Morning Report: EUR At 11 Year Lows Ahead Of Key ECB Meeting

KEY DATA RELEASES TODAY (GMT) :

1200 GBP Asset Purchase Facility exp 375B v 375B
1200 GBP Official Bank Rate exp 0.50% v 0.50%
1203 GBP MPC Rate Statement
1245 EUR Minimum Bid Rate exp 0.05% v 0.05%
1330 USD Revised Nonfarm Productivity q/q exp-2.3% v -1.8%
1330 EUR ECB Press Conference
1330 USD Unemployment Claims exp 293K v 313K

OVERNIGHT:

EUR continues on its downward path printing 11 year lows as a rather stubborn 1.1160 support level was finally taken out and the catalyst for a swift move lower which has continued in the Asian session resulting in a low of 1.1027 so far. Event risk picks up from here into the end of the week with ECB today and then onto non farms tomorrow. For now 1.1120 and 1.1160 our immediate resistance levels and now the obvious 1.1000 psychological level is on everyone’s radar with increased volatility expected on any break below.

It is the calm before the NFP storm in the USD/JPY market, and with the daily ranges compressing, we are anticipating a breakout to occur tomorrow. The ADP data indicated the jobs market, although negatively affected by weather and other factors, remains robust. Markets are of course cautious of a poor print as well, but market is anticipating a poor one hence positioned short or square looking to buy a dip. The big surprise in the markets will be for a strong number. Supports on the downside at 119.30/119.00.

GBP/USD bearish view was rewarded overnight by the collapse of cable through the previous support level of 1.5310, with a weaker­ than­ expected services PMI print also helping the cause (along with real money selling of EUR). Retain the same bearish stance, anticipating a test of the pivotal 1.5200 level at the least. BOE MPC Policy decision today, but no material action expected, the political premium is also starting to weigh on GBP.

AUD Retail Sales and Trade Balance were much as expected in the end although AUD/USD assumed a heavy stance in front of RBA’s Lowe speech and also with copper coming off hard. The market looked like it was getting itself into a bearish stance. However Lowe’s speech was a touch on the hawkish side when he stated that AUD/USD fair value was closer than it had been for many years.

Looking ahead today's headline/event risk will be the ECB rate decision and ECB press conference during the late European session, with Initial claims eyed during the US session

PRICE ACTION OVERVIEW:

EUR: While 1.1170 caps upside target 1.10 and 1.09 beyond
GBP: While 1.5330 contains upside reaction, targeting 1.49
JPY: While 118.50 supports expect break of 120.50 and target 2014 highs beyond
CAD: While 1.2350 trendline supports 1.28 next upside objective ahead of key 1.30
AUD: While .7860/80 contains, downtrend to resume targeting .75

KEY TRADES:

ANALYSIS:

EUR/USD Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bearish

• While 1.1160 caps upside a break of 1.10 is the next downside objective, caution on headline/event risk later today
• Order Flow indicators; OBV at lows lows, Linear Regression and Psychology bearish
• Risk free shorts in play

GBP/USD: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bearish

• While 1.5330 caps upside target year to date lows, 1.52 next downside objective a break here will set up a retest of the previous trendline resistance from above at 1.51
• Order Flow indicators; OBV retesting lows, Linear Regression and Psychology bearish
• Risk free shorts in play

USD/JPY: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bullish

• While 118.50 supports, the next upside objective is a close above 120.50 to target stops above 2014 highs.
• Order Flow indicators; OBV continues drifting back towards recent highs, Linear Regression pierces midpoint form above and Psychology testing midpoints form above
• Monitoring price action and Order Flow indicators to set longs to target 2014 highs

USD/CAD: Short Term (1-3 Days): Neutral - Medium Term (1-3 Weeks) Bullish

• While 1.2350 supports expect retest and break of 1.28 on route to key 1.30 key resistance. break of 1.2350 targets trendline test at 121.50 a failure here would suggest a broader corrective phase.
• Daily Order Flow indicators; OBV consolidating at highs, Linear Regression and Psychology bearish
• Monitoring price action and Order Flow indicators to set long positions targeting 1.30

AUD/USD: Short Term (1-3 Days): Neutral - Medium Term (1-3 Weeks) Bearish

• .79 the key upside hurdle to further corrective upside below .77 threatens retest and potential break of lows for early trend resumption targeting .75 next
• Order Flow indicators; OBV continues to drift higher, Linear Regression pierces midpoint from below and Psychology bullish but no follow through
• Shorts in play