Following China’s official manufacturing PMI released on Sunday showed a sharp bounce, US stocks were n the march, supporting a risk on the environment and flow into USD/JPY, especially as the euro slumped to test critical territory following yet more poor manufacturing data.
The Dow Jones Industrial Average put on a decent 329 points, or 1.3%, to close around 26,258. The Nasdaq Composite added 1.3% to end around 7,829. Monday marks the best percentage gain for the blue-chip Dow since February the 15th and the best daily gain for the broad-based S&P since March the 11th.
As for yields, the US 10yr treasury yield extended a two-day gain from 2.44% to 2.50%, the 2yr from 2.28% to 2.33%, with the sharpest move on the ISM data. Fed funds futures prices now imply a 90% chance of a Fed rate cut by December, down from 100% the previous day. Meanwhile, US data came out mixed, but over bullish for the dollar with an upside revision in retail sales, albeit underwhelming on both the headline and the core control group which fell -0.2%. However, the upbeat ISM manufacturing index boosted the dollar and stocks, moving up from 54.2 in Feb to 55.3 in Mar – following stronger new orders (+1.9pts to 57.4) and a sharp recovery in employment (+5.2pts to 57.5). Meanwhile, construction spending will lead to a meaningful lift in GDP tracking estimates, with a solid 1% gain in Feb – January is now seen at 2.5% from an initial estimate of 1.3%.
USD/JPY levels
Valeria Bednarik, Chief Analyst at FXStreet explained that the pair settled above the 61.8% retracement of its March slide at around 111.20, now the immediate support:
“The short-term picture is bullish, with the next relevant resistance, once beyond the mentioned daily high, coming at 111.69, a relevant daily high. In the 4 hours chart, the pair is now developing well above all of its moving averages, with the 20 SMA extending its advance below the larger ones, which converge in the 111.00/20 price zone, reinforcing the support zone. Technical indicators in the mentioned chart lost upward momentum after reaching overbought readings, but hold nearby. Chances remain skewed to the upside, as long as the mentioned Fibonacci support holds.”