Morning Report: Dust Settles After NFP’s Power USD Surge

KEY DATA RELEASES TODAY (GMT) :

1015 EUR Eurogroup Meetings

OVERNIGHT:

Quiet start to the week post payrolls, as the FX markets look to be in consolidation mode after the aggressive USD buying program on Friday. That said, the profit taking dynamic has not been as strong as usual, given the size of the moves, suggesting markets still feels under invested. The DXY remains robust above 97.5, and 10yr yields holding support at 2.20%.

EURUSD continues to consolidate following a swift move lower on back of late Fridays strong US February nonfarm payrolls data which has resulted in an 11 year low traded of 1.0822.We have little in way of key US data until Fridays retail sales market retains a bullish view on USD but following such a quick and extended move will widen intraday parameters anywhere up to 1.1030 which will now act as key resistance level with renewed acceleration to the downside through 1.0750.

Patience with the bullish USDJPY view was rewarded on Friday with the strong US NFP figures, market anticipates the momentum higher in USDJPY to continue from here. Markets watching the story developing in Japan as well… Q4 GDP figures (albeit inventory ­led) were revised much lower overnight, and market should be giving closer attention to this, most likely mid­ March wage negotiations are the key mover for BOJ, any additional downward move in growth and/or inflation expectations will only encourage further easing. Friday’s high of 121.29 is the initial resistance, followed by the Dec highs of 121.86. Expect significant option ­related interest at the next psychological level of 122.00. Supports now at 120.50 followed by 120.00/10

GBP can’t find a bid right now, except against the EUR. Stronger than expected employment data from the US pushed cable through the pivotal 1.5190 level before finding some support ahead of the psychological 1.5000. Market is bearish GBP as political concerns and the requisite hedging develops. It is likely the BOE’s alignment to the FOMC and there desire to look through weaker CPI data in the near term takes a back seat to the political theme unlill elections in May.

Looking ahead, its a fairly quiet week on the data front. Today will bring the next Eurogroup meeting

PRICE ACTION OVERVIEW:

EUR: While 1.0980 caps upside target 1.0760
GBP: While 1.5160 contains upside reaction, targeting 1.49
JPY:  While 120.50 supports target 2014 highs beyond
CAD: While 1.2550 supports 1.28 next upside objective ahead of key 1.30
AUD: While .7860 contains, downtrend to resume targeting .75

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDBearish Await new signal
GBPUSDBearishAwait new signal
USDJPYBullish Await new signal
USDCADBullishAwait new signal
AUDUSDBearish Sell/02 Mar .7760 Open.7860

ANALYSIS:

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

  • While 1.0980 caps upside pressure remains on the downside, with 1.0760 2003 low the next downside objective.
  • Order Flow indicators; OBV at lows, Linear Regression and Psychology bearish, but ticking up form depressed levels
  • Monitoring price action and Order Flow below 1.0980 to reset short positions targeting 1.0760 next.

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

  • While 1.5160 caps upside 1.50 next downside objective a break here will set up a retest of the year to date lows, only above 1.5260/80 suggests broader correction.
  • Order Flow indicators; OBV at lows, Linear Regression and Psychology bearish, ticking up from Fridays lows
  • Monitoring price and Order Flow below 1.5160 to reset short positions

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

  • Close above 120.50 targets move to test stops above 2014 highs, 120.40/50 to act as primary support only below 119.80 concerns immediate bullish view
  • Order Flow indicators; OBV continues ticking up from consolidation, Linear Regression and Psychology bullish but lack momentum
  • Monitoring price action and Order Flow indicators to set longs to target 2014 highs

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

  • Support moves up to 1.2550 and while this area contains downside expects a test and break of 1.2665 with 1.28 the next upside objective, only below 1.2350 concerns upside bias
  • Daily Order Flow indicators; OBV consolidating at highs, Linear Regression attempting to recapture midpoint from below. Psychology bearish
  • Monitoring price action and Order Flow indicators to set long positions targeting 1.30

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

  • While .79 caps corrective upside expect break of .77 targeting .75 next, above .79 suggests test of .8050/.8100 before lower
  • Order Flow indicators; OBV consolidates at lows, Linear Regression pierces midpoint from above and Psychology bearish
  • Shorts in play

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