Market Brief
The EUR/USD continues sliding lower amid last minute uncertainties on whether negotiations with Greece would start in Athens as scheduled today. The pair hit 1.0666 as Asian traders adjusted their positions to ECB, EC and IMF officials meeting to seek solution for Greek debt repayments. Greece should service 6.5 billion euro worth debt within three weeks. The sentiment in EUR remains strongly negative. Decent option barriers trail below 1.0725 for today expiry. In addition to Greek turmoil, the hawkish Fed expectations before next week’s FOMC meeting pave the way toward the next target 1.05. EUR/GBP advanced to 0.70801 in an effort to clear bids at 0.70/0.72 region. The strong EUR-negative sentiment offsets the parallel GBP debasing. As bearish EUR/GBP trend gains momentum, we expect stronger challenge at 0.70 psychological support.
GBP/USD consolidates weakness a figure higher than January low (1.4952). The formation of bullish harami suggests short-term correction, if the Cable holds ground above 1.5027/29 following industrial and manufacturing production data to be released in London today (at 09:30 GMT). Traders look to sell the rallies with strong USD appetite pre-FOMC next week and with Conservatives leading the elections polls with 33% of votes verse 31% in favor of Labour party (YouGov/Sun poll). Strong offers are presumed at 1.5180/1.5252 (Fibonacci 38.2% / 50% on Jan-Feb pick-up). The next support stands at 1.4952 (Jan 23th low).
USD/CHF tests resistance at 1.00 as USD strength is now ready to pull the pair above parity. Trend and momentum indicators are comfortably bullish with USD-leg determinant for overall direction. Option bets are supportive above 1.00. Threat for deeper negative rates on the franc should keep the USD appetite sustained in the mid-run. Post-January 15th correction should push USD/CHF to 1.0240, level before removal of EUR/CHF floor. Verse EUR however, the volatilities drain suggesting that the SNB continues buying euros to stabilize EUR/CHF at 1.05/1.10 implicit target band. EUR debasing remains expensive for the SNB, left with limited choice other than acting directly on the FX. The euroswiss futures advance to 100.80 as speculations for potential rate cut increase.
USD/JPY remained capped at 121.50 as EUR/JPY and AUD/JPY extended losses. EUR/JPY pulled out the January low (130.15) and traded below 130 for the first time since Sep’13. The EUR debasing should push the pair easily to 128.52 (Fib 61.8% on 2012-2014 rise). On USD/JPY, large vanilla expiries should give support above 120.00/121.00, while 122 offers seem easy to clear.
Later today, the RBNZ will give policy verdict and is expected to keep its official cash rate unchanged at 3.50%. NZD/USD failed to recover amid baseless news that Fonterra’s baby milk may be contaminated. With a strengthening bearish momentum, it is just a matter of time before 0.72 support is challenged.
Today’s economic calendar : French 4Q (Final) Non-Farm Payrolls q/q, German 4Q Labor Costs q/q & y/y, French January Current Account Balance, Swedish February Unemployment Rate and CPI m/m & y/y, UK January Industrial and Manufacturing Production m/m & y/y, UK February NIESR GDP Estimate.
Currency Tech
EUR/USD
R 2: 1.0907
R 1: 1.0725
CURRENT: 1.0645
S 1: 1.0536
S 2: 1.0500
GBP/USD
R 2: 1.5270
R 1: 1.5136
CURRENT: 1.5064
S 1: 1.5027
S 2: 1.4952
USD/JPY
R 2: 124.14
R 1: 122.50
CURRENT: 121.38
S 1: 120.61
S 2: 119.38
USD/CHF
R 2: 1.0240
R 1: 1.0190
CURRENT: 1.0022
S 1: 0.9825
S 2: 0.9722