Forex News and Events
EUR/USD 1-month ATM implied volatility remains elevated around 17, as uncertainty around the Greece lingers. Media reports indicate that Greek Prime Minister Alexis Tsipras spoke with senior European officials about speeding up the new bailout deal process. Ironically the name of the team of representative from Greece and its creditors is the Brussels Group, a place not renowned for its rapid action responses. After last week’s deadlock discussions and rumors of a “plan B” circulating, the divide feels extremely wide. We remain speculative that an agreement or a deal that can last will be reached. That said, with EUR/USD now at 1.08, the market seems to be pricing in an inevitable agreement based on merely the fact that Greece is exceptionally short of cash indicates a deal must be close. In addition with a lack of easing by central banks this week the policy divergence trade which has accelerated USD will diminish.
Wednesday FOMC
Outside the Brussel and Athens negotiation, traders will be watching Wednesday FOMC rate decision meeting. Clearly Q1 US economic data has been disappointing since the last meeting. Therefore, we anticipate a slightly dovish policy statement as FOMC members recognize the soft patch the US economy is currently suffering through. Most of this dovishness has already been priced in with expectations for a 2015 rate hike diminish significantly resulting in the DXY index falling to 97 and US treasury curve flatting (10yr treasury yields stable at 1.90%). Traders will be listening to how hawkish / dovish the data dependent members economic outlook have become. Should they discount the current weakness as transitory (as we expects), speculation of a September hike will get a lift. In the midterm, remain bearish on EUR/USD, while period of consolidation around the 1-0.6 -1.08 level, can be expected as economic weakness get pushed through.
BoJ
The BoJ meeting scheduled on April 30 and the released of March CPI on Friday may trigger some erratic movements in the JPY. We expect the BoJ to maintain the key policy of increasing base money at an annual pace of about ¥80tn. The central bank will also provide its GDP and CPI forecasts; we expect it to be revised downward as the Japan economy didn’t pick up as expected during the first months of 2015. The release of the CPI on Friday will be closely watched – National CPI for March is expected at 2.2% and the ex-VAT around 0.2%y/y. We expect inflation to be close to zero or even to go into negative territory before the end of the year as inflation has steadily decreased since May 2014. Therefore, the BoJ may stimulate further the economy this year, the release of the Tankan and CPI figures will thus play a determining role.
The Risk Today
Luc Luyet
EUR/USD is in a consolidation phase since the second half of March. The break of the hourly resistance at 1.0849 (17/04/2015 high) indicates an improving short-term technical configuration. The hourly resistance at 1.0888 (08/04/2015 high) is challenged. A key resistance stands at 1.1043. Hourly supports can be found at 1.0785 (24/04/2015 low) and 1.0660 (21/04/2015 low). In the longer term, the symmetrical triangle from 2010-2014 favours further weakness towards parity. As a result, we view the recent sideways moves as a pause in an underlying declining trend. A strong resistance stands at 1.1114 (05/03/2015 low). Key supports can be found at 1.0504 (21/03/2003 low) and 1.0000 (psychological support).
GBP/USD is challenging the key resistance area between 1.5137 (09/03/2015 high) and 1.5166 (see also the declining trendline). Hourly supports can be found at 1.5028 (24/04/2015 low) and 1.4960 (23/04/2015 low). In the longer-term, the break of the strong support at 1.4814 opens the way for further medium-term weakness towards the strong support at 1.4231 (20/05/2010 low). A decisive break of the key resistance at 1.5166 (18/03/2015 high) is needed to invalidate this scenario. Another key resistance stands at 1.5552 (26/02/2015 high).
USD/JPY continues to consolidate near its key support at 118.18. A break of the resistance at 120.12 (intraday high, see also the declining trendline) is needed to suggest exhaustion in the selling pressures. An hourly support stands at 118.53. Another resistance can be found at 120.84 (13/04/2015 high). A long-term bullish bias is favoured as long as the strong support at 115.57 (16/12/2014 low) holds. A gradual rise towards the major resistance at 124.14 (22/06/2007 high) is favoured. A key support can be found at 118.18 (16/02/2015 low), whereas a key resistance stands at 121.85 (see also the long-term declining channel).
USD/CHF continues to challenge the key support area between 0.9491 and 0.9450 (see also the 38.2% retracement). Hourly resistances can be found at 0.9628 (intraday low) and 0.9712. In the longer-term, the bullish momentum in USD/CHF has resumed after the decline linked to the removal of the EUR/CHF floor. A test of the strong resistance at 1.0240 is likely. As a result, the current weakness is seen as a countertrend move. Key supports can be found at 0.9450 (26/02/2015 low, see also the 200-day moving average) and 0.9170 (30/01/2015 low).
