London Forex Report: Friday’s nonfarm payroll release bested estimates and strengthening the case for tighter monetary policy this year albeit at a very moderate pace. Employers added 215k jobs to payroll last month (Feb: revised to 245k) and while unemployment rate ticked 0.1% higher to 5.0%, labor-force participation firmed up to 63.0%, suggesting that labor market conditions continue to tighten. In spite of healthy jobs report, markets remain increasingly convinced that the Fed’s policy decision is shifting away from jobs data to global development and inflation prospects. Cleveland Fed President Mester who voted to keep rates unchanged at the March meeting said the Fed should still raise rates gradually given resiliency in the US economy. USD ended mixed, the USD Index closed a mere 0.03% higher at 94.61, barely holding on to gains from a better than expected US nonfarm payrolls.
EUR/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: The final prints of the March PMI series presented a tentative stabilisation in activity in the euro area in Q1. Last week also showed that headline CPI was unchanged in March at -0.1% y/y from the previous month. Although headline inflation is negative, the euro area is far from being in deflation.
Technical: Price achieved the symmetry swing objective at 1.1420, printing a hight of 1.1438 before pulling back below the figure, intraday supported is sited at 1.1330 failure here opens pivotal 1.1220 support.
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: Q4 GDP growth was revised up to 2.1% q/q, and the latest PMI survey for March suggests activity in the manufacturing sector is stabilising as per the global trend. In the near term, Brexit risks continue to cloud the domestic economic outlook, pose a threat to financial stability, and weigh on sterling.
Technical: 1.4050 pivotal support to retest 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 1.45 stops above.
Retail Sentiment: Bullish
Trading Take-away: Sidelines
USD/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: Last week the BoJ quarterly Tankan survey was disappointing. Business sentiment declined by more than expected and respondents expect conditions to deteriorate further in the current quarter. BoJ Governor Kuroda speaks this week at the quarterly meeting of the central bank’s branch managers. His views on inflation, wages, and business sentiment will be interesting given these data have been disappointing in recent months.
Technical: Continue to play the broader range of 110/114 with the range lows at 110.60/40 the key support pivot , a breach of the range is required to help define the next directional play.
Interbank Flows: Bids 110.50 offers below. Offers 114 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
EUR/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: News on Saturday saw PM Abe soften his stance against delaying the planned sales tax hike, saying he will make a timely and proper decision. The failure to reflate the economy poses increasing risk about the future of Abenomics, which, if it happens, could lead to a collapse in confidence and trigger a sell-off in the Nikkei and force large unwinds of JPY-hedges.
Technical: Symmetry swing resistance at 128.15 stalls the upside advance on the initial test. Failure at 126.50 suggests false upside break and opens retest of 123. While 126.50/30 supports anticipate a retest of last weeks highs.
Interbank Flows: Bids 126.50 stops below. Offers 128 stops above.
Retail Sentiment: Neutral
Trading Take-away: Neutral
AUD/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Fundamental: In this weeks RBA statement that follows the meeting, it is likely that the RBA will have to adjust its language a touch. At the last meeting, when the AUD was trading closer to USD0.72 the RBA said “the exchange rate has been adjusting to the evolving economic outlook”. It seems unlikely that at close to USD0.77 cents they would want to express the same sanguine message.
Technical: Only a close below .7550 threatens the near term bullish bias, while this level supports intraday expect a grind higher to test .7770.
Interbank Flows: Bids .7550 stops below. Offers .7750 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: Oil prices extended its drop after Saudi Arabia said the kingdom will only freeze production if Iran and others follow suit. Oil prices edge below US$40/bbl. Catalysts for CAD moves this week are back end loaded with Housing starts for Marc and labour report for March due on Friday.
Technical: Retest of recent lows in the 1.2920’s set a potential double bottom base as intraday price pierced lower to test structural support sited 1.2830/50 which attracted decent bids. As this area supports we have the potential to set a base for a broader correction. with 1.33 as an initial upside objective.
Interbank Flows: Bids 1.2850 stops below. Offers 1.3150 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
