Comentário Diário | 31/03/2017

USD extends its recent gains

• The US dollar extended its recent gains on Thursday, and during the Asian morning Friday. The move may have been fueled by some relatively optimistic comments from New York Fed President William Dudley, who noted that fiscal policy is likely to shift to a more stimulative setting over time and that the risks for both growth and inflation over the medium-longer term may be shifting gradually to the upside. The market may have paid extra attention to his comments, considering that a couple of weeks ahead the March FOMC gathering, his remarks boosted dramatically expectations with regards to a hike. The upward revision in the nation’s final estimate of Q4 GDP may have helped the dollar as well.

• USD/JPY surged yesterday, breaking back above the key obstacle of 111.60 (S2). That move signals the return of the rate back within the sideways range between that hurdle and the 115.50 zone, which contained the price action from the 11th of January until the 22nd of March. If the pair manages to close the week within that range, then we may experience further advances, at least in the days to come. We would expect the rate to challenge the 112.45 (R1) resistance first, where a break may set the stage for the next one, at 112.90 (R2).

• Today, the focus of USD traders will probably turn to the core PCE price index for February, as it is the Fed’s favorite inflation measure (see below). Another point of interest today may be that President Trump is expected to sign an executive order aimed at identifying trade abuses that contribute to the US trade deficit. In our view, this could reignite market concerns regarding increased global protectionism and may have an impact on the rhetoric of central banks such as the RBNZ and the RBA, considering that both of those economies are heavily export-oriented.

Euro investors lock their gaze on inflation data

• Today, during the European morning, we get Eurozone’s preliminary CPI data for March. The forecast is for the headline CPI rate to have slid to +1.8% yoy from +2.0%, while the core rate is expected to have remained unchanged. We see the risks surrounding the headline rate as skewed to the downside, considering the disappointing German print, as well as the slowdown in the yearly change of oil prices.

• Nonetheless, following repeated signals from ECB policymakers, we expect investors to focus primarily on the core rate. In case the headline rate declines but the core stays unchanged as anticipated, we may see a modest negative reaction in EUR. That said, any surprise in the core rate could fuel a much bigger reaction in the currency, as investors adjust their expectations regarding the next ECB move.

• EUR/USD continued its tumble yesterday to find support slightly above the 1.0665 (S1) barrier. The short-term sentiment towards this pair has shifted negative on Wednesday following the Reuters report on the ECB’s signals. Our view remains the same as yesterday. The pair is possible to continue drifting lower in the short run, but it is too early to call for a bearish medium-term outlook. The possibility for a higher low on the daily chart still exists and as such, although we see a negative short-term picture, we remain flat on a longer-term perspective.

As for the rest of today’s highlights:

• In the UK, the final estimate of Q4 GDP for 2016 is due out. Given that these data will be released on the final day of Q1 2017, we will view them as being outdated. The reaction in GBP may remain limited.

• From the US, we also get the core PCE price index for February, though no forecast is available. Our own view is that the core PCE rate may have remained unchanged with risks skewed to the downside. We base this view on the ISM manufacturing and non-manufacturing surveys for the same month, as well as the downtick in the core CPI rate. We also get personal income and spending data for February. Expectations are for both income and spending to have risen at the same pace as the previous month, but given that retail sales slowed notably during the month, there is the possibility for spending print to follow suit. Bearing all these in mind, we think that the reaction in USD may be negative at these releases. We also get the Chicago PMI for March.

• From Canada, we get GDP data for January.

• As for the speakers, we have Minneapolis Fed President Neel Kashkari, St. Louis Fed President James Bullard, and BoE Chief Economist Andy Haldane on the agenda.

USD/JPY

• Support: 111.90 (S1), 111.60 (S2), 111.00 (S3)

• Resistance: 112.45 (R1), 112.90 (R2), 113.50 (R3)

EUR/USD

• Support: 1.0665 (S1), 1.0630 (S2), 1.0600 (S3)

• Resistance: 1.0700 (R1), 1.0725 (R2), 1.0770 (R3)