Morning Report: EUR Trades At 2003 Levels

KEY DATA RELEASES TODAY (GMT) :

0930 GBP Manufacturing Production m/m exp 0.2% v 0.1%
1430 USD Crude Oil Inventories exp 4.5M v  10.3M
1500 GBP MPC Member Weale Speaks
1500 GBP NIESR GDP Estimate 0.7%
1701 USD 10-y Bond Auction 2.00|2.6
2030 USD Bank Stress Test Results

OVERNIGHT:

Asian equities followed the out sized sell-off on Wall St with most markets opening lower over continued concerns on the impact of a strong dollar on US earnings and Fed rate hike expectations. Day 2 of the ECB QE programme saw an acceleration in recent FX & FI trends. Technically, the near term outlook for the dollar index stays bullish as recent up-trend continues. Based on current momentum, the next resistance level at 98.90 should be taken out with ease before challenging the psychological 100 level

Remarks from Italy’s Economy Minister Pier Carlo Padoan that a Greek Euro exit would present a huge risk and meant that the Euro is reversible although he does not believe that will happen. Reuters reported the headlines without citing the source. Those words came at the New York close and sent Euro from 1.0695 to 1.0666, EUR is in a world of pain as ECB QE has taken bond yields lower and spot’s traded to a new lows on the 1.06 handle (not seen since 2003). Reported Interbank flows have been more mixed than the price action would suggest with a mix of Real Money and some Hedge Fund short covering demand but plenty of macro and fast money selling on the other side. From here we see 10760-70 as a short term resistance ahead 1.0840, expect bids on first test of 1.0650 with stops below.

GBPUSD has been dragged down with the EURUSD to some extent but has found demand into 15050-30 and have held there so far. From here expect supply into 1.5130-40 initially with 1.5170-80 a region where we saw demand on Friday so expect this to be a topside pivot from here. Down below we are not far from 1.50 which is a big psychological level with year to date lows beyond.

USDJPY broke through barriers above 121.50 and then 122.0 but again local supply showed up in USDJPY (which has been the case of late on pops in the Asia market) and the move in EURXs dragged EURJPY lower as well. Reported offers remain into 121.50-122.00 as this is a key chart point and we are getting into Japan yr end this month so repatriation is a factor. Below 120.20-40 was decent resistance last week so it becomes initial support and we keep an eye on 118.50 as a bigger longer term support in the market. There is about 1.1bln of 120.50s option expiries rolling off today and about 750mln from 120.51-121.10.

Australia Westpac consumer confidence dropped -1.2% in March while home loans dropped -3.5% in January. RBA Asst Gov Kent said that despite the latest decline, AUDUSD remains relatively high given the state of economy, but that low rates will translate into stronger activity in housing. Ahead of employment data tomorrow, Kent also said unemployment would rise for a bit longer and peak higher.

PRICE ACTION OVERVIEW:

EUR: While 1.0840 caps upside target 1.0600
GBP: While 1.5160 contains upside reaction, targeting 1.49
JPY:  While 120.50 supports target 124.00
CAD: While 1.2550 supports 1.28 next upside objective ahead of key 1.30
AUD: While .7860 contains, downtrend to resume targeting .75 and .72 beyond

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.7760

ANALYSIS:

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

  • While 1.0760/60 caps upside pressure remains on the downside, with 1.0650 the next downside objective, above 1.0780 target last weeks lows of 1.0840 in broader corrective move
  • Order Flow indicators; OBV at lows, Linear Regression and Psychology bearish, but ticking up form depressed levels to attempt midpoint tests from below
  • Monitoring price action and Order Flow below 1.0840 to reset short positions targeting new lows.

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

  • While 1.5140/60 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 ticking up form lows, Linear Regression and Psychology bearish but ticking up to attempt midpoint tests from below
  • Monitoring price and Order Flow below 1.5160/80 to reset short positions

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

  • As suggested double top on first retest of 2014 highs, watching for correction to 120.20/40 previous resistance to act as upport and base for sustained break of 2014 highs, only below 118.50 concerns bullish bias
  • Order Flow indicators; OBV continues ticking up from consolidation, Linear Regression testing midpoint from above and Psychology bullish
  • Monitoring price action and Order Flow indicators on retest of 120.00/120.50 to set longs targeting 124

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

  • While 1.2550 contains downside expects a test of 1.28 with 1.30 the next key objective, only below 1.2350 concerns upside bias
  • Daily Order Flow indicators; OBV consolidating at highs, Linear Regression and Psychology bullish
  • 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 .77 caps upside reactions next downside objective is .75 with .72 beyond above .77 suggests further consolidation before lower, only above .7860 concerns bearish bias
  • Order Flow indicators; OBV consolidates at lows, Linear Regression pierces and Psychology bearish
  • Risk free shorts in play

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