London Forex Report: Dollar Dented by Profit Taking

London Forex Report: Dollar Dented by Profit Taking

London Forex Report: Markets ended in bid tone after solid headline NFP and other firm job prints reinforced expectations of a March interest rate hike in the US. Stock indices and UST soared higher but the dollar index trended down as Friday’s job report failed to infuse further optimism surrounding this week’s FOMC meeting and more than three Fed hikes this year. US nonfarm payroll added more than expected jobs of 235k in February and jobless rate inched a tad lower to 4.7% as expected. Net two-month revision came in at a positive 9k. Other underlying job details including sustained wage growth of 0.2% MoM as well as higher labour force participation rate at 63.0% all cemented the case for the Fed to raise interest rate this Wednesday. USD weakened against 90% of its G10 counterparts while the Dollar Index tumbled after US employment data, closing 0.59% lower at 101.85 in what appears to be markets unwinding bullish bets on the greenback as there is probably little room for further rally given the high optimism over the Fed’s decision this week.

FX Majors: EUR French industrial production fell 0.3% MoM in January and was down 0.4% YoY. The decline was led manufacturing output, down 1.0% MoM, 1.3% YoY. Elsewhere, Germany’s trade surplus narrowed in January as a stronger than expected lift in exports (2.7% MoM) was countered by an even stronger lift in imports (3.0% MoM). GBP UK data was less rosy. Impact from Brexit talks was putting pressure on UK’s economic growth in the first quarter of the year and the trend will likely prevail for the rest of the year amid further negotiation on a clean break from the European Union. Report from NIESR indicated that growth slowed to 0.60% in the three months to February compared to a 0.80% expansion in the previous three months. Factory production was a disappointment as industrial production contracted 0.40% MoM in January followed a revised 0.90% MoM growth in December. Even the construction sector was under performing in January, staging a 0.40% MoM decline after a solid 1.80% MoM growth in December. JPY Data flow from Japan was also less promising. A survey by Japan’s Ministry of Finance on corporations with capital above 1 billion yen showed that sentiment among manufacturers turned more downbeat this quarter. The BSI all industries index slipped from 3.0 last quarter to 1.3 in 1Q as firms reported less willingness to increase capital spending. In a separate release, machine orders fell more than expected by 3.20% MoM in January, dragged by a steep fall in manufacturers’ orders adding to signs of sluggish business outlook and spending. PPI picked up to increase at a faster pace of 1.00% as expected, its first back to back gain since Mar-15, driven by quicker increases in imports prices mirroring the rise in global and commodity prices.

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

Technical: The closing breach of 1.0650 arrests near term bearish bias and resets attention on upside objectives, with 1.0830 the primary upside objective ahead of 1.0985 equidistant swing objective.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: Only over 1.2330 stems selling pressure near term support is sited at 1.22 a failure here opens a retest of last weeks lows at 1.2135
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: The close over 114.50 reasserts upside targets and 114.50 now becomes near term support as price primarily targets stops over 115.50. Failure below 113.80 concerns near term bullish bias.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 122.50 as the primary upside objective achieved profit taking has developed. Only below 121 concerns near term bullish bias
Retail Sentiment: Bearish
Trading Take-away: Long

Commodities FX: GOLD recovered late Friday in response to the US non-farm payrolls report for February that failed to meet elevated expectations, prompting a drop in the dollar and Treasury yields. The metal hit a low of $1,194.55 an ounce on Friday, after slipping below $1,200 an ounce in the previous session for the first time since 31 January. OIL markets, prices gave up initial gains on Friday amid pressures concerning global oversupply. Prices had begun to slide earlier in the week, after news of another big rise in US crude inventories to record highs. On Friday, oil services firm Baker Hughes reported another weekly increase in the US drilling rig count. AUD Australia home loan climbed 0.50% MOM in January followed a 0.20% MOM increase in December. Headline growth was driven by the 1.30% surge in owner occupied home loans and the 1.30% increase in property investment. CAD Canadian economy added 15.3k jobs in February with the real news being the addition of 105.1k full time jobs! That offset a loss of 89.8k part time jobs and bodes well for the outlook of wages. The unemployment rate also fell by 0.2% to 6.6%, the lowest level since January 2015.

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

Technical: .7500 downside objective achieved as .7570 caps upside corrections .7450 becomes the next downside objective, only over .7650 resets attention on upside targets
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Symmetry swing objective sited at 1.3480 achieved, as 1.3390 supports bulls target 1.3598 . Only a close below 1.33 concerns the near term bullish bias
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: The close below 1215 invalidates bullish bias opening a retest of 1200 as 1225 caps upside corrections 1180 becomes the next downside objective
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Price is now testing primary trend line support from the February 2016 lows at 48.70 while this are supports there is an opportunity to retest range support at 51.00 as this level caps upside reactions bears target 45.20 as he next downside objective
Retail Sentiment: Bullish
Trading Take-away: Short

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