London Forex Report: BoJ on Hold, ECB In Focus

London Forex Report: BoJ on Hold, ECB In Focus

London Forex Report: The tax reforms plan much campaigned by President Trump were finally unveiled. The Trump administration proposed to massively cut corporate income tax to 15%, from the current 35% while the ceiling rate for individual income tax will be reduced to 35% from the current 39.6%. The personal income tax bracket will also be reduced from seven to three, of 10%, 25%, and 35%. The proposal also includes plan to end the taxation of US corporate income abroad but there was no mention on any border tax on imports and domestic sales, which had earlier stirred concerns over negative implications on exports from China and Asia.

USD The Trump tax announcement failed to excite markets given its scant details. Concerns on whether the proposed tax reforms plan will exert further pressure on the government fiscal position were not addressed. It remains to be seen if the resulting boost on growth would be sufficient to offset tax revenue foregone. In addition, while the tax plans aimed at relieving the tax burdens of all businesses and medium income earners could help spur economic growth, it is not expected to reap much benefits this year. The only economic data from the US was weekly mortgage application from the Mortgage Bankers Association. Last week, the number of application rose 2.70% after dropping 1.80% in the previous week. The Dollar Index climbed in Asian afternoon but pared gains in late US session, closing 0.26% higher at 99.04.

EUR Aside from the uncertain political environment in Europe, the economy has improved. The common currency has had a decent run up since the first round of French election. With the ECB and Mario Draghi on the wire today, we should see some consolidation leading to their rate announcement. Judging from the options activity, the markets are pricing in an expectation of a more hawkish tone by Draghi.

GBP There will be a number of UK economic surveys to provide colour on activity at the start of Q2, ahead of tomorrow’s preliminary official estimate of Q1 GDP growth. The CBI distributive trades survey is due this morning, while the GfK consumer confidence will be released tomorrow.

JPY As expected the central bank is expected maintained the settings on its monetary easing program unchanged as its two-day policy meeting ended. Though inflation remains well below the central bank’s 2% target, it is ticking up. Japan’s small business confidence index slipped to 48.6 in April from the first expansion and highest reading in three years of 50.5 in March. A final report showed that machine tool orders increased 22.80% YoY in March, twice the pace of 9.10% YoY in February. On a third report, all industry activity index climbed at the fastest pace in eight months, climbing 0.70% in February followed a drop of 0.40% YoY in January.

EURUSD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Technical: 1-3 Day View – As 1.0850 supports expect a grind higher to test 1.0982 as the next upside objective. Only below 1.0820 concerns near term bullish bias.

1-3 Week View – While 1.10 contains corrective attempts higher focus remains on a retest of 1.03 ahead of 1.0118 extension objective form 2015/17 consolidation. Only over 1.14 sets upside focus on 1.1876
Retail Sentiment: Bearish
Trading Take-away: Long

GBPUSD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Technical: 1-3 Day View – Testing 1.2880 equidistant swing resistance as 1.2770/50 supports bulls will focus on a test of psychological 1.30 magnet , only below 1.2560 concerns near term bullish bias.

1-3 Week View – While below 1.2880 bears set sites on 1.10 as the broader downside objective, a weekly closing breach of 1.2880 opens 1.30 as the next upside objective ahead of symmetry swing objective sited at 1.3238
Retail Sentiment: Bearish
Trading Take-away: Long

USDJPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Technical: 1-3 Day View – As 1.1050 supports potential to test 111.75 pivot, a close over 112 resets focus on larger upside objectives

1-3 Week View – as 108.40 equidistant swing support survives on a weekly closing basis bulls will look for a grind higher to retest 115, a close below 108 negates the broader bullish theme and opens the psychological 100 magnet
Retail Sentiment: Bearish
Trading Take-away: Long

EURJPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Technical: 1-3 Day View – Near term support sited at 120.35 as price prepares to test pivotal trend line resistance at 122.35 a close over this level opens 124.40.

1-3 Week View – The weekly close below symmetry swing support sited at 117.69 sets a bearish tone with 113.70 the medium term downside objective , a weekly close above 118.50 would arrest the immediate downside risk, resetting focus on pivotal 124.40.
Retail Sentiment: Bearish
Trading Take-away: Long

Posted in Forex Analysis, London Forex Report, tagged with on