USD poised at major resistance

The G-10 rundown

USD – the broad USD picture looks positive with the rather odd exception of resilient emerging market urrencies, especially given the weaker CNY as China’s markets return from holiday. USD interest picks up if the EURUSD supermajor can break out of the range this week.

EUR – the German 10-year bund benchmark notched a new low for the cycle last week below 10 basis points, underlining the terrible outlook across the EU. Don’t see what has any chance of shoring up the euro’s prospects in the near term.

JPY – the yen hasn’t cooperated with the idea that it will outperform across the board if both risk appetite and global bond yields fall as the USDJPY chart remains very well supported here and the pair is banging on 110.00 and possibly looking for more short-term gains. Elsewhere, we would still suspect JPY resilience if global risk sentiment continues to worsen (especially for EM – think carry trades).

GBP – busy calendar today for the UK, but traders aren’t going to commit capital to trades until we get the important Brexit developments we are all waiting for. The noise level on a vote to avoid a cliff-edge on March 29 will increase in the days ahead.

CHF – risk off, lower yields and a creeping rise in EU existential risks at the margin are driving EURCHF back lower, but SNB likely to get busy if the pair approaches the 1.1200 area again.

AUD – iron ore goes limit up overnight in Asia on the supply risks from Brazil – interesting to see how little the bump in the mining giants and the milder than expected outcome of the Royal Commission inquiry has been felt in AUD, where the negative focus is on the housing market bubble unwind and RBA beginning to raise the white flag on its guidance.

CAD – USDCAD posted a bullish reversal last week and we look for follow up price action to the upside until proven otherwise. A few housing-related event risks this week, with the January Teranet/National Bank home price index up mid-week.

NZD – RBNZ this week the obvious focus for kiwi as rate expectations collapsed last week on the latest jobs and earnings data. Kiwi has escaped weakness as the market has preferred to use AUD as the Antipodean whipping boy – this week an important test of that tendency.

SEK – a pivotal week for SEK, which has run away to the downside recently. What signal will the Riksbank send – if the bank tilts to a more cautious stance, there is little to nothing to work with on the interest rate policy front, leaving QE and the currency (the Riksbank has been very happy to bring the krona into the discussion as a policy tool).

NOK – a weak CPI print this morning adds further energy to the squeeze back higher in EURNOK this morning. Still assuming the highs from over the holiday period are too big a hurdle for the pair to overcome until proven otherwise. Last resistance levels ahead of the cycle top look like 9.90 and then 10.00.

Upcoming Economic Calendar Highlights (all times GMT)

• 0930 – UK Q4 GDP Estimate
• 0930 – UK Dec. Visible Trade Balance
• 0930 – UK Dec. Manufacturing Production
• 1400 – ECB’s Knot to Speak
• 0030 – Australia Dec. Home Loans
• 0030 – Australia Jan. NAB Business Surveys