Markets slightly lower on China GDP
Following a busy EU session yesterday, markets calmed down in the US session and traded sideways ahead of the Chinese GDP. Despite the Chinese figures coming as expected and with a bullish tone associated, the markets in Asia traded generally lower with Hong Kong and Japan on the offer. In FX markets, the NZD shined with NZDUSD being up 0.8% in time of writing. Oil is hovering above the $40-lvl and is cautious ahead of the meeting in Doha, where the oil production levels will be discussed. In Fixed Income, interest rates were flat to higher. This morning, Japanese Industrial Production for February came out higher than expected, but still in negative territory and not enough to send Japanese equities on the bid. The Nikkei tested higher, but has been rejected by the Daily Ichimoku cloud resistance and is on technical level indecisive, but with a bullish tendency.
The EU session was relatively quiet yesterday with stock markets trading sideways and the EUR selling off against peers. We saw Euro zone CPI coming out more or less as expected yesterday and despite US CPI coming out slightly lower, the USD was generally bid with EURUSD trading sideways in a 60-pip range 1.1235-1.1295. The pair is stuck between the fibo points in the Aug-Dec 2015 wave and 50-day MA (red) coming in at 1.1180-area. With limited activity in the EU session today, we could see these levels being used for a break-out trade intra-day with the trigger being the US figures from 1430CET and forward.
In the US session, we expect market action to pick up. The US earnings season is in full flow, but have not been impressive. This has put a damper on risk taking although the general uptrend in US main indexes is still intact. US Industrial Production is expected to show a drop of 0.1% from -0.5% and Manufacturing is expected to show a 0.1% increase. Sentiment indicators on the business and consumer side (NY Empire State and U, of Michigan Consumer Cofidence) are expected to increase. Overall, we are still bearish on the USD, but a disappointment in US macro figures and earnings could trigger additional risk aversion, which would lead to a sell-off in equities and a strengthening of the US dollar as investors are shifting towards safer assets. We prefer the downside in the USD overall, but respect a bullish move as current sentiment is leaning that way.
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