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  • Forex today traded around an improved taste for risk with both the European and US market rallying, despite poor data from the US.  

The greenback was advancing from the midpoint of the 96 handle and when on to make a high of 96.85 surrounded by an hourly bullish Ichimoku cloud formation and forming an ascending channel with a target on the 97 handle, albeit with momentum spent according to stochastics.

As for US yields, the US 10yr treasury yield was consolidated and stuck to within a tight range of 2.40% and 2.45% following a heavy decline commencing last Friday on poor European and US data. The 2yr yield was also confined to a 5 bp range of between 2.25% and 2.30%. However, the Fed funds futures prices are now implying a 90% chance of a Fed rate cut by December.

As for data, the Conference Board’s consumer confidence index dropped to 124.1 in March from 131.4 – This was the fourth decline in the last five months. Elsewhere, the Richmond Fed’s manufacturing index also fell within line of expectations by 10 in Mar from 16 in Feb. As for Housing starts, these were highly disappointing considering the fall in Feb, -8.7%, (est: -1.6%).  

Currency action (Analysts at Westpac’s analysis of the G10s):

“The euro underperformed, EUR/USD falling from 1.1310 late Sydney to 1.1265. Once again GBP/USD was choppy but net barely changed on the day, around 1.3200. USD/JPY rose from 110.00 to highs above 110.60, supported by the improvement in risk appetite. Outperformer AUD continued to grind higher to 0.7148, then slipped a little in sympathy with EUR. NZD remained elevated around 0.6920. AUD/NZD rose from 1.0290 to 1.0335.”

Key notes from U.S. session:

  • Wall Street in better shape and DJIA holds above the pivot on bullish correction testing 21-D SMA

Key events ahead in Asia:

Analysts at Westpac explained that the RBNZ reviews policy today, with a brief statement due at 12pm Syd/9am Sing/HK (there is no quarterly statement):

“A steady hand at 1.75% is assured. We expect Governor Orr to repeat the key lines from the Feb MPS: “We expect to keep the OCR at this level through 2019 and 2020. The direction of our next OCR move could be up or down.” While there has been plenty of dovish momentum in global markets in recent weeks and markets price around a 70% chance of a rate cut by end-2019, New Zealand’s decent Q4 GDP data last week argues for limited change in the statement from 13 February.”