Markets will open on the back foot in Europe. MSCI Asia Pacific earnings were down 11% last quarter, while a tech company disappointed. Equities in the region dropped at the open before stabilising, while USD/Asia was a bit up with the crucial exception of CNY. Japan’s trade balance did deteriorate as expected following the catastrophe in line with expectations and should have now troughed as manufacturing picked up faster than originally expected. With key markets such as the S&P500 close to key supports such as its MA(100) and equivalents in FX such as EURUSD on its MA(100), SEKCHF on a triple support at 13.8 and similarly CADMXN on a multi-year support. Front end vols already price in the odds of such breaks and have either stabilised or fallen lower.
In such an environment, rumours kick in to force a break of key levels and force a deeper deleveraging, with the latest concerning snap elections in Greece and reported by Reuters. Juncker continues to push for reprofiling, while the ECB is dead set against it. Nothing changed in Euroland. The German Gfk consumer is expected to have eased lower, with consensus biased towards a negative surprise.
US Durable goods ex transportation may prove to be the mover. They have already been revised higher to 2.3% and we expect a strong print of 1.6%, in line with a positive bias to expectations in the market. This may be the print to stabilise the market and stop attempts at further deleveraging, following a trend in negative surprises globally. Hence, we are likely to see attempts at breaks from EURUSD at the 1.3986 level (MA(100)) to equivalent breaks in SEKCHF or CADMXN before rebounding later in the day. Precious little changed except attempts at taking out concentrations of positions.
The second estimate of Q1 GDP will give the expenditure breakdown, with consumption as the key variable. It is expected to be at 0.1%. GBPUSD has done quite well given the amount of bearish expectations built in, but it will be interesting to see how it fares on this release.
JUCKES Kit
Societe Generale
Research & Analytics