Risk on or risk off

FX has remained reasonably neutral as two risk events dominate the equity markets. The dollar is holding on to its recent Yellen-inspired gains. The Dow made another high yesterday following the news of further M&A activity as Rupert Murdoch’s 21st Century Fox made an $80 billion offer for Time Warner. As the Asian markets opened the EU and US announced further sanctions against Russia, targeting defence and energy companies along with the financial sector including Gazprombank. The Kremlin has dismissed the sanctions, suggesting that that US just won’t accept what Ukraine has asked for. President Vladimir Putin said the imposed sanctions would lead US-Russia relations to a ‘dead end’, describing the sanctions as ‘aggressive policy’.

The JPY ignored the slightly weaker Tankan report, instead taking its guidance from the slightly weaker Nikkei and its safe haven global tension status. The NZD continues to trade softly despite stronger consumer confidence survey as longs are pared back ahead of the RBNZ meeting next week. The probability of a rate hike dropped to 84% from 91% just yesterday, subsequent to the reduction in diary prices and below consensus CPI data.

The FX market will now focus on EU CPI data released this morning. Housing data is likely to draw attention from across the pond following Yellen’s concerns on the US housing recovery, along with the Philadelphia business survey.

EUR/USD

Supports 1.3503-1.3480-1.3400 | Resistance 1.3575-1.3615-1.3650

USD/JPY

Supports 101.40-101.20-100.75 | Resistance 101.70-102.00-102.30

GBP/USD

Supports 1.7100-1.7065-1.7000 | Resistance 1.7200-1.7215-1.7270