Morning Report: Draghi Drags EUR To 2003 Levels, NFP’s Eyed

KEY DATA RELEASES TODAY (GMT) :

1330 USD Average Hourly Earnings m/m exp 0.2% v 0.5%
1330 USD Trade Balance exp -41.3B v -46.6B
1330 USD Non-Farm Employment Change exp 240K v 257K
1330 USD Unemployment Rate exp 5.6% v 5.7%

OVERNIGHT:

As the ECB press conference got under way yesterday EURUSD rallied, was sold, and ended up back where we started. The spike higher was due to the fact that the growth forecasts were higher than consensus. Consensus on Bloomberg highlighted that GDP expectations in 2015 were expected to be 1.2% YoY and 1.6% for 2016. ECB forecasts were for 1.5% and 1.9% respectively. 2017 CPI forecasts from the ECB were in line with expectations and the ECB’s mandate (Inflation close to but below 2%) post ECB, EURUSD broke below 1.100 level for the first time since September 2003 the 2.54billion of 1.10 strikes rolling off today likely helped to limit the downside overnight. It is expected that the ECB will start the QE program on Monday, 9 March, totalling EUR60bln, bears remain in control below 1.1110/1.1160

USD/JPY turned down from 3 week high of 120.40 to 120.10s after disappointing US jobless claims and factory orders figures. Some small companies are encountering tough conditions from weak yen that incurs higher costs; BOJ should consider reducing size of the asset purchases; cutting interest rate on excess reserves could be an option upon BoJ starts to bring the size down, BoJ board member Takahide Kiuchi said, Bulls have the ball above 119.30 targeting 2014 highs. Today’s NFP’s will be the key catalyst for a potential run a the stops above 120.50

GBPUSD had traded around 1.5250 ahead of BoE’s MPC meeting. As expected, BoE has kept its bank rate unchanged at 0.5% GBP rose to a 7-year high against the EUR after ECB chief Mario Draghi left the door open for asset purchases beyond September 2016. Bearish stance below 1.5330.

Looking ahead todays headline/event risk is the US jobs report which could in turn bring about the next leg lower in the EUR should we get another robust report, market consensus is 235k (Feb 257k) – an upward beat to forecasts should see market target the EURUSD Sep ’03 low 1.0760. The risk of course to today’s print is the weather effects given vast swathes of the US was covered in snow last month.

PRICE ACTION OVERVIEW:

EUR: While 1.110 caps upside target 1.09 and 1.0760 beyond
GBP: While 1.5280 contains upside reaction, targeting 1.49
JPY:  While 118.50 supports expect break of 120.50 and target 2014 highs beyond
CAD: While 1.2350 trendline supports 1.28 next upside objective ahead of key 1.30
AUD: While .7860/80 contains, downtrend to resume targeting .75

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDBearish Await new signal
GBPUSDBearishAwait new signal
USDJPYNeutral Await new signal
USDCADNeutralAwait new signal
AUDUSDNeutral Sell/02 Mar .7760 Open.7860

ANALYSIS:

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

  • While 1.1110/1160 caps upside pressure remains on the downside, caution on headline/event risk later today with the potential for more short term whipsaw price action.
  • Order Flow indicators; OBV at new lows, Linear Regression and Psychology bearish
  • Monitoring price action and Order Flow below 1.1160 to reset short positions

EUR2015-03-06 07_16_19-

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

  • While 1.5280 caps upside target year to date lows, 1.52 next downside objective a break here will set up a retest of the previous trendline resistance from above at 1.51. Only above 1.5330 suggest retests of 1.5550
  • Order Flow indicators; OBV at lows, Linear Regression and Psychology bearish
  • Monitoring price and Order Flow below 1.5330 to rest short positions

gu2015-03-06 07_21_06-

USDJPY: Short Term (1-3 Days): Neutral  – Medium Term (1-3 WeeksBullish

  • While 118.50 supports, the next upside objective is a close above 120.50 to target stops above 2014 highs.
  • Order Flow indicators; OBV continues drifting back towards recent highs, Linear Regression and Psychology pierce midpoints from above
  • Monitoring price action and Order Flow indicators to set longs to target 2014 highs

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

  • While 1.2350 supports expect retest and break of 1.28 on route to key 1.30 key resistance. break of 1.2350 targets trendline test at 121.50 a failure here would suggest a broader corrective phase.
  • Daily Order Flow indicators; OBV consolidating at highs, Linear Regression attempting to recapture midpoint from below. Psychology bullish
  • Monitoring price action and Order Flow indicators to set long positions targeting 1.30

uc2015-03-06 08_25_40-

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

  • .79 the key upside hurdle to further corrective upside below .77 threatens retest and potential break of lows for early trend resumption targeting .75 next
  • Order Flow indicators; OBV continues to drift higher, Linear Regression pierces midpoint from below and Psychology bearish but continuing to rotate around midpoint in narrow range
  • Shorts in play

AU2015-03-06 08_53_12-

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