Trading Themes: The US dollar was bolstered last week by a raft of positive Fed commentary as members espoused Hawkish views. Notably Fed’s Bullard said that policy makers should consider hiking in April amid positive outlook on inflation and the job market. Recovery in economic indicators suggests that policy tightening would avoid “overshooting on inflation”. February Durable Goods fell less than expected, underpinning positive USD sentiment. Focus now turns to PCE data on Monday, which the Fed use as a key gauge for inflation, and the March employment report on Friday.
EUR: EuroZone March CPI the headline data for the week on Thursday
GBP: GDP the key data focus. Brexit concerns still plague the outlook.
JPY: Risk-sentiment to remain key driver in absence of data.
CHF: A lack of EUR downside keeps the pressure off the SNB for now
AUD: Supported by firmer Iron ore prices and stronger domestic labour-market data. Traders wary of possible RBA discomfort with stronger AUD.
CAD: Oil battling between $38 support and $40 resistance. GDP on Thursday key domestic data focus
Let’s take a look at what the latest COT report data is showing us from a trend and net change week over a week perspective…
- EUR bearish, decreased on the week
- GBP bearish, increased on the week
- JPY bullish, decreased on the week
- CHF bullish, increased on the week
- AUD bullish, decreased on the week
- CAD bearish, decreased on the week
EUR/USD Outlook – Bearish
The single currency traded steadily lower over the week, weighed upon by USD strength and lack of catalyst for further upside. The ECB noted in its economic bulletin that weak external demand and a slowdown in emerging markets will dampen the recovery. Focus this week turns to Euro Zone Inflation and Unemployment data as well as German inflation & Unemployment data.
COT Indicators
- Index active buy signal ticks down
- Strength active sell signal ticks down
- Momentum signal turns flat, await new signal
LFOrder Flow Trader Bearish
GBP/USD Outlook – Bearish
Sterling was knocked sharply lower over the week as fresh European terrorist attacks fuelled investor expectations of increased support for a Brexit vote in the UK’s June 23rd referendum. These moves were further extended by Hawkish Fed comments mid-week. On the data front, February Retail Sales were shown to have fallen less than expected. Domestic data focus this week will be on earnings and employment data alongside final 4Q GDP.
COT Indicators
- Index buy signal
- Strength signal ticks up
- Momentum buy signal
LFOrder Flow Trader Bearish
USD/JPY Outlook – Bullish
JPY traded lower over the week, despite initial strength in the wake of European terrorist attacks. Latest BOJ meeting minutes showed that policy makers engaged in heated debates on the advantages and disadvantages of the negative interest rates, with one even suggesting it was preferable to roll it back. A lack of tier one Japanese data this week should leave JPY trading off risk and USD flows.
COT Indicators
- Strength active sell signal, ticks up
- Index active sell signal, ticks up
- Momentum flat, awaiting new signal
LFOrder Flow Trader Bullish
USD/CHF Outlook – Bullish
With EUR having moved counter-intuitively higher in response to the latest ECB measures, it seems some pressure has likely been alleviated from the SNB who refrained from moving on rates at their recent meeting. Worth noting however that recently SNB’s Jordan has warned of a “nuclear” option in the event of continued CHF appreciation stating that the SNB can cut the exemption from negative deposit rates that it extended to most domestic banks’ reserves.
COT Indicators
- Strength active buy signal, ticks down
- Index active sell signal, ticks down
- Momentum active sell signal ticks down
LFOrder Flow Trader Bullish
AUD/USD – Outlook Bullish
The Australian Dollar moved lower over the week weighed upon by a stronger US Dollar and the slide in commodity prices, led by the moves in Oil. Focus this week will be on Chinese Manufacturing data which could knock risk sentiment off course with a weak print. In the medium term, firmer Iron ore prices and strong domestic labour market data continue to support though traders wary of RBA discomfort with strong AUD.
COT Indicators
- Strength active buy signal, ticks down
- Index active buy signal, ticks down
- Momentum active buy signal, ticks down
LFOrder Flow Trader Bullish
USD/CAD Outlook – Bullish
The Canadian Dollar corrected lower over the week weighed upon by a decline in Oil prices which lost 4% as US crude stockpiles rose more than expected, strengthening concerns about a stubborn global glut. Domestic data focus this week will be on GDP .
COT Indicators
- Strength active buy signal, ticks down
- Index active sell signal, ticks down
- Momentum sell signal, ticks up
LFOrder Flow Trader Bullish
