€€€ Euro, Top Currencies Focus on Spanish Bond Sale and Earnings Docket €€€

Talking Points

• All Eyes on Spanish Bond Auctions Amid Returning Eurozone Debt Fears
• Traders Most Concerned with Guidance as Q1 Reporting Season Continues
• Last Batch of US Data This Weeks Aims to Produce Risk-Supportive Cues

Eurozone debt crisis worries take center stage in European hours as traders look for the outcomes of a pair Spanish bond auctions for direction. Madrid is due to sell 2014 and 2022 debt. Previous auctions of equivalent maturities drew average yields of 2.069 and 5.403 percent for 2-year and 10-year notes respectively. Readings north of these outcomes threaten to project returning funding stress in the currency bloc and stand to weigh on the Euro and broad-based risk appetite.

The spread between yields on Spanish and benchmark German 10-year bonds now stands at 410.2 basis points, which is 67.6bps or 2 standard deviations above its three-month average. France is also on the issuance calendar, with Paris selling up to 3bn in 2018 inflation-linked bonds as well as a tranche of 2014, 2015 and 2017 paper.

Later in the session, another helping of corporate earnings reports enters the spotlight, with names including Bank of America, Verizon and Microsoft on tap. Traders appear primarily concerned with guidance from major cycle-sensitive companies as the primary question defining the macro environment remains the degree to which a pickup in the US can offset a slowdown in China and recession in the Eurozone this year.

On the US economic data front, expectations call for a minor pullback in the Philadelphia Fed business confidence gauge in April while Existing Home Sales rise the most in five months while the composite Leading Indicators metric gains 0.2 percent to reach the highest level since June 2008. Weekly jobless claims numbers are expected to yield mixed results, with initial applications for benefits down while continuing ones advance.

The US Dollar (ticker: USDollar) continues to show a formidable inverse correlation with the S&P 500, hinting a pick-up in risk appetite that sends share prices higher – whether courtesy of earnings outcomes or the economic data set – is likely to weigh on the benchmark currency. Needless to say, the inverse scenario stands to produce the opposite effect.

Asia Session: What Happened

GMT	CCY	EVENT	ACT	EXP	PREV
22:00	NZD	ANZ NZ Job Ads (MoM) (MAR)	-1.0%	-	4.6% (R-)
22:45	NZD	Consumer Prices Index (QoQ) (1Q)	0.5%	0.5%	-0.3%
22:45	NZD	Consumer Prices Index (YoY) (1Q)	1.6%	1.6%	1.8%
23:50	JPY	Merchandise Trade Balance Total (¥) (MAR)	-82.6B	-223.2B	29.4B
23:50	JPY	Adj. Merchandise Trade Balance (¥) (MAR)	-223.2B	-446.3B	-321.4B (R-)
23:50	JPY	Merchandise Trade Exports (YoY) (MAR)	5.9	0.2	-2.7
23:50	JPY	Merchandise Trade Imports (YoY) (MAR)	10.5	7.0	9.2
1:30	AUD	NAB Business Confidence (1Q)	-1	-	1
1:30	AUD	RBA FX Transaction (A$) (MAR)	944M	-	372M

Euro Session: What to Expect

GMT	CCY	EVENT	EXP	PREV	IMPACT
8:00	EUR	Italian Industrial Orders sa (MoM) (FEB)	-1.1%	-7.4%	Low
8:00	EUR	Italian Industrial Orders nsa (YoY) (FEB)	-6.2%	-5.6%	Low
8:00	EUR	Italian Industrial Sales sa (MoM) (FEB)	-	-4.9%	Low
8:00	EUR	Italian Industrial Sales nsa (YoY) (FEB)	-	-4.4%	Low
8:30	EUR	Spain to Sell 3.3% 2014 Bonds	-	-	High
8:30	EUR	Spain to Sell 5.85% 2022 Bonds	-	-	High
9:00	EUR	France to Sell €3bn I/L 2018 Bonds	-	-	Medium
9:00	EUR	France to Sell 2014-2017 bonds	-	-	Medium

 Critical Levels

CCY	SUPPORT	RESISTANCE
EURUSD	1.3074	1.3157
GBPUSD	1.5931	1.6135

Is the US Dollar Rebound Sustainable? Traders Eye the Economic Docket

Currency Strategist 27 March 2012 21:16 GMT  The greenback is notably stronger at the close of North American trade with the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) advancing 0.34% on the session. The advance comes on the heels of yesterday’s decline which was prompted by dovish remarks from central bank Chairman Ben Bernanke who held his ground with regards to further easing from the Fed amid ongoing weakness in the labor markets. As such, it seems the Fed will maintain its zero-interest rate policy (ZIRP) throughout 2012 despite more robust economic data coming out of the world’s largest economy. What does this mean for the dollar? While the remarks suggest no major change in policy, it’s likely to limit dollar advances in the interim as traders continue to factor in super low rates with improving US data likely to see investors shift their focus as the appeal for higher yielding assets grows. Equities were weaker on the session with the Dow, the S&P, and NASDAQ off by 0.33%, 0.28%, and 0.07% respectively as investors piled into the dollar and US Treasuries.
The dollar rebounded off the 100-day moving average at 9896 before encountering resistance at the confluence of former channel support and the 61.8% Fibonacci extension taken from the August 1st and October 27th troughs at 9945. This level remains paramount for the greenback with a breach above offering conviction on our bullish bias with daily targets eyed at long standing trendline resistance dating back to the October 4th highs, currently around 10,020. Note that the daily relative strength index now looks poised for a rebound off the 50-level with such a scenario likely to fuel the index with enough momentum to breach the 9945 barrier. A break below the 100-day moving average eyes daily targets at the 50% extension at 9850.
An hourly chart shows the index continuing to trade within the confines of a descending channel formation with the dollar now looking to test channel resistance with an attempted break above the 61.8% extension at 9945. Subsequent intra-day topside targets are eyed at 9975, 10,000, and 10,030. Critical resistance comes into play at the 78.6% extension at 10,080. Support rests at 9900 backed by 9875 and the 50% extension at 9850. Look for the index to remain in consolidation heading into Asia Pacific trade with a breach above channel resistance offering further conviction for dollar advances.
The greenback advanced against all four component currencies highlighted by a 0.63% advance against the Australian dollar. The high yielder tested channel resistance today dating back to the February 29th high before reversing sharply to close below the 1.05-figure. The aussie is likely to remain under pressure with our medium-term bias remaining weighted to the downside. For complete AUDUSD scalp targets refer to last week’s Scalp Report. The sterling was the top performer of the lot with a loss of just 0.08% despite broad-based dollar gains. Key resistance for the pound continues to hold at the 1.60-figure, with a likely break above this level eyeing daily topside targets above the 1.61-handle. For complete GBPUSD scalp targets refer to today’s Winners/Losers report.
Tomorrow’s economic docket is highlighted by the February durable goods orders with consensus estimates calling for orders to rise by 2.9% m/m, up from a previous decline of 4.0% m/m. It will be interesting to see the dollar’s reaction on tomorrow’s print with a stronger than expected read likely to support risk, but will it support the dollar in light of Bernanke’s dovish rhetoric? Look to take cues off price action on the heels of the print with a break above channel resistance in the index targeting subsequent topside levels.
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