Improved market sentiment puzzles the market

USD seems to be stalling its ascent higher against its counterparts, as the market tended to have an improved sentiment during today’s Asian session allowing the greenback to suffer some safe haven outflows. Yet we would like to note also that the release of the US consumer confidence for February yesterday may have paved the way for the USD to drop as the indicator’s reading dropped considerably. US stock markets weakened as the key stock market indexes were in the reds, ending a bad month as they lost ground maybe with the exception of Nasdaq, which remained relatively unchanged for February. Yet as we mentioned the market sentiment tended to improve during today’s Asian session, as both of China’s manufacturing PMI figures the Caixin and NBS, rose substantially and characteristically the NBS manufacturing PMI figure showed that economic activity expanded at the fastest pace in more than a decade, raising hopes that the positive effect could overspill to the global economy. The release enhanced the risk-on approach of the market and provided support for the Kiwi, the Yuan and the Aussie with the last one yet being constrained given that Australia’s GDP growth rate slowed down considerably for Q4.

The release of Australia’s GDP rate though could have ripple effects also for RBA’s intentions regarding its monetary policy as it may provoke second thoughts to the Australian central bank policymakers about further tightening. Speaking of monetary policy, we highlight the comments deriving from nominated BoJ Deputy Governor Uchida early this morning, where he stated that the bank should not alter its ultra-loose monetary policy. The statement could be considered to be dovish, yet overall, we didn’t expect a radical overhaul of BoJ’s ultra-loose monetary policy by the appointment of Mr. Ueda, as the new Governor, at least not in the short term. Across the world, we note the acceleration of Frances’ preliminary HICP rate for February, and highlight Germany’s respective indicator today and should it accelerate, we may see ECB’s hawkish stance hardening even further. The release came just before ECB chief strategist Philip Lane stated that the bank has started to win the war on inflation which may have eased market worries for ECB’s intentions somewhat. 

AUD/USD edged higher during today’s Asian session. In its upward motion the pair broke the downward trendline guiding it since the 14^th of the month, hence we switch our bearish outlook for a sideways motion initially. Should the bulls take over, we may see AUD/USD breaking the 0.6800 (R1) resistance line and aim for the 0.6900 (R2) resistance level. Should the bears take over, we may see the pair reversing course and breaking the 0.6720 (S1) support line and aim for the 0.6625 (S2) support level.

EUR/USD remained relatively stable testing the 1.0575 (S1) support line. We tend to maintain our bearish outlook given the downward channel guiding the pair, yet we note that EUR/USD is putting its upper boundary to the test. Should the pair find fresh buying orders along its path, we may see EUR/USD breaking the 1.0715 (R1) resistance line and aim for the 1.0855 (R2) resistance level. Should a selling interest be expressed we may see the pair breaking the 1.0575 (S1) and aim for the 1.0430 (S2) support level. 

Other highlights for the day:

During today’s European session, we note the release of UK’s Nationwide House Prices for February, Germany’s and UK’s final manufacturing PMI figure for the same month. On the monetary front, we note that BoE Governor Andrew Bailey and BuBa President Nagel are scheduled to speak. In the American session, we note the release of Canada’s manufacturing PMI figure for February and from the US the ISM manufacturing PMI figure for the same month, while oil traders may be more interested in the release of the weekly EIA crude oil inventories figure. During tomorrow’s Asian session, we note the release of Australia’s building approvals growth rate for January.   

EUR/USD H4 Chart

Support: 1.0575 (S1), 1.0430 (S2), 1.0290 (S3)

Resistance: 1.0715 (R1), 1.0855 (R2), 1.1000 (R3)

AUD/USD H4 Chart

Support: 0.6720 (S1), 0.6625 (S2), 0.6545 (S3)

Resistance: 0.6800 (R1), 0.6900 (R2), 0.7010 (R3)

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