A rebound on the dollar has just slowed this morning as markets look for the next steer on sentiment. Today is Chinese New Year and as such, Asian markets are muted. The advance on Treasury yields, with the 10 year jumping 9 basis points in the past two sessions has just been put on hold this morning, perhaps as traders wait for the stream of services PMI data to be announced today. This is resulting in holding patterns across markets coming around key levels. The euro is back to its near term pivot of $1.1420 against the dollar, whilst Dollar/Yen is back around is medium term pivot at 110.00 and gold is back to holding its $1310 long term pivot. Even oil is steady in its support. The main mover of the morning is the Aussie which has regained some lost ground in the wake of the RBA. The Reserve Bank of Australia maintained rates at +1.50% (no change expected at +1.50%) and cut its forecasts for growth and inflation. This was the 30th consecutive meeting of holding rates, and interest rate futures continue to price for the next move being lower, possibly by the end of this year. However, given the backdrop of negative economic trends across global markets, the RBA moves were perhaps not as bad as feared.
Wall Street closed higher once more as the S&P 500 was +0.7% higher at 2725 with US futures a shade lower by -0.1%. The Nikkei is one of the few Asian markets open, trading a touch lower at -0.2%. In Europe there is a positive vibe to equities today, with FTSE futures and DAX futures around half a percent higher. In forex, there is very little move currently, aside from the Aussie being +0.4%. The lack of follow through on the dollar rebound has allowed commodities to find support, with Gold and Silver a shade higher, whilst oil is also supported.
In the continued absence and uncertainty over US data, the services PMIs numbers today take on an added importance. The Eurozone Services PMI is at 0900GMT and is expected to see the confirmation of the flash services number at 50.8 (50.8 flash January, 51.2 final December), whilst the Eurozone Composite PMI is expected to come in at 50.7 (final December 51.1). The UK Services PMI is expected to slip a shade to 51.0 (from 51.2 in December). The US ISM Non-Manufacturing is expected to drop back to a still very strong 57.2 (from 58.0 in December).
Chart of the Day – EUR/JPY
With the BoJ seeming willing to allow the 10 year JGB yield to drop decisively into negative territory, there has been a shift in sentiment on the yen. This comes as the euro has broadly held its ground, and therefore has resulted in an upside break across yen crosses. One such move has come with Euro/Yen pushing above the key resistance band 124.60/125.40. This move was seen on Friday and now confirmed by the entire candlestick (whole session) trading above the old resistance. The continuation of this move higher (likely to be driven by continued yen weakness) comes as momentum indicators pull decisively higher. The RSI is now increasing to its highest level in over four months in the mid-50s, whilst the MACD lines continue to improve and Stochastics remain strong. It was interesting to see the 125.40 resistance turning supportive yesterday and the outlook is improving for a continued recovery towards the late December rally high resistance at 127.10 (itself a basis of a historic pivot band 127.10/