London Forex Report: FED and ECB Central Bank Chiefs stress caution over global risks and the implied uncertainties over the world economy and financial conditions which remain substantial and warrant vigilance. Trailing dovish FOMC minutes, Fed Chair Yellen said yesterday that the labor market has greatly improved but underemployment are still “higher than one would expect”, indicating that some slacks remains. ECB President Draghi said that the Euro area continues to face disinflationary forces and hinting that the central bank has more rooms to act if conditions deteriorate. On top of that, minutes of the ECB’s meeting on March 10 suggested that policy makers had considered a sharper rate cut than the 10 bps cut in deposit rate that was delivered and an exemption plan for bank’s deposits, again signaling that ECB has scope to increase its current stimulus program. USD rebounded, lifted by renewed weakness in market risk sentiment that bolstered refuge demand. The USD Index mounted a sustained recovery after a plunge in early European session to close 0.05% higher at 94.48.
EUR/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: EUR weakened by 0.2% versus the US dollar after executive board member Peter Praet said the European Central Bank can boost the scale of its support to the euro-area economy further in the event that fresh risks to the region’s outlook arise. European Central Bank officials underlined their readiness to further ease monetary policy as political, banking and sovereign fault lines showed the region remains vulnerable six years after the start of the debt crisis.
Technical: Price continues to recoil and rotate below symmetry swing objective at 1.1420, printing a hight 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 1.1450 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines
GBP/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: GBP dropped towards its lowest levels in more than a month against the USD amid concern that the economy will be damaged if the UK votes to leave the EU on June 23. The pound fell against the USD after analysts said Dutch voters rejecting a European Union trade agreement with Ukraine could embolden Britons campaigning to leave the single market, as Dutch voters rejected a treaty between the EU and Ukraine by a margin of nearly two-to-one, exposing anti-EU sentiment in one of the bloc’s founding members
Technical: Price is rotating around 1.4050 pivotal support within the broader 1.45/1.40 range. A failure to hold 1.40 opens a retest of year to date lows at 1.38 ahead of 1.37 weekly swing objective.
Interbank Flows: Bids 1.40 stops below. Offers 1.45 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: USD continued to drop against the JPY on Thursday as markets believed that the Bank of Japan (BoJ) was unlikely to intervene with more policy measures. The pair hit a fresh low of 107.67 yesterday. Japanese Finance Minister Taro Aso warned on Friday that the government would take steps against a rapid rise in the JPY, however, he declined to comment on any intervention in the markets.
Technical: The downside ratchet now targets 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 107.50 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): Bearish
Fundamental: Japan’s current account surplus widened to 2434.9bn in Feb (Jan: 520.8bn) due to positive trade balance and the increase in investment income. Surplus hit the highest level seen in 11 months, spurred by the 5.4% MoM climb in exports coupled with a 9.5% MoM decline in imports, pushing trade surplus to 584.6bn (Jan: – 637.7bn)
Technical: Bears target a retest of 122 year to date lows, intraday resistance is sited at 124.50. Only a close over 126.80 eases immediate downside pressure.
Interbank Flows: Bids 122 stops below. Offers 124.50 stops above.
Retail Sentiment: Bullish
Trading Take-away: Short
AUD/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish
Fundamental: Aussie climbed to highs of 0.7637 against yen in late Asian session yesterday. However, AUD/USD has experienced a marked turnaround since the start of European session and dropped below 0.7500 handle. The pair is now trading at around 0.7530 while 0.7500 handle may be tested again. Traders dumped Aussie yesterday as risk off sentiment rekindled by under performing global stock markets.
Technical: Only a close below .7500 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 .7600 stops above
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/CAD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Fundamental: USD/CAD surged from the intraday low of around 1.3014 to 1.3179 in US session which is nearly the same level of its open. Oil prices dropped 1 percent yesterday as data showed an increase of oil stock in US Cushing area. Traders await the Canadian Unemployment data due today
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 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: Neutral
Trading Take-away: Neutral
