Morning Report: Markets Back To Pre FOMC levels

KEY DATA RELEASES TODAY (GMT) :

1015 EUR EU Economic Summit
1420 USD FOMC Member Lockhart Speaks
1530 USD FOMC Member Evans Speaks

OVERNIGHT:

Market continues to trade on position adjustment post Wednesday’s FOMC. The low in EURUSD was around 1.0610/15 which was around the pre FOMC levels. We have drifted back higher this morning to touch 1.0696 area. Overall the Euro can go lower over the medium term but over the course of the next two weeks we get US CPI, Q4 GDP revisions, University of Michigan and NFP which the market will have to negotiate. Given the weakening outcome of recent USD data the market could be a little nervous around some of these data points and therefore expect EURUSD to consolidate further before eventually heading lower. Support is 1.0610 then 1.0550/80 and 1.0450. Topside 1.0740, 1.0795 then 1.0920 key

BOE’s chief economist Haldane has added to the recent doveish rhetoric from the central bank, citing the chance of a rate cut or rise is evenly balanced. This has led to fresh weakness in the pound, and the pair now trades a 1.47 handle after trading as high as 1.5155 post ­FOMC. Market remains bearish the pair given that the BOE has matched the doveish tone of the FOMC (and has been more aggressive against the strength of its currency), and expect political risk to remain a hindrance on risk sentiment as well. 1.4830 (where cable was trading before the headlines from Haldane) should be the pair’s initial resistance, while downside support at 1.4720/00.

USDJPY has stabilised above the 120 level, supported primarily by domestic real money demand. There are reports since yesterday citing that three pension funds will be formally announcing a more aggressive portfolio shift mirroring GPIF’s after the Nikkei close today. This is in line with other reports that the big lifers have stepped up plans to increase M&A outside Japan. This domestic paradigm should keep both the Nikkei and USDJPY supported in dips, and the market has a bullish bias in the pair in spite of the weakness in the USD elsewhere. 119 – 122 looks to be the range the market is content with, but anticipate some momentum generated if either side breaks, more especially on the topside.

AUDUSD tracked higher a touch with the USD under a bit of pressure in Asia. Good support in Aussie is seen at 0.7590/0.7610. RBA Steven’s spoke this morning but revealed very little. 0.7710 is resistance. Today we have Canada CPI which is key. USDCAD has retraced a touch but overall retains a bullish bias

PRICE ACTION OVERVIEW:

EUR: While 1.0870/90 contains upside target 1.0460
GBP: While 1.4910/30  contains upside target 1.4630
JPY:  While 119.90.120.10 contains downside target 124.00
CAD: While 126.60/40 contains downside target 130
AUD:  While .7760/80 contains upside target .72

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDBearish Await new signal
GBPUSDBearishAwait new signal
USDJPYBullish Await new signal
USDCADBullishAwait new signal
AUDUSDBearishAwait new signal

ANALYSIS:

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

  • While 1.0870/90 caps upside on a closing basis, expect break of 1.06 to retest of 1.0460, while 1.06 supports potential for further consolidation before lower
  • Order Flow indicators; OBV consolidates at lows, Linear Regression bullish but stalling, Psychology bullish
  • Monitoring price action and Order Flow below 1.09 to reset short positions targeting 1.03

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

  • While 1.4910/30 caps upside expect a break of 1.47 to confirm trend resumption
  • Order Flow indicators; OBV at lows, Linear Regression rejected at midpoint from below, Psychology pierces midpoint from below
  • Monitoring price and Order Flow against 1.5010/30 targeting 1.46/45

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

  • While 119.90/120.10 supports expect retest and eventual break of year to date highs en rout to 124
  • Order Flow indicators; OBV continues consolidation, Linear Regression supported at midpoint, Psychology pierces midpoint from above
  • Monitoring price action and Order Flow indicators for longs targeting 124

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

  • While 1.2450 supports still potential for close above 1.28 to target key 1.30 only below 1.2350 concerns bullish bias
  • Daily Order Flow indicators; OBV at highs, Linear Regression supported at midpoint Psychology pierces midpoint from above
  • Monitoring price action and Order Flow indicators to set longs  targeting 1.30

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

    • Below .76 suggests trend resumption and targets a break of .75 with .72 the next objective.
    • Order Flow indicators; OBV consolidates at lows, Linear Regression rejected at midpoint Psychology bullish
    • Monitoring price action and Order Flow indicators to set shorts targeting .72

au2015-03-19 08_45_08-

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