EURUSD – Portuguese spread on the rise

There is no dominating theme for the EURUSD at the moment, but we wouldn’t be surprised to see Portugal on the headlines again. The Portuguese spreads continue to rise and kept trading above 400 bps (against 10y bunds) for two days. This is not surprising taking into account a still tricky state of Portuguese public finances and economy.

Technically, the EURUSD continues to fulfill the scenario we pointed at yesterday with the key support around 1,35 getting closer and a possible ride towards 1,3245 should it get broken. A major risk for the H&S to be fulfilled is that is so evident (for many traders) at the moment (even if it wasn’t as recently as yesterday). 

S&P500 – fight at resistances

Coming back to our Wednesday’s snapshot when we pointed at a wedge limiting further gains for S&P500 futures, it becomes clear that bulls find it hard to push through this resistance. However, some pullbacks at the end of Wall Street cash trading (both on Wednesday and Thursday) suggest they do not give up just yet as well. A small profit taking should end within the wedge – that is above 1285. Moving lower would probably trigger a stronger sell-off.

AUDUSD – employment up; rates? Not necessarily

Australian employment might be on the rise (by 24k in January, slightly above the consensus) yet it’s far from enough to convince the RBA to pull the rates higher once again. Governor Glenn Stevens made it clear in his semiannual speech to the House of Reps. Not like the market expected further aggressive hikes anyway, but the rhetoric is the AUD negative.

The impulse comes just when the technical picture of the Aussie is getting less favorable for the bulls. The pair failed to score a fresh high recently and that itself might be a good reason for a correction. How deep it will be depends on global markets (mostly commodities). The first support (and a possible sell signal if broken) is around 0,9970.  

Warsh leaves the Fed

Fed’s youngest governor ever – Kevin Warsh will leave the Fed by the end of this quarter. That means the Fed will have two vacancies. The news seems to be the dollar negative at the first glance – Warsh was a moderate hawk and some could see him as a guarantee the Fed won’t expand the QE2. Obama could in theory propose another dove, however, since his latest nominee – dovish Peter Diamond, cannot get an approval from Republican-dominated Congress, President might want to choose to find some kind of a compromise and actually propose someone favored by Republicans (and thus most likely another hawk).

Events to watch – US trade balance and UM index, UK’s PPI

Friday’s calendar doesn’t include the market movers, perhaps with the exception of the UK’s PPI (4.30 ET, 10.30 CET, consensus +4,4% y/y). The rate talk in UK is back on the agenda and thus the PPI’s significance. The US’s trade balance (8.30 ET, 14.30 CET, consensus -40,4 bln USD) and UM sentiment index (9.55 ET, 15.55 CET, consensus 75 pts.) will be of the secondary importance just like the Canadian trade data (8.30 ET, 14.30 CET, consensus -0,3 bln CAD).

Przemysław Kwiecień PhD, Chief Economist

Disclaimer, investment risk warning
X-Trade Brokers Dom Maklerski S.A. does not take responsibility for investment decisions made under the influence of the information published on this website. more