.845, German 10 year yield at 0.343

News & Data:

  • Japan Leading Index 105.1, Expected: 105.9, Previous: 105.6
  • Japan Leading Index -0.2 % m/m, Previous: 1.5 %
  • Japan Coincident Indicator 2.4 %, Previous: 1.5 %
  • Australia AIG Construction Index 43.9, Previous: 45.9
  • PBOC Advisor Qian: Decline Of Prices In China Deserve Attention — BBG
  • PBOC Advisor Qian: China Should Speed Up Pricing Reforms As Inflation Cools — BBG
  • PBOC Advisor Qian: China’s Recent Rate Cuts Aim To Offset Inflation Decline, Differ From Strong Stimulus — BBG
  • Fed’s Williams: Should Hike Sooner And More Smoothly, Sees Reaching Maximum Employment By Year End Or Sooner
  • Fed’s Williams: Waiting For 2% Inflation May Mean Overshooting
  • ECB: The QE programme will begin on March 09th and will total €60 billion per month
  • ECB will buy debt with negative yields, but only if those yields are not below the ECB deposit rate at the time of purchase. Currently, the deposit rate stands at -0.20 %.
  • ECB: If a Euro-Area CB cannot purchase sufficient marketable debt instruments to fulfil its allocation, the ECB will allow substitute purchases, which will allow the bank to reach the monthly €60 billion target
  • ECB will not buy more than 25 % share of any debt issue, so that it can avoid having a blocking majority in case of debt restructuring
  • ECB will only buy debt in the secondary market with maturity between 2 and 30 years

Markets Update:

EUR/USD initially rallied above 1.11 yesterday as the ECB hiked their growth and inflation forecasts for 2016. However, this simply provided traders with better levels to sell and the pair quickly returned back in the lower 1.10s. The ECB has announced the details of their quantitative easing programme, which will begin next week, but there were no surprising comments or anything similar at yesterday’s press conference. Traders saw this as a sign that the downtrend can resume and added to bearish bets on the Euro. While the negative EUR sentiment is unlikely to change anytime soon, option-related demand could slow down momentum. There are barrier options reported at 1.0950 & 1.09, and there are €4 billion worth of options expiring at 1.10 at today’s NY cut at 1500 GMT.

GBP/USD followed the Euro lower, but had a rather small intraday range yesterday. Price action has been quiet overnight as traders are now looking forward to the NFP release later today. GBP/USD has lost almost 350 pips since last week’s top at 1.5550 and is approaching another pivotal support area at 1.5200/10. A weekly close beneath that area would suggest a move towards 1.50 in the near-term.

USD/JPY gave up some of its gains overnight, as traders did cover some long positions ahead of key US econ data. Good intraday support seen at 119.75, with 119.40 the key short-term support level now. Meanwhile, the Aussie and Kiwi Dollar were able to recover somewhat after a bad day. AUD/USD is back above 0.78, while NZD/USD recovered to 0.75. The price action in NZD/USD looks quite bearish and the sharp reversal after the second failure at 0.7610 suggests further losses are ahead. Immediate support noted at 0.7420 and then 0.7330.

Upcoming Events:

  • 07:00 GMT – German Industrial Production (0.5 %)
  • 08:15 GMT – Swiss CPI (-0.1 % m/m, -0.6 % y/y)
  • 10:00 GMT – Euro Zone GDP (0.3 % q/q, 0.9 % y/y)
  • 13:30 GMT – US Nonfarm Payrolls (240k)
  • 13:30 GMT – US Unemployment Rate (5.6 %)
  • 13:30 GMT – US Average Hourly Earnings (0.2 %)
  • 13:30 GMT – US Trade Balance (-$41.4bln)
  • 13:30 GMT – Canadian Trade Balance (C$0.3bln)
  • 13:30 GMT – Canadian Building Permits (5.5 %)

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