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Europe Roundup: Euro slides to new 2018 low, DXY extends rally, Oil highest since 2014 after U.S pulls out of Iran nuclear deal, European shares supported by strength in oil stocks - Wednesday, May 9th, 2018

Market Roundup

  • EUR/USD 0.02%, USD/JPY 0.49%, GBP/USD -0.01%, EUR/GBP 0.03%
     
  • DXY -0.03%, DAX 0.05%, FTSE 0.57%, Brent 2.47%, Gold -0.52%
     
  • Oil hits 3-1/2-year high after U.S. quits Iran deal 
     
  • Europeans scramble to save Iran deal after Trump reneges
     
  • GB Apr BRC Retail Sales YY, -3.1%, 2.30% prev
     
  • FR Mar Industrial Output MM, -0.4%, 0.4% f'cast, 1.1% prev (r)
     
  • Investors push back ECB rate-hike bets further into 2019
     
  • China to tighten rules on banks' wealth management business - sources

Economic Data Ahead

  • (0700 ET/1100 GMT) U.S. MBA Mortgage Applications, -2.5% prev
     
  • (0700 ET/1100 GMT) U.S. Mortgage Market Index, 388.6 prev
     
  • (0700 ET/1100 GMT) U.S. MBA Purchase Index, 258.1 prev
     
  • (0700 ET/1100 GMT) U.S. Mortgage Refinance Index, 1,104.9 prev
     
  • (0700 ET/1100 GMT) U.S. MBA 30-Yr Mortgage Rate, 4.80% prev
     
  • (0830 ET/1230 GMT) U.S. Apr PPI Final Demand YY, 2.8% f'cast, 3.0% prev
     
  • (0830 ET/1230 GMT) U.S. Apr PPI Final Demand MM, 0.2% f'cast, 0.3% prev
     
  • (0830 ET/1230 GMT) U.S. Apr PPI ex-Food/Energy YY, 2.4% f'cast, 2.7% prev
     
  • (0830 ET/1230 GMT) U.S. Mar Wholesale Invt(y) R MM, 0.5% f'cast, 0.5% prev
     
  • (0830 ET/1230 GMT) U.S. Mar Wholesale Sales MM, 0.5% f'cast, 1.0% prev
     
  • (0830 ET/1230 GMT) CA Mar Building Permits MM, 2.0% f'cast, -2.6% prev
     
  • (1100 ET/1500 GMT) CA May TR IPSOS PCSI, 56.43 prev

Key Events Ahead

  • (0900 ET/1300 GMT) Germany's finance minister Olaf Scholz holds news conference on tax revenue estimates - Berlin
     
  • (1315 ET/1715 GMT) FRB Atlanta's Raphael Bostic speaks on economic outlook - Jacksonville 
     
  • (1715 ET/ 2115 GMT) BoC's Filipe Dinis speaks on strengthening cyber defenses – Toronto 
     
  • (1950 ET/2350 GMT) BoJ releases summary of opinions from board members at April 26-27 policy meeting 
     
  • N/A EBRD holds its annual meeting – Amman

FX Beat

DXY: Dollar rally shows no signs of fading. The dollar index rose 0.3 percent to 93.377, its strongest since late December. The index has shown a good jump above 55- W EMA for the first time since May 2017. Any convincing close above 93 (55-W EMA) will take the index till 94/94.75. Market eyes US PPI data which is to be released for further direction.

EUR/USD: Euro is continuing its weakness for second consecutive week, slides to new 2018 low. The pair recovered almost 40 pips form the intraday low due to profit booking. But overall trend is still weak as long as resistance 1.2017 holds. It is currently trading around 1.18677.On the lower side, near term support stands at 1.1800 and any break below targets 1.17120 (38.2% fibo)/1.1600. The near term resistance is around 1.1900 and any break above will take the pair to next level till 1.1925/1.1970/1.200. 

GBP/USD: GBP/USD has formed almost a double bottom at 1.3480 and shown a good recovery of almost 100 pips. Market eyes BOE’s super Thursday for further direction. Any hawkish tone by BOE will drag the Pound sterling further down. On the higher side, 1.3600 will be acting major resistance and any convincing break above will take the pair slightly till 1.3630 (200- H MA)/1.3676 (10- day MA). Major trend revrsal only above 1.4000. The near term support is around 1.3480 and any break below will drag the pair till 1.3450/1.3400.

USD/CAD: USD/CAD trades amid strong oil price. WTI Crude oil prices has broken $71 for the first time since 2014 on account of re-impose of economic sanctions on Iran by US. Technically near term resistance is around 1.3000 and any convincing break above targets 1.3040/1.3125. Major bullish continuation only above 1.3125. On the lower side, near term support is around 1.2920 and any break below will drag the pair down till 1.2880 (23.6% fibo)/1.2800/1.2775 (55- day EMA).

