President Trump and Kim Jong Un to meet
- Media suggested yesterday that president Trump announced his intentions to meet with North Korea's leader, Kim Jong Un, marking a dramatic breakthrough. The announcement was made after the North Korean leader’s intentions to suspend further missile testing were announced. The place and time are still to be announced, however, officials stated that it should happen within the next few months. The announcement boosted the Japanese market and JPY weakened against the US dollar. We see the case for the trend to correct and stabilize somewhat and the pair to return to normal trading levels.
- USD/JPY rose, yesterday’s Asian day tested the 106.95 (R1) resistance line. We see the case for the pair to trade in a sideways manner today with some bullish tendencies. Please be advised that the pair may prove to be quite sensitive to fundamental news as US employment data released on Friday and the headlines about Korea continue to reel in. Should the pair come from selling interest we could see it reaching the 105.55 (S1) support level. Should it find fresh buying orders along its path we could see it breaking the 106.95 (R1) resistance line and hover above it.
ECB remains on hold, however, sounds a bit more hawkish
- ECB decided to remain on hold at 0.00% as was widely expected. The accompanying statement was considered as more on the hawkish side than usual. The bank dropped its readiness to increase its asset-buying program in the accompanying statement. The bank also sees inflation hovering around 1.5% for the rest of 2018 with rather muted underlying inflation pressures. In the following press conference, president Draghi mentioned that the change in the lines about it’s QE program was unanimous which also supported the EUR somewhat, however, continued in rather dovish tone. Despite the markets, initial positive reaction the EUR weakened on further dovish comments during the press conference. We see the case for EUR to continue to weaken in the next couple of days.
- EUR/USD dropped yesterday breaking the 1.2355 (R1) support line (now turned to resistance). We see the case for the pair to trade in a sideways manner for the next couple of days with some bearish tones. Please be advised that the pair could be sensitive to the US employment report which was released on Friday and any further headlines about the US trade tariffs as well as any retaliation actions from Europe. Should the bulls take the reins we could see the pair breaking again the 1.2355 (R1) resistance level and aim, for the 1.2495 (R2) resistance hurdle. Should the bears take the driver’s seat we could see the pair breaking the 1.2230 (S1) support line and hover below it.
In Friday’s other economic highlights:
- From Germany we got industrial output for January and the trade balance surplus of the same month, from the UK we got the manufacturing output for February and the trade balance deficit for January. From the US the employment report for February is to be released providing for high volatility in USD crosses. As the NFP figure was 313k and the unemployment rate stayed at 4.1%. The Average Earnings growth rate could attract a high level of attention. Average earning’s ticking down (+2.8% year on year vs. previous +2.9% year on year) may not influence the market as it still indicates a strong average earnings growth rate. Overall, the report could be indicative of further labor market tightening which in its turn, in conjunction with one of the strongest GDP growth rates for Q4 in the past years, could strengthen the argument for further rate hikes by the Fed. Should the actual results meet the forecast, we could see the USD strengthening. The Canadian employment data were released at the same time as the US Employment Report and could support the Loonie.
USD/JPY
·Support: 105.55 (S1), 104.66(S2), 103.65(S3)
·Resistance: 106.95(R1), 108.30(R2), 109.20(R3)
EUR/USD
·Support: 1.2230(S1), 1.2100(S2), 1.1915(S3)
·Resistance: 1.2355(R1), 1.2495(R2), 1.2680(R3)