Volatility overnight slowed with both equities and currencies markets showing mixed results. There were some headlines relative to oil, however, discussions are taking place to release crude oil from the strategic reserves in many developed countries. There was no mention of a finalized decision but if we do see this, expect sharp declines in oil prices and an accompanying rise in the US Dollar. Strategic oil reserves were accessed last year as the war in Libya was choking off oil supplies, and 60 million barrels of oil were made available over a one month period.
Macro data out of the US has been showing progress this year and this trend continued today, as the US jobless claims figures dropped to 351,000 at the beginning of March, which is the lowest printing in 4 years. Analyst expectations for the Unemployment rate are suggesting further declines into the upper 7 percent region by the end of this year, so as the weekly jobs figures continue to hold up, expect equity markets to maintain elevated. Today, the main regional economic figures will be the Consumer Price Index (CPI), Industrial Production and the University of Michigan Consumer Confidence survey.
In Japan, the BoJ released its minutes from the very significant monetary policy meeting on February 14th, which is when the bank decided to enact additional easing policies (new asset purchases) and discuss its revised inflation target of 1 percent. Markets will be watchful of how unified this decision actually was. It has been reported that some central bank members wanted an inflation target as high as 2 percent which would bring the economy more inline with the progression of developed economies. Any major evidence of dissention within the bank could lead to enhanced volatility in both the USD/JPY and in Japanese treasuries.
In Europe, equities are following the trends in other areas, with the DAX and CAC pointed to relatively unchanged opens. Macro data will come with the Eurozone Trade Balance, followed by the Italian Trade Balance, and Current Account figures. Corporate earnings reports will come from Fresenius SE, Eurazeo, Astaldi, Espirito Santo Financial.
The EUR/JPY has broken its daily downtrend line and continues to press higher with resistance now seen at 109.85. The MACD indicator is showing positive momentum with the RSI still at neutral readings, so there is still plenty of room to extend to the upside. Support is now seen at 105.50 and dips are likely to be contained here for the near term. A break, however, would take pressure off of the topside and put the yearly lows back in focus.
Oil prices are showing some conflicting signals, based on which chart is being watched, as we are currently seeing a descending triangle on the 4H charts. This is suggesting that we are seeing a short term top in place now at 109.90. A break of support at 103.10 will confirm this but it should be remembered that the longer term charts are still firmly in bull territory, so preferred strategy is to sell rallies rather than breakouts.