20140312

Good morning,

Risk aversion was dominant in the Asian session, where equities led the downfall with the Nikkei down 2.6%. Falling commodity prices in the Asia has been the main source for the concern as lack of demand implies a risk of growth falling below expectations.  FX Markets were trading in tight ranges, but the negative risk environment channeled itself through JPY and USD bidding. Aussie was on the offer as investors sought safer havens. A pickup in January Home Loans was outweighed by a negative development in the February Investment Lending for Homes.  Oil was offered while gold enjoyed the second day in a row in positive and has continued this morning, breaking above the short term top at 1354.7 - next resistance at the October 2013 top at 1361.8.

Today, we could see another range bound day as the news hitting the market is not expected to have a major impact. Major pairs are looking to add another leg of USD-strength should the risk aversion theme stick. Most important for the day, is the interest rate release from the RBNZ in the evening, as the market is expecting an increase of 25bp to 2.75%. It will be interesting how the markets react - will it be a continuation of the current uptrend, or a "buy rumor, sell fact" strategy?