London Forex Report: IMF cut growth forecast again, down to 3.2% from 3.4% as weak exports and sluggish investment dim prospects in the US, consumption tax hike dampens growth in Japan and low commodity prices continue to exert downside pressure on commodity exporters. US is expected to grow 2.4% (previous: 2.6%), Japan 0.5% (previous: 1.0%) and euro zone 1.5% (previous: 1.7%). The fund anticipated extended sluggishness from Russia and Brazil, dragging growth in emerging markets. The only bright spot was projection on China, which was revised up by 0.2% to 6.5%. Growth in 2017 is revised from 3.6% to 3.5% in 2017. Remarks from Fed officials suggest that pace of policy tightening remains uncertain. Philadelphia and Dallas Fed President echoed Yellen’s stance for a slow approach, which was in line with March projection of up to two 25 bps hike this year. On the other hand, Richmond and San Francisco Fed Chief argued in favor of tightening at a quicker pace, the latter calling for two to three hikes this year. USD Index inched 0.06% higher to 94.01 at closing, buoyed by relatively deeper losses in major components CHF, EUR and JPY.
EUR/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Fundamental: EUR eased to the intraday low of 1.1345 after turning around from a six-month peak of 1.1464. The Euro recovered a little bit and it is now trading at 1.1380 to start its Wednesday level. The Euro Zone Industrial Production will be the focus today.
Technical: Price continues to recoil and rotate below symmetry swing objective at 1.1420, printing a hight of 1.1465 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.Failure at 1.1330 opens 1.1220 support next.
Interbank Flows: Bids 1.1330 stops below. Offers 1.1450 stops above.
Retail Sentiment: Neutral
Trading Take-away: Neutral
GBP/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Fundamental: British CPI has released as 1.5% year over year, beat the forecast of 1.3%. However, worries of Brexit issue outweighed the upbeat inflation data. Sterling muted early morning gains on Tuesday after an opinion poll showed more votes for “out” the EU before June’s referendum.
Technical: Price continues to finds bids at 1.4050 pivotal support within the broader 1.45/1.40 range, While 1.4140 supports 1.44 symmetry swing objective is the upside target.. 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 1.41 stops below. Offers 1.44 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: Improved sentiment boosted the USD which climbed above 108.50 levels against the JPY, after hitting its lowest level of 107.66 on Monday. The Bank of Japan still has tools left to expand monetary stimulus further but must bear in mind that there are limits to how much it can deepen negative interest rates, according to a senior International Monetary Fund official said yesterday.
Technical: The downside ratchet now targets 105.50 as the next major downside objective. Near term look for upside reaction to fail at 1.09 ahead of trend resistance at 110.50 for renewed weakness.
Interbank Flows: Bids 107.50 offers below. Offers 109 stops above
Retail Sentiment: Neutral
Trading Take-away: Neutral
EUR/JPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Fundamental: Japanese machine orders fell 21.2% YoY in March, dragged mostly by sluggishness in foreign orders. On a separate release, PPI slumped 3.8% YoY (Feb: -3.4% YoY), marking the steepest decline in five months as deflationary pressure showed no signs of abating.
Technical: Bears target a retest of 122.05 year to date lows, 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): Bullish – Medium Term (1-3 Weeks): Bullish
Fundamental: AUD rose yesterday after an upbeat local business survey combined with firm iron ore prices. The Australian dollar popped to 0.7689, nearing a nine-month peak of 0.7721 recorded late March. The AUD/USD received a boost after a survey showed Australian firms across most industries saw improving conditions in March, lifting an index of activity to its highest in eight years.
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 .7500 opens pivotal .7450 support.
Interbank Flows: Bids .7500 stops below. Offers .7700 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 strengthened to a near nine-month high against the US dollar as rising oil prices improved the economic outlook before the Bank of Canada’s interest rate announcement due today. The currency rebounded 15 percent since January, when it hit a 12-year low at 1.4689, supported by a partial recovery in oil prices, the Canadian government’s plan for fiscal stimulus and sharply reduced expectations for Bank of Canada rate cuts.
Technical: Anticipated retest of 1.2830/50 level under way as we once again attempt to set a double bottom base to encourage a broader correction.Failure below 1.2780 opens 1.2550 as the next downside objective.
Interbank Flows: Bids 1.2750 stops below. Offers 1.3250 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
