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We make a start by noting that the USD was able to strengthen against its counterparts yesterday. It should be noted that February’s PPI rates accelerated beyond market expectations both on a month-on-month as well as on a year-on-year level. The release practically verified the resilience of inflationary pressures in the US economy, as highlighted by the CPI rates for the same month. The release could enhance the hawkishness of the Fed in its interest rate decision next week. At the same time, we note that the weekly initial jobless claims figure came in lower than expected, implying a relative tightness of the US employment market and also providing some support for the USD. On the flip side, we note that US retail sales for February despite accelerating by escaping the negative area, failed to reach the market’s expectations and thus may have clipped the potential gains of the USD for the day.
On a technical level, the strengthening of the USD was obvious also against the JPY, as USD/JPY broke the 148.05 (S1) resistance line now turned to support. We tend to maintain a bullish outlook for the pair as long as the upward trendline guiding it since the 11th of March remains intact. We also note that the RSI indicator has risen above the reading of 50, implying that a bullish sentiment is building up in the market for the pair. On the other hand the price action seems to be flirting with the upper Bollinger band that may slow down the bulls somewhat. Should the buyers maintain control over the pair, we may see it aiming if not breaching the 149.55 (R1) resistance line. Should the bears find a chance and take over, we may see the USD/JPY reversing course, breaking the prementioned upward trendline in a first signal that the upward movement has been interrupted, break the 148.05 (S1) support line and aim for the 146.45 (S2) support level.
On the other hand, US stock markets took a dive lower as all three major US stock market indexes, namely the Dow Jones, S&P 500 and Nasdaq ended their day in the reds. On a company level, we maintain our worries for Tesla (#TSLA) as the negative headlines continue to multiply. It’s characteristic that Wells Fargo downgraded the share’s outlook and highlighted the potential for Tesla’s stock to fall as much as 23% as it is characterized as a ‘Growth company with no growth’. Also, we highlight the troubles of Boeing (#BA) in production quality control being ongoing, which continues to weigh on the company’s share price.
During Monday’s Asian session, we note the release of China’s industrial output, retail sales and urban investment growth rates all being for February. The release is expected to keep Aussie traders on the edge of their seats, given the close economic ties of Australia with China. A possible slowdown of the industrial output growth rate could imply a wider amount of raw materials exported from Australia to China, while an acceleration of the Urban investment growth rate could ease somewhat market worries for the much-troubled Chinese construction sector.
AUD/USD has been moving in a sideways motion, yet over the past 24 hours, bearish tendencies have appeared turning the direction of the pair southwards towards the 0.6515 (S1) support line. At the same time, we note that the RSI indicator has been approaching the reading of 30. Hence we tend to maintain our sideways motion bias, yet issue also a warning for a bearish outlook. For a clearcut bearish outlook we would require the pair to clearly break the 0.6515 (S1) support line and take aim for the 0.6400 (S2) level, while if the bulls take over, we may see the pair breaking the 0.6620 (R1) line and aiming for the 0.6725 (R2).
Other highlights for the day:
Today in the European session, we note the release of France’s final HICP rates for February, and just before the American session starts, we get Canada’s House starts for February and wholesale trade rate for January and from the US the industrial output for February and the preliminary UOM consumer sentiment for March while on the monetary front ECB’s chief economist Lane is scheduled to speak.
USD/JPY H4 Chart
Support: 148.05 (S1), 146.45 (S2), 144.35 (S3)
Resistance: 149.55 (R1), 150.85 (R2), 152.00 (R3)
AUD/USD H4 Chart
Support: 0.6515 (S1), 0.6400 (S2), 0.6270 (S3)
Resistance: 0.6620 (R1), 0.6725 (R2), 0.6870 (R3)
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