Summary:

• Japan’s yen advances against its major peers in G10 despite weaker trade balance as well as cautious remarks from the BoJ
• NZ dollar is placed among the largest losers in the morning following slower than previously growth of services PMI
• Asian stock markets begin the week positively except for the NIKKEI (JAP225 on xStation5)

Early trading on Monday is bringing a little bit stronger Japanese yen which does not seem to be keen to give up its last week gains. The currency is gaining momentum despite disappointing trade balance for February pointing to over a 200 billion JPY deficit in adjusted terms while the consensus had indicated a 90 billion JPY deficit. This happened regardless of better than anticipated exports and lower imports, however, the data might be distorted to some extent due to the Chinese Lunar New Year, and therefore one needs to wait for another month to make some opinions.

On top of that we were offered the Bank of Japan summary of opinions from its March meeting where the bottom line is that persistent monetary easing appears to be still necessary. Beyond remarks we already well knew the BoJ expressed some concerns with regard to the ex-change rate suggesting that if yen appreciates and stock declines become prolonged, it could adversely influence both CAPEX and consumption. Those comments seem to underline importance of the Japanese currency in setting of monetary policy. Finally, the BoJ admitted it needs to differentiate monetary tightening from monetary normalization as the latter seems to be unlikely to happen any time soon.

The USDJPY is continuing to drive lower after it failed to break above its crucial short-term resistance zone placed at around 106.40. Thus, until the price keeps hovering below the mentioned level, an extended pullback toward 105.25 seems to be on the cards. Source: xStation5

Apart from the JPY the NZ dollar deserves some attention as well. The currency, along with other commodity-related peers, is trading broadly lower on the day, and a decline of services PMI could have helped accelerate those falls. Technically, the pair came back to a support zone placed at 0.7200 which served as an important level in the past. Once the pair is able to stay above this line at the close of the day, it could be seen as a buying signal with the target in the vicinity of 0.74. Let us remind that the RBNZ meets this week, hence the NZ dollar could wobble later in the week.

The NZDUSD has lost its upward momentum and right now it seems to be on the edge of a major breakout. If the price closes below 0.72, it would mean the end of range trading we have seen for more than two months. Source: xStation5

While the FX market appears to show some inflows to safe haven and commodities remain on the back foot in early trading, Asian equities have played down those events. Except for the Japanese NIKKEI225 (the effect of a JPY increase) all major indices are trading marginally higher heralding a green opening across European desks. At the end it’s worth mentioning the weekend news from the European Union as the group published two lists with American products to which tariffs could be applied. Their total value could reach 6.4 billion EUR nonetheless tariffs cannot be implemented until the European Commission notifies the lists to the WTO within a 90-day deadline. That said, in practice it means that any decision whether to use tariffs would be taken after three months.