Key overnight events:
- In the second day of her testimony before the senate banking committee, Fed President Janet Yellen made a few key points:
- FOMC is evaluating the possibility of negative rates in the US
- USD strength is something the Fed takes into account when setting monetary policy
- Both the Fed and market have been “quite surprised” by oil’s movements and in any given year, the probability of recession is always there
- Market turmoil in 2016 has been driven by a dive in oil prices and the depreciation of the yuan, not Fed policy
- The S&P 500 index fell 1.2% to 1,829, sitting precariously just above the key support level at 1,812. The Dow Jones Industrial Average tumbled more than 250 points, or 1.6%, to 15,660.
- Crude oil futures expiring in March fell to a 12-year low of $26.05/bbl after it was reported that US inventories rose again, before recovering back up to above $27/bbl this morning after the Wall Street Journal reported that a UAE energy minister commented that OPEC is willing to cooperate on production cuts.
- US weekly jobless claims were positive, as they declined by 16k to 269k, the lowest level in 7 weeks.
- In Europe, Sweden’s Riksbank cut its policy rate by more than expected to -0.5%. Markets were expecting a cut from -0.35% to -0.45%.
- Spot 1.3970
- The Singapore dollar has gained 1.4% against the US dollar this week, and 3.5% from its weakest on 11th Jan this year, fuelled by decreasing bets that the Fed will hike rates this year, which in turn is driving US dollar weakness.
- USDSGD fell to a 3-month low of 1.3861 yesterday. A break below the next support level of 1.3728 would indicate a possible trend reversal.
- Spot 0.7125
- AUDUSD has remained somewhat stable, maintaining within its consolidation range of 0.6828 – 0.7385 over the past 5-6 months.
- RBA Governor Glenn Stevens stated in a testimony this morning that Australia has the flexibility to ease monetary policy further if that aids the economy. He added that it is unlikely that rates will be raised anytime soon; both current and projected inflation is and should remain low, and won’t be a hurdle for a future rate cut.
- Spot 1.3905
- After hitting a low of 1.3640 on 4th Feb, USDCAD retraced back to a 1-week high of 1.4016 this morning. The break above the 1.4000 handle was brief though, as it soon retreated back below the psychological level.
- Failure to hold above 1.4000 suggests that the 100-day moving average support of 1.3593 could be tested.
- Spot 6.5415
- USDCNH yesterday fell to 6.5264, the lowest since 22nd Dec last year, after data signalled that the PBOC is supporting the exchange rate.
- China’s FX reserves shrank by US$99.5 billion to US$3.23 trillion in January as the central bank was seen intervening in both onshore and offshore markets to stem the yuan’s depreciation. The decline in reserves was less than Bloomberg’s estimate of US$120 billion.
- Spot 8.5668
- After hitting a 2 month low of 8.4465 on 5th Feb, and breaking the 100-day moving average in the process, USDNOK has continued to trade below the 8.600 handle.
- The USDNOK uptrend since mid-2014 remains intact though, but just barely. A clean break below 8.4000 could signal the beginning of a possible break in trend. The next two support levels below are the 200-day moving average at 8.3113 and the 8.0389 October low.