London Forex Report: Consensus is surfacing that global risks are increasingly taking precedence over domestic growth prospects in the Fed policy decision, FOMC minutes showed. While two members wanted an interest rate hike in March and some other participants indicated that an increase in April “might be well warranted”, all members agreed that path of tightening has to be gradual this year to accommodate sluggish inflation outlook and volatility on the global front. Participants now see two instead of four 25 bps hikes this year, but again, timing of such move(s) remains elusive. USD weakened, tumbling ahead of FOMC minutes amid risk aversion to overturn gains. The USD Index plunged in early US trade, before inching higher post-minutes to close 0.21% lower at 94.43.
EUR/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: EUR remained bid post FOMC minutes, which left the USD vulnerable as most market participants took the FOMC minutes to have a distinctly dovish read through, as FOMC members have coalesced around two hikes instead of four for 2016. Attention now shifts to today's March ECB meeting minutes.
Technical: Price achieved the symmetry swing objective at 1.1420, printing a height of 1.1438 before pulling back below the figure; price action appears to be coiling. While 1.1330 continues to support, expect a test of offers towards 1.15 next.
Interbank Flows: Bids 1.1330 stops below. Offers 1.15 stops above.
Retail Sentiment: Bearish
Trading Take-away: Long
GBP/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: Latest ICM poll data from the UK demonstrates that 44% favor leaving the EU with 43% in favor of staying in the EU, while a YouGov poll sees 39% for status quo, 38% for Brexit and 23% undecided. The continued political uncertainty weighs on the GBP and is likely to continue to do so in the near-term.
Technical: A breach of 1.4120 exposes 1.4050 pivotal support to set the platform to test the topside of the broader 1.45/1.40 range. A failure to hold 1.4050 opens a retest of year-to-date lows at 1.38 ahead of 1.37 weekly swing objective.
Interbank Flows: Bids 1.4050 stops below. Offers 1.43 stops above.
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: JPY strengthened to 6-month highs against the USD following comments from Japan’s PM Shinzo Abe. He told WSJ on Wednesday that whatever the circumstances, they must definitely avoid competitive devaluation, and should refrain from arbitrary intervention in currency markets.
Technical: The downside failure opens 105.50 as the next major downside objective. Near-term look for upside reaction to fail 110.50 resistance for renewed weakness.
Interbank Flows: Bids 108.50 offers below. Offers 110.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
Fundamental: BoJ Governor Haruhiko Kuroda reiterated earlier today that the BoJ is willing to take action, be it further interest rate cuts or an expansion of the bank’s asset buying program if needed.
Technical: Failure at 126.50 suggests false upside break and opens retest of 123. Only a close over 126.80 eases immediate downside pressure.
Interbank Flows: Bids 124 stops below. Offers 125.50 stops above.
Retail Sentiment: Bullish
Trading Take-away: Short
AUD/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Fundamental: Australia’s gauge of the construction sector dropped from 46.1 in Feb to 45.2 in March. The latest reading was the lowest registered in 13 months, dragged by the residential and engineering construction categories. Decline in mining activities continued to drag growth of industrial intensive projects.
Technical: Only a close below .7550 threatens the near-term bullish bias. While this level supports intraday, expect a grind higher to test .7770. A failure at .7550 opens pivotal .7450 support.
Interbank Flows: Bids .7500 stops below. Offers .7650 stops above.
Retail Sentiment: Bearish
Trading Take-away: Long
USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: CAD managed to trim most of its intraday losses against the dollar after a report showed a sharp drawdown in stockpiles. Oil prices surged to their highest level in the week, with the US benchmark advancing beyond $37.00 a barrel after the country reported a large draw in domestic stockpiles.
Technical: The major hurdle to the upside remains the symmetry swing resistance sited at 1.3230. While this area continues to contain upside reactions, anticipate a retest of the 1.2830/50 level as we once again attempt to set a double-bottom base to encourage a broader correction.
Interbank Flows: Bids 1.30 stops below. Offers 1.3250 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
