London Forex Report: Hawkish comments from top Fed officials suggest that a rate hike may be warranted as soon as the next FOMC meeting in April. Richmond Fed president Jeffrey Lacker said that inflationary pressure is moving toward its targeted 2.0%, while Atlanta Fed chair Dennis Lockhart opined that recovery in the US is firm enough to justify a rate hike as early as April, sharing the view of San Francisco president John Williams. The comments overshadowed sentiments on the data front. US existing home sales fell to the lowest level in three months, igniting concerns that the housing market may lose steam amid economic headwinds. USD strengthened, extending its rebound from recent losses even as risk appetite firmed up. The USD Index recovered from a tumble in European session, closing 0.21% higher at 95.28.
EUR/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: The non-seasonally adjusted current account surplus dropped with Spain and Italy recording deficits, but that largely reflects seasonal patterns. The EUR is getting little support even though the overall surplus remains strong. The EUR/USD traded as low as 1.1233, and remained nearby by the end of the US session, having met selling interest on approaches to the 1.1280 levels, throughout the day.
Technical: Expect a further grind higher to test pivotal resistance at 1.1370 en route to the 1.1420 symmetry swing objective, while 1.1210 supports intraday. Only a close below 1.1050 eases immediate bullish pressure.
Interbank Flows: Bids 1.1200 stops below. Offers 1.14 stops above
Retail Sentiment: Bearish
Trading Take-away: Long
GBP/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: Politics remains the key driver for GBP with sterling under pressure as cracks appear in the Tory party. The Confederation of British Industry (CBI) said Brexit would cost the economy GBP100bn and about 1 million jobs, although the CBI trends series showed the expected uplift in activity.
Technical: Close over 1.43 eases immediate downside pressure. Bulls now target a retest of offers and stops above 1.4668. Bulls have the ball while 1.43 supports downside corrections.
Interbank Flows: Bids 1.43 stops below. Offers 1.4550 stops above.
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: JPY reversed early gains while the USD rose against the yen to 111.93. Japanese Economy Minister Nobuteru Ishihara said yesterday that the effects of the Bank of Japan’s surprise negative interest rate policy on Japan’s real economy are not yet clear. The BoJ unexpectedly cut a benchmark interest rate below zero in January, stunning investors with another move to stimulate the economy.
Technical: Retest of bids sub 111 attracts profit taking, a sustained breach here will leave the psychological 110 exposed, intraday resistance is sited at 112.20 with a close over 113 required to neutralize the immediate downside threat.
Interbank Flows: Bids 110 offers below. Offers 112.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
EUR/JPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Fundamental: Current account balance in the euro area tumbled to its lowest level in five months amid decline in investment income. Surplus came in at € 25.4 billion in Jan, € 3.2 billion less than the print in Dec.
Technical: While 125 acts as support for the current advance, expect 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/USD was well supported as China loosened controls on margin lending. Amid a wider USD recovery, the Australian dollar traded slightly lower but found support in stronger commodity prices led by an extended rally in iron ore. With little domestic data, attentions was on RBA Governor Stevens’ speech in which he stated that he believed the Aussie ‘was getting a little ahead of itself’.
Technical: Profit taking pull back should find fresh buyers at .7560/80 for the next upside leg to target .7729 next. Only a failure at.7400 support threatens near term bullish bias
Interbank Flows: Bids .7590 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: USD/CAD slowly traded back up overnight at current levels of 1.3080 above Friday’s multi-month lows under the backdrop of broad USD recovery. Market focus will also turn to Wednesday’s Canadian Federal Budget. An announcement of a massive growth-supportive fiscal stimulus could provide some upside potential for the Canadian dollar, alongside with a fade in the BoC’s dovish bias.
Technical: AB=CD ultimate 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
