Risk edgy on Chinese housing market

The FX markets started the week with a slight risk off theme as Asian equity markets traded lower, led by the Chinese Shanghai composite. This followed the release of weak house price data that revealed the average new house price rose 6.4% on the year compared to 7.3% in March and 8.2% in February. In Japan the Nikkei and subsequently the JPY failed to react to reports that Japanese officials are considering a proposal to add two or three dedicated professional advisors to the committee that oversees investment of the GPIF as the Nikkei closes around the 14,000 level along with the JPY hovering above 101.30.

Sterling surprisingly is unmoved over reports that the board at AstraZeneca have turned down an increased and final offer from Pfizer. BoE Governor Mark Carney suggested over the weekend that surging house prices are the biggest risk to the UK economy that has fuelled further expectations of a UK rate hike.

The latest CFTC data showed euro longs fell $6.0bio, flipping to a net short of $0.4bio in the wake of the dovish ECB meeting as GBP longs fell $1.0bio to $3.3bio, AUD longs increased $0.8bio to $1.6bio, while CAD shorts fell $0.5bio to $2.4bio.

There are no major data releases today as traders speculate over the themes of last week: what’s happened to the carry in one day? What happened to risk? What are the consensus trades now? Will the ECB impose negative rates? Have flows into peripheral bonds stopped? Will European peripheral risk return? As German yields trade lower, will this weigh on the euro? Stronger US data hasn’t translated into higher Treasury yields and equities haven’t rebounded.

EUR/USD

Supports 1.3675-1.3625-1.3580 | Resistance 1.3750-1.3780-1.3830

USD/JPY

Supports 101.20-100.75-100.30 | Resistance 101.80-102.00-102.30

GBP/USD

Supports 1.6780-1.6720-1.6655 | Resistance 1.6840-1.6915-1.7000