London Forex Report: Belgian terror attacks lead flight to safety bid in early trade, but equities close little changed on the day, while treasuries end weaker. The first glimpse of March manufacturing readings signalled tentative signs of pick-up in manufacturing activities in the US and Eurozone. USD strengthened, firmed up by a jump in safe haven demand amid declines in equities immediately after the attacks in Belgium. The USD Index rallied in early European trade and just before US midday to close 0.38% higher at 95.64
EUR/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Fundamental: EUR/USD fell to 1.1187, extending its recoil from last Thursday’s one-month high of 1.1342. The euro weakened as fears increased that the deadly blasts, which the Islamic State claimed responsibility for, could increase the likelihood of Britain departing from the European Union (EU). However, support gained from the figures indicating that business activity in the eurozone and sentiment in Germany ended the first quarter on a brighter note, suggesting the ECB’s extra stimulus may already be having a positive effect.
Technical: EUR is testing symmetry support in the 1.12 area. A breach of yesterday's low opens a move back to 1.1050 in broader range trade. While yesterday’s low survives on a closing basis, expect a grind higher to retest last weeks highs
Interbank Flows: Bids 1.1150 stops below. Offers 1.14 stops above
Retail Sentiment: Neutral
Trading Take-away: Neutral
GBP/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: GBP was the day’s biggest mover, falling to its lowest level at 1.4188 against the USD in a week. Traders believe the attacks on Brussels’ airport and the metro train might influence more votes to favor Britain leaving the EU in a June referendum. Leaving the EU would hit growth and threaten the huge foreign investment flows Britain needs to fund its current account deficit, one of the biggest in the developed world at about 4% of national output.
Technical: Failure at 1.43 support opens downside symmetry objective at 1.4130. A breach of this level opens 1.4050 pivotal support.
Interbank Flows: Bids 1.4130 stops below. Offers 1.4300 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
USD/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: USD dropped slightly against perceived safe-haven JPY to 112.26 levels in the current trading session, as investors reacted to the news of attacks in Brussels. However, it remained above 17-month lows of 110.67 touched last Thursday after Fed Chair Janet Yellen took a cautious tone on the timing of raising rates this year.
Technical: Retest of bids sub 111 attracts profit taking. A sustained breach here will leave the psychological 110 exposed. Intraday resistance is now sited at 112.88, with a close over 113 required to neutralise the immediate downside threat.
Interbank Flows: Bids 110 offers below. Offers 112.50 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: Japan’s Manufacturing PMI fell to 49.1 in March (Feb: 50.1), the first contraction since April 2015 amid decline in new orders and output, dragged by renewed weakness in exports oriented industries. The print overshadowed the upbeat but lagging all industry activity index. The index climbed 2.0% MoM in Jan (Dec: -0.9% MoM), led by pick up in the services, construction and manufacturing sectors at the turn of the year.
Technical: Bids sub 125 supported the current advance to target a test of symmetry resistance at 128.15 as the immediate corrective objective. Failure at 124.50 suggests false upside break and opens retest of 123.
Interbank Flows: Bids 125 stops below. Offers 127.50 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: AUD edged higher yesterday to reach intra-day high of 0.7642, supported by upbeat comments from RBA governor Stevens. In his speech, he sounded rather positive about the domestic economy, despite the recent slowdown in the Chinese economy and plunging commodity prices. Having lost 70 pips in the panic that followed the terror attacks in Brussels, AUD/USD rebounded strongly as markets simmered down.
Technical: Buyers at .7550 are positioned and playing for the next upside leg to target .7729 next. Only a failure at.7400 support threatens near term bullish bias.
Interbank Flows: Bids .7550 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: The Canadian government released its Federal Budget with the promise to spend more on infrastructure to boost growth, which is estimated to drive 0.5 percent of GDP growth. USD/CAD lost ground after the Brussels terror attacks to reach as high as 1.3137 before slowly regaining as markets awaited the release of the Federal Budget. The price of oil was lower after Libya had announced it would not participate in the Doha summit to freeze oil output and the aftermath of the Brussels attacks, offsetting some of the strength of the Canadian dollar.
Technical: AB=CD downside objective at 1.2966 achieved, while 1.3160 contains profit taking bears target 1.2680 as the next downside objective. Only a close over 1.34 negates immediate bearish bias.
Interbank Flows: Bids 1.3000 stops below. Offers 1.3150 stops above
Retail Sentiment: Neutral
Trading Take-away: Neutral