USD/JPY: A strong follow-through USD buying pushing the major higher. US dollar also seemed to track rising US bond yields amid Fed rate hike speculations. USD/JPY extends gains above 109 handle, hits 4 day highs of 109.80. The pair trades 0.52% higher on the day at 109.70. US Producer Price Index (PPI), due later during the early NA session, would now be looked upon for some fresh impetus. 

EUR/JPY: EUR/JPY edges higher from 7-week lows at 129.23, retakes 130 handle. The pair finds strong support at 200W SMA at 129.19, we see further weakness only on break below. Price action has broken into weekly cloud and breach at 200W SMA will raise scope for test of  38.2% Fib at 128.85. On the flipside we see major resistance at 20W SMA at 132.56, bearish invalidation only on break above.

Equities Recap

European shares supported by strength in oil stocks. The pan-European STOXX 600 index was down 0.27 percent at 391.06 points, while the FTSEurofirst 300 index slipped 0.09 percent to 1,597.15 points.

Britain's FTSE 100 trades 0.51 percent up at 7,604.03 points, while mid-cap FTSE 250 down 0.03 percent to 20,588.04 points.

Germany's DAX was up 0.10 percent at 12,925.59 points; France's CAC 40 trades largely unchanged at 5,522.63 points.

Commodities Recap

Oil highest since 2014 after U.S pulls out of Iran nuclear deal. Oil prices rose more than 3 percent on Wednesday, hitting 3-1/2-year highs at $71.14. Brent crude oil touched its highest since November 2014 at $77.20 a barrel.

Safe-haven buying of gold falls as dollar rises on higher U.S. Treasury yields. Spot gold had fallen 0.65 percent to $1,305.16 an ounce by 0713 GMT, its lowest since May 3. U.S. gold futures for June delivery were down 0.6 percent at $1,305.70 per ounce.

Silver slipped 0.4 percent to $16.36 an ounce, while platinum fell 0.4 percent to $908.60 an ounce and palladium edged down 0.1 percent to $968.50 an ounce.

Treasuries Recap

U.S.: The U.S. Treasuries plunged Wednesday ahead of the country’s producer price index (PPI) for the month of April, scheduled to be released today by 18:00GMT. Also, the 10-year Note auction and Federal Open Market Committee (FOMC) member Bostic’s speech due today by 22:30GMT and 22:45GMT respectively will add further direction to the bond market. The yield on the benchmark 10-year Treasuries jumped 4-1/2 basis points to 3.01 percent, the super-long 30-year bond yields surged 4 basis points to 3.16 percent and the yield on the short-term 2-year traded 1 basis point higher at 2.52 percent.

UK: The UK gilts plunged during European session Wednesday ahead of the country’s manufacturing production for the month of March, coupled with the trade balance data as well. Further, the Bank of England’s (BoE) monetary policy meeting, scheduled to be held on the same day, will add detailed direction to the debt market. The yield on the benchmark 10-year gilts, jumped 3-1/2 basis points to 1.48 percent, the super-long 30-year bond yields surged 3 basis points to 1.89 percent and the yield on the short-term 2-year also traded nearly 3 basis points higher at 0.83 percent.

EUR: The German bunds slumped during European session Wednesday amid a muted trading session that witnessed data of least economic significance ahead of the European Central Bank (ECB) President Mario Draghi’s speech, scheduled to be held on May 11 by 13:15GMT. The German 10-year bond yields, which move inversely to its price, jumped nearly 2-1/2 basis points to 0.58 percent, the yield on 30-year note also surged close to 2-1/2 basis points to 1.26 percent and the yield on short-term 2-year traded 1 basis point higher at -0.55 percent.

NZD: New Zealand bonds slumped at the time of closing Wednesday as investors remained eager to watch the Reserve Bank of New Zealand’s (RBNZ) monetary policy decision, scheduled to be unveiled late today, followed by a press conference later in the day. Also, focus remains on the central bank Governor Adrian Orr’s first policy decision speech, due on May 10 for added insights into the debt market. At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, jumped 4 basis points to 2.81 percent, the yield on the long-term 20-year note climbed 3 basis points to 3.35 percent and the yield on short-term 2-year also closed 3 basis points higher at 1.92 percent.

JGBs: The Japanese government bonds remained little changed Wednesday after the Bank of Japan’s (BoJ) regular bond-buying operation was offset by a decline in the United States Treasuries in the overnight session. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, remained tad higher at 0.05 percent, the yield on the long-term 30-year note hovered around 0.73 percent and the yield on short-term 2-year traded flat at -0.12 percent.

AUD: Australian government bonds slumped on Wednesday tracking weakness in the U.S. Treasuries amid rising expectations of gradual policy tightening form the Federal Reserve this year and next. The U.S. 10-year Note yield hovered around the 3 percent mark. The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, rose 5 basis points to 2.790 percent, the yield on the long-term 30-year Note surged 3-1/2 basis points to 3.288 percent and the yield on short-term 2-year up nearly 2-1/2 basis points to 2.041 percent.
 

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