Macro data out of Australia overnight came in negatively (for the second time this week) as jobs data showed a decline for the month (-15,400 total jobs created) and an increase in the national unemployment rate (rising to 5.2 percent). This follows the lower GDP released yesterday and this is leading to analyst estimates that we will see additional interest rate cuts from the RBA at some point this year. For the most part, these rate expectations are lacking a clear consensus and regional macro data will start to take on a greater level of importance in the coming months.
More immediately, however, market attention will now shift to the upcoming monetary meetings from the BoE, ECB and the Bank of Canada. Analysts are not expecting a change in interest rates from any of these central banks but the policy statements released later will give traders some guidance in sentiment for today’s sessions. In addition to this, many will remain watchful for any new headlines in Greece, with the Private Sector Involvement (PSI) deadline coming close and bondholders will have until 20:00 GMT to confirm their involvement in the current bailout program. Currently, the EUR/USD is trading moderately higher at 1.3130/1.3160 while the USD/JPY is remaining supported at 81.05/81.40.
Also overnight, the Reserve Bank of New Zealand (RBNZ), held its monetary policy meeting, leaving interest rates unchanged at 2.5%. This was widely expected by markets and at the proceeding policy conference with the central bank Governor (Bollard), views relative to the New Zealand Dollar were expressed, saying that the elevated currency levels are seeing as a negative weight on export companies and will provide limitations on GDP growth for the remainder of this year. Language of this type suggests that it is unlikely we will see an increase in rates in the coming quarter and that the NZD is overvalued at current levels.
Equity markets have seen a slow drift higher, recovering some of the losses seen earlier in the week. This is occurring even with the negative macro data out of Australia and Japan during the Asian session, so it remains clear that traders are focused on the Eurozone more than anything else and as the Greek PSI deadline approaches, this will likely continue to be the case for the rest of today’s market activity.
Technical Analysis:
The USD/CAD is headed lower after its big rally posted in the last two weeks as prices now trade comfortably below parity and have broken support at 0.9955. This area was previously seen as resistance turned support as well as the 38.2% retracement of the latest rally. The break now targets the 0.99 level, which is the next major Fibonacci retracement but we expect prices to be contained here and will look to enter into new long positions in this area.
The Nikkei 225 is caught in a longer term symmetrical triangle, with prices approaching resistance at the downtrend line. Major resistance here comes at the confluence of historical and Fibonacci levels at 10160 and prices are unlikely to see a break to the upside given the lack of momentum seen in the MACD indicator. Sell positions preferred here, as downside risk far outweighs upside potential.
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