Early in the Asia-Pacific session, the RBNZ kept rates on hold at 2.25% which was expected with about 70% probability. Kiwi shot up on the back of the decision, given there was a chance priced in of a cut. The statement was similar to prior statements and maintained the strong easing bias. The RBNZ will likely cut rates at the next meeting in June. Kiwi rallied 125 pips on the news.
The yen saw massive appreciation across the board when the BoJ kept monetary policy unchanged. Many analysts were predicting an increase in easing measures at this meeting. The surprise of keeping monetary policy unchanged saw USDJPY drop over 300 pips immediately, and likewise dips in all yen pairs. The yen is likely to remain strong, especially if sentiment takes a risk-off tone. Analysts will likely be transferring their easing predictions to the next BoJ meeting, where the likelihood of action will be higher.
Also from Japan, we saw inflation figures, with Tokyo CPI ex-food & energy for April printing at 0.6% y/y, same as prior. The BoJ's own measure of National Core CPI (ex-food & energy) for March printed at 1.1%, also same as prior. Inflation refuses to move higher in Japan.
Our trade call for the London session is to sell AUDJPY on a pullback to around the 83.70 region. Stop-loss and take-profit should be around 135 pips, but above levels of support or resistance.
Last week's long USDJPY would have been closed for locked-in profit when the BoJ failed to provide further easing.
*New updates to the fundamental section will be left in bold for 24 hours*
USD: The Fed's April 27 statement failed to provide any further clarity on when the Bank may raise rates. There was no indication in the statement that a rate hike is likely in June, with Fed fund futures pricing a less than 20% chance of a hike at that meeting. CPI for March slightly missed estimates with Core dropping to 2.2% y/y from a prior of 2.3% and for the month, missing estimates at 0.1% versus 0.2% expected. Headline inflation also dropped from prior and missed estimates at 0.9% y/y. Employment figures for March were solid with 215,000 jobs added, a rise of 0.3% in Average Hourly Earnings, and an increase in Participation Rate to 63.0%.
EUR: A bearish currency fundamentally, however currently trading neutral following upside from Draghi's comments at the March meeting. CPI for March came in as expected for the headline at -0.1% y/y, but beat estimates for the core figure at 1.0% vs expectations of 0.9% and prior of 0.8%. On March 10, the ECB cut all three key interest rates and an increased QE by €20bn per month.
GBP: Fundamentally a slightly bullish currency, however market expectations regarding the UK's EU referendum will remain the primary driver of price action. Preliminary GDP for Q1 printed at 0.4% q/q as expected, however GDP y/y slightly beat expectations at 2.1% vs 2.0% expected. Average Weekly Earnings for February increased by 1.8%, below expectations of 2.3%, Claimant Count Change also missed expectations, increasing by 6,700 vs an expected decrease of 11,300. For the month of March, Core CPI m/m printed at 0.6%, double the expected 0.3%, and core y/y printed at 1.5% above expectations of 1.3%. Headline CPI also beat market expectations at 0.4% m/m and 0.5% y/y.
AUD: CPI for Q1 missed by a wide margin with Trimmed Mean CPI printing at 1.7% y/y, below expectation of 2.0%. This is well below the RBA's 2% target for inflation and hence greatly increases the chances of a cut at the May 3 meeting. This makes the AUD a bearish currency for now. Employment data for March beat estimates at 26.1K vs expected 18.0K for the Employment Change, whilst the Unemployment rate fell to 5.7% vs expectations of 5.9%.
NZD: The RBNZ kept rates on hold at the April 28 meeting, but maintain a strong easing bias which suggests another cut at the June meeting. Fundamentally a weak currency given the RBNZ's easing bias, however currently seeing upside for the same reasons as the AUD. CPI for Q1 slightly beat estimates at 0.2% q/q versus expectations of 0.1%. Year-over-year CPI matched estimates at 0.4%, well below the RBNZ's target mid-point of 2% cialis generika preise. Excluding petrol prices, CPI rose 0.7% y/y.
CAD: A neutral to weakly-bullish currency, with sentiment in lock-step with WTI. Core CPI for the month of March rose 0.7% versus an expectation of 0.3%. This puts year-over-year core inflation at 2.1%. Retail Sales Excluding Automobiles rose 0.2% for February, well above the expected half-percent decline. Solid data from Canada during April has erased any expectation of easing this year, for now.
JPY: The BoJ kept policy unchanged at the April 28 meeting, which saw massive strength in yen across the board, given the market pricing for a potential announcement of further easing. The BoJ may ease further at the next meeting on June 16. Tokyo CPI Ex-Food & Energy for April was at 0.6% y/y. The BoJ measure of National Core CPI remained steady in at 1.1% y/y for March.
CHF: Fundamentally a weak currency, highly correlated with moves in EUR. The franc is fundamentally a weak currency given the SNB's negative interest rates, however it can suddenly rally on safe-haven flows. The SNB regularly recite that the franc is overvalued and they are prepared to intervene to weaken the currency. The franc's direction is difficult to predict due to regular intervention by the SNB.
We will be monitoring levels of support and resistance in unison with any impactful news and the underlying fundamentals in order to find a high probability trade. Support and resistance includes previous highs and lows (horizontal s/r), trendlines, moving averages, fibonacci retracements, daily pivot levels and round numbers. These levels of support and resistance are most effective when there are several of them converging at the same area (confluence).