Forex News and Events
The BoE and the ECB give policy verdict today and are both expected to maintain the status quo. The BoE will certainly be a non-event for the GBP-trader, especially given that pre-election talks should increasingly occupy headlines and define GBP’s direction through weeks ahead. Besides the Grexit, now markets start talking about a Brexit! If the Conservatives win the May 7 elections, the probability of the UK leaving the EU would jump from 15% currently to 45%. The Cable is back below its 50-dma (1.5273) and the MACD warns of short-term bearish reversal before the US jobs data due tomorrow.
Across the Channel, the ECB is expected to hold on amid several months of heavy policy action. It is now time to sit back for the ECB Council and monitor the results of the massive easing tools that have been introduced very quickly, one after the other over the past six months: negative rates, TLTROs, private debt purchases and finally the quantitative easing that will start only from the next week. All these measures will lead President Draghi to point out improved sentiment (ZEW, IFO and other confidence indices), strong PMI reads, expansion in lending and encouraging 4Q GDP growth.
There is good chance that the disinflation will not be the core subject of this meeting. The 5y5y breakeven inflation swap rate further eased to 1.64%, which is obviously no good news for ECB’s struggle against the consumer prices decline. Yet thankfully, the lower oil prices will continue being the additional excuse to slowing demand across the Euro-zone.
And remains the Greek puzzle…
We expect to hear relevant details on the QE, especially regarding the Greek puzzle. The Greece needs to service 6.5 billion euros worth debt and interest within the three weeks ahead, while no agreement has been reached with the EU on a potential bailout yet. Greek Finance Minister Varoufakis said the country has alternative plans to deal with the debt crisis. In the absence of specification however, the trust in Greek solvency declines, which may cost the country the “ineligible” stamp and leave Greece out of the QE program (and this would mean the euro-exit for the country). We are curious to hear what Draghi has to say on latest developments.
EUR debases pre-ECB
EUR/USD broke below the January low 1.1098 in New York yesterday and fell as low as 1.1026 (at the time of writing). The key support stands at 1.10 psychological level, below which decent stops and large option barriers should accelerate and reinforce the EUR-debasing with implications on the entire EUR-complex. The broad EUR-negative pressures pushed EUR/JPY to a month low of 132.15. The MACD (12, 26) stepped in the red zone, suggesting the beginning of short-term bearish reversal for a daily close below 133.70 (MACD pivot). EUR/GBP consolidates weakness at 0.72383/0.72626. The psychological support of 0.72 should come under pressure with increasing number of EUR-skepticals pre-Draghi. The mid-term direction in EUR/GBP is however unclear as pre-election jitters in the UK weighs on traders’ appetite in GBP. The 3-month currency basis shows sustained preference in favor of EUR verse GBP. This suggests the potential reversal in EUR/GBP downtrend walking into May elections.
Decline in GBP preference
The Risk Today
Luc Luyet
EUR/USD has broken the support at 1.1098, confirming an underlying bearish trend. Hourly resistances can now be found at 1.1144 (intraday high) and 1.1245 (27/02/2015 high). In the longer term, the symmetrical triangle favours further weakness towards parity. As a result, any strength is likely to be temporary in nature. Key resistances stand at 1.1534 (03/02/2015 high) and 1.1679 (21/01/2015 high). Key supports can be found at 1.1000 (psychological support) and 1.0765 (03/09/2003 low).
GBP/USD has broken the hourly support at 1.5317. Another hourly support can be found at 1.5197 (see also the 61.8% retracement). Hourly resistances lie at 1.5317 (17/02/2015 low) and 1.5398 (03/03/2015 high). A key support stands at 1.4952. In the longer term, the recent rise is seen as an oversold rebound, whose upside potential should be capped by the key resistances at 1.5620 (31/12/2014 high) and 1.5826 (27/11/2014 high). A strong support stands at 1.4814.
USD/JPY continues to move within a short-term rising channel. However, a key resistances area stands between 120.48 (11/02/2015 high) and 120.83. A support can be found at 119.12 (see also the rising channel). Another support lies at 118.18. A long-term bullish bias is favoured as long as the key support at 110.09 (01/10/2014 high) holds. Even if a medium-term consolidation is likely underway, there is no sign to suggest the end of the long-term bullish trend yet. A gradual rise towards the major resistance at 124.14 (22/06/2007 high) is therefore favoured. A key support can be found at 115.57 (16/12/2014 low).
USD/CHF continues to strengthen after the break of the key resistance at 0.9554 (16/12/2014 high). Another key resistance stands at 0.9831. Hourly supports can now be found at 0.9593 (04/03/2015 low) and 0.9527 (02/03/2015 low). In the longer-term, the bullish momentum in USD/CHF has resumed after the removal of the EUR/CHF floor. The break of the key resistance at 0.9554 (16/12/2014 low) opens the way for a further rise towards the other key resistance at 0.9831 (25/12/2014 low). A key support can now be found at 0.9374 (20/02/2015 low, see also the 200-day moving average).
