Morning Report: BOJ Stands Pat On Policy, FOMC Minutes Next

KEY DATA RELEASES TODAY (BST) :

10:00 EUR Retail Sales m/m -0.1% v 1.1%
14:30 USD FOMC Member Dudley Speaks
15:30 USD Crude Oil Inventories 3.3M v 4.8M
19:00 USD FOMC Meeting Minutes

OVERNIGHT:

EURUSD was under pressure yesterday, the pair consolidated at around 1.0890s until it abruptly hit a fresh low of 1.0802 during late US session. ECB’s Mersch said that it would be free to adjust QE programme if the economy advanced faster than expected towards its goal of lifting inflation. Extremely low yields in Europe continue to encourage real money funds to buy USD even though market expects the Fed to be cautious in commencing their tightening cycle.

GBPUSD was boosted from UK services PMI, printed 58.9 in February vs 57.0 expected, but then the pair moved lower and closed at 1.4805. The gains were capped by uncertainty ahead of next month’s national election; polls show that neither Prime Minister David Cameron’s Conservatives nor Ed Miliband’s opposition Labour Party are likely to gain enough votes to win a majority.

USDJPY was trading towards a two week high before BOJ released its policy statement and kept rates on hold, Governor Kuroda held a press conference this morning market participants expect BOJ will maintain its record stimulus. Japan current-account Surplus (FEB) printed at 1.44t yen, ended its four-month straight down

USDCAD hovered at around 1.2500 level. Oil prices recovered as US forecast lower crude production growth and higher demand. Brent crude climbed to around $59 per barrel. The job market report due on coming Friday will be the key domestic event for the loonie this week.

AUDUSD jumped above 0.7700 level on Tuesday as the Reserve Bank of Australia held the cash rate at 2.25% The RBA’s decision surprised the market, but still retained the easing bias in the coming meetings.The iron ore price remains at around $48 per tonne.

PRICE ACTION OVERVIEW:

EUR: While 1.08 contains downside expect fourth test of 1.10
GBP: While 1.4870/90 contains upside expect retest of 1.4740
JPY:  While 119.30 contains downside target 121.00
CAD: While 126.60/40 contains downside target 130
AUD:  While .7760/80 contains upside target .72

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDNeutral Await new signal
GBPUSDNeutralAwait new signal
USDJPYNeutral Await new signal
USDCADNeutralBuy/7 Apr 1.25181.301.2409
AUDUSDNeutralAwait new signal

ANALYSIS:

EURUSD Short Term (1-3 Days): Neutral – Medium Term (1-3 WeeksBearish

  • Third rejection above 1.10 finds support a the anticipated 1.08 level, while this area supports potential for fourth retest of 1.10 offers
  • Order Flow indicators; OBV consolidating above lows, Linear Regression pierces midpoint form above, Psychology bullish but stalling
  • Monitor price action and Order Flow to reset shorts against 1.12

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GBPUSD: Short Term (1-3 Days): Neutral – Medium Term (1-3 WeeksBearish

  • While 1.4940/60 caps upside reactions intra day expect test of 1.4740 bids, above 1.5050 alleviates downside pressure.
  • Order Flow indicators; OBV consolidating recent gains form lows, Linear Regression pierces midpoint form above, Psychology bullish but pulling back to test midpoint from above
  • Monitoring price action and Order Flow against 1.5030/50 targeting 1.46/45

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USDJPY: Short Term (1-3 Days): Neutral  – Medium Term (1-3 WeeksBullish
  • Continued bullish consolidation below year to date highs while 118.30 supports expect retest and break of highs, below 118 negates pattern and suggests broader range trade towards 117. Intraday look for 119.30 support to maintain near term upside pressure
  • Order Flow indicators; OBV continues to consolidate below recent highs, Linear Regression pierces midpoint from below, Psychology ticking up to test midpoints from below
  • Monitoring price action and Order Flow indicators for longs targeting 124

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USDCAD: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bullish

  • Continues to test trendline support at 124.50, while this holds on a closing basis expect further gains en route to 128.00 retest below 1.2350 concerns bullish bias.
  • Daily Order Flow indicators; OBV retesting consolidation support below recent highs, Linear Regression testing midpoint from below, Psychology bearish
  • Longs in play

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AUDUSDShort Term (1-3 Days): Neutral  – Medium Term (1-3 WeeksBearish

  • Potential double bottom in play while 7550 holds on a closing basis potential for broader corrective price action towards .79 initially with 8050 upside objective beyond, a breach of 7550 on a closing basis targets .72
  • Order Flow indicators; OBV ticking up form lows, Linear Regression and Psychology pierce midpoints from below
  • Monitoring price action and Order Flow indicators to set shorts targeting .72

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