London Forex Report: Sentiments remain mixed following a slew of soft US data and RRR cut by PBoC. Before other major central bank meetings this month, China became the next in line to increase easing measures. PBOC slashed reserve requirement ratio by 50 bps to 17.0%, effective March 1, to increase liquidity in the banking system and stem stock market routes. US manufacturing and housing data disappointed as widely expected, contrasting more upbeat performances in the consumer sector. Uneven growth and global uncertainties could mean any further Fed rate hike is not a done deal. USD climbed, the USD index inched 0.07% higher to 98.21, climbing most in US morning on the back of continued refuge demand as equities extended their slides.
EUR/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: Eurozone dipped into deflation again. Headline CPI fell for the first time in five months, by 0.2% YoY in February while core CPI also moderated to 0.7% YoY, reinforcing expectations for additional easing from the ECB when policymakers next meet this month.
Technical: While prior support at 1.0970 acts as intraday resistance, bears target prior range support at 1.08. Only a close over 1.1080 eases immediate downside pressure.
Interbank Flows: Bids 1.0850 stops below. Offers 1.0950 stops above.
Retail Sentiment: Bullish
Trading Take-away: Short
GBP/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: Hampered by worries about a possible exit from the European Union, GBP hovered near a seven-year low against dollar yesterday. GBP/USD traded as low as 1.3833 during European session although it has recovered overnight. An online poll on Friday showed there is a four percentage-point lead for the campaign which took Britain out of the EU. Investors are also worried about net capital outflow from UK in face of a possible Brexit.
Technical: While 1.4040/60 acts as resistance expect a continued grind lower for a test of the next major monthly downside objective at 1.37. Only a close over 1.4250 eases immediate downside pressure.
Interbank Flows: Bids 1.3850 stops below. Offers 1.4040 stops above.
Retail Sentiment: Bullish
Trading Take-away: Short
USD/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: JPY was broadly firmer in the Asian session yesterday, having climbed to a two-year high as investors sought safe-haven Japanese currency even as China reduced RRR to stimulate its economy. USD/JPY dropped to an intraday low of 112.62 as US stock markets turned red and weak eurozone CPI data drove the markets toward risk off.
Technical: Friday’s close over 113.30 sets up the potential for a broader corrective phase against the daily double bottom pattern from last week. Bulls will be looking for 112 to continue to support for a further leg of corrective gains, to retest the broken neckline support at 115/116. Failure at 112 open 11 again.
Interbank Flows: Bids 112 offers below. Offers 114 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines
EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: Japan data was a mixed bag. Housing starts unexpectedly rebounded to increase 0.2% YoY. On the contrary, construction orders plunged13.8% YoY in Jan, snapping two monthly increases driven by a hefty 23.1% drop in the private sector category. On the consumer sector, jobless rate improved a notch to 3.2% in January but overall household spending extended its decline for the fifth consecutive month, by 3.1% YOY in January.
Technical: While 123.70 offers intraday resistance, expect a continued grind lower to print fresh lows and test bids at the psychological 120 en route to a weekly downside objective at 118/117. Only a close over 125.10 eases bearish bias.
Interbank Flows: Bids 122 stops below. Offers 123.50 stops above.
Retail Sentiment: Bullish
Trading Take-away: Sidelines
AUD/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: Aussie traded relatively stable overnight as markets awaited central bank policy decision. As expected RBA remained on hold, maintaining its conditional easing bias. The AUD/USD dropped to 0.7125s ahead of the rate decision before pushing up 40pips post decision.
Technical: While .7120 supports intraday expect a test of range resistance at .7300. Only a failure at.7050 pivotal support threatens bullish bias.
Interbank Flows: Bids .7100 stops below. Offers .7300 stops above.
Retail Sentiment: Bullish
Trading Take-away: Sidelines
USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: CAD touched a fresh 12-week high against the USD before ending slightly weaker, as crude oil prices rose and huge commodity consumer China eased monetary policy to spur growth. Oil prices jumped three percent after China acted to boost its slowing economy and OPEC king pin Saudi Arabia said it would work with other producers to limit oil market volatility
Technical: While USD/CAD trades sub 1.3660 downside pressure remains the driver with bears focusing on a AB=CD ultimate downside objective at 1.2966, the next support level to watch is is 1.3450 the breakout point of the upside acceleration.
Interbank Flows: Bids 1.3450 stops below. Offers 1.3650 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
