London Forex Report: Today we await the ECB Monetary Policy decision which will be followed by ECB Chief Mario Draghi’s Press Conference. The consensus seems to be looking for another 10bps cut in the deposit rate, although there are quite a few looking for 15-20bps of cuts as well. Increasing of QE is another potential outcome along with other potential liquidity measures. Draghi saw the result of the ECB disappointment back in December. Markets believe he wont want to under-deliver again and risk EUR going back to 1.15. Either way, this is going to be a big press conference. In the US, wholesale inventories climbed 0.3% MoM in Jan (Dec: flat growth) according to a report from the Commerce Department. The increase was led by higher non-durable inventories. Coupled with lower sales of durable goods, inventory to sales ratio climbed to the highest level since April 2009. Separately, weekly mortgage applications climbed 0.2% last week after a 4.8% decline in the previous week. USD Index eased 0.03% to 97.17 at closing.
EUR/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Fundamental: Euro held steady yesterday as traders adopted a wait-and-see approach before ECB meeting. EUR/USD dropped to an intraday low of 1.0944 in European session while the pair erased nearly all the loss in US session. The markets widely expect ECB meeting due today will result in interest rates falling deeper into negative territory, and more bond purchases to help the eurozone economy.
Technical: Only a close over 1.1080/1.11 eases immediate downside pressure. Intraday support is sited at 1.0955/35 while this survives expect a further grind higher to test pivotal resistance at 1.11. Failure at 1.09 opens retest of bids towards 1,08
Interbank Flows: Bids 1.09 stops below. Offers 1.11 stops above.
Retail Sentiment: Bullish
Trading Take-away: Sidelines
GBP/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: GBP consolidated yesterday, showing resilience despite the soft industrial output data and noise ahead of June’s vote on Brexit issue. Sterling, which fell to a 7-year low after the announcement of a date for the referendum last month, has since then recovered nearly 3%
Technical: While 1.4130/10 acts as intraday support expect a continued grind higher with the next corrective objective at 1.4424. A failure at 1.41 opens base support test at 1.4030
Interbank Flows: Bids 1.41 stops below. Offers 1.43 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines
USD/JPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Fundamental: USD/JPY experienced a marked turnaround during the European session, and recovered from the intraday low of 112.20 to above 113.40 levels. The pair last traded at 113.50 levels (as of writing). Many traders think that Bank of Japan will hold off cutting the rate at next week’s rate meeting so as to soothe market jitters caused by January’s surprise decision to adopt negative interest rates.
Technical: 112.50/30 continues to support expect a further leg of corrective gains, to retest the broken neckline support at 115/116. Failure at 112.50 open 11 again.
Interbank Flows: Bids 112 offers below. Offers 114 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines
EUR/JPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Fundamental: Japan’s machine tool orders dropped a staggering 22.6% YoY in Feb (Jan: -17.2% YoY), marking its seventh straight decline due to falling orders from domestic and foreign markets. Separately, producer prices slumped 3.4% YoY (Jan: -3.2%) posting signs that sluggish price pressure may prompt another round of easing by the BoJ in the months ahead.
Technical: Retest of bids back at 123 attracted buyers only a close over 125.10 eases near term bearish bias. A failure at 123 would open the pivotal psychological 120 en route to a weekly downside objective at 118/117.
Interbank Flows: Bids 123 stops below. Offers 125 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: With iron ore prices rising 1.4%, the Australian dollar was boosted by the recent uptrend in commodity prices. Again riding on the recovery of oil prices, US and European stocks all closed higher and resulted in even firmer market risk sentiment. Under the lack of domestic data, a loosening in monetary policy from the ECB today might further drive up market risk appetite, which is positive for the Australian dollar.
Technical: .7530 upside objective achieved profit taking pulll back from this area, while .7400 supports intraday expect further upside pressure targeting .7679 next. Only a failure at.7300 support threatens near term bullish bias.
Interbank Flows: Bids .7400 stops below. Offers .7600 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 sharply to reach 1.3220 against the USD after the Bank of Canada left its rates at 0.5 percemt. Although no cut was expected, the central bank’s hawkish rhetoric from the post-meeting statement and a further rebound in the oil price provided enough support for the Canadian dollar. Despite a report from US Energy Information Administration showing crude oil inventories rose more than expected, oil prices edged higher ahead of the OPEC meeting to discuss an output freeze.
Technical: While 1.3400 contains the recovery, downside pressure remains the driver with bears focusing on a AB=CD ultimate downside objective at 1.2966, the next interim support level to watch is is 1.3176. Only a close over 1.3650 negates the bearish bias.
Interbank Flows: Bids 1.3200 stops below. Offers 1.3400 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
