London Forex Report: Dove Evans Echos Yellen

London Forex Report: Dove Evans Echos Yellen

London Forex Report: Against the hawkish comments that we have seen last week, Fed Evans echoed Yellen’s dovishness, calling for a “very shallow” series of interest rate hikes, not only this year, but over the next few years as he reiterated that the balance of risks to the US economy remains tilted to the downside. ADP job report showed that US private sector added 200k jobs in March, less than the revised 205k increase in Feb but beat consensus estimate of 195k. Markets anticpate Friday’s nonfarm payroll to suggest similar traction in the US job market. USD also extended its losses, tumbling as expectations for a less robust rate hike path continued to resonate amid prevailing downside risks to growth. The USD Index extended its leg down, closing 0.33% lower at 94.84.

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

Fundamental: Traders gave the USD a wide berth yesterday as dovish comments from Federal Reserve Chair Janet Yellen continued to resonate, diminishing demand for the currency. With the debilitated of the USD, the EUR was back within striking distance of its 2016 peak of 1.1375.

Technical: The close over 1.1220 opens a move to test the symmetry swing objective at 1.1420, expect intraday support to come in at the aforementioned 1.1220.

Interbank Flows: Bids 1.1250 stops below. Offers 1.14 stops above.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Fundamental: GBP ended the day roughly where it started yesterday at around 1.4370s. Against a much weaker USD, sterling also continued to be weighed down by the ongoing Brexit issue with news that Tata Steel will be looking at selling its Steel mills in the UK which employ 15,000 people. Market focus today will turn to UK current account balance and BoE Governor Carney’s speech to see his reaction to Fed Yellen’s speech.

Technical: 1.4050 pivotal support provides a platform for technical rebound to retest the topside of the broader 1.45/1.40 range, intraday support sited at 1.4280. A failure to hold 1.4050 opens a retest of year to date lows at 1.38 ahead of 1.37 weekly swing objective.

Interbank Flows: Bids 1.4050 stops below. Offers 1.45 stops above.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Fundamental: Today marks the end of Japan’s fiscal year and two way flows will prevent a significant move of USDJPY in either direction. Bank of Japan (BoJ) Governor Haruhiko Kuroda signals his readiness to expand an already huge asset-buying programme or push interest rates deeper into negative territory, officials fear a homogeneous board could brush aside pitfalls such as market distortion, and the rising perils of an exit strategy.

Technical: Continue to play the broader range of 110/114 with 112 the pivot to lean against intraday, a breach of the range is required to help define the next directional play

Interbank Flows: Bids 110.50 offers below. Offers 114 stops above
Retail Sentiment: Bullish
Trading Take-away: Short

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

Fundamental: Heightened concern after the Brussels attacks was reflected in Eurozone’s March economic confidence index. The index tumbled to 103.0 (Feb: 103.9), the lowest level in 13 months and consumer confidence plunged further to -9.7 (Feb: -8.8), suggesting that recovery in the euro area will likely be modest this year.

Technical: While 126.40 bids support intraday expect a test of symmetry resistance at 128.15 as the immediate corrective objective. Failure at 124.50 suggests false upside break and opens retest of 123.

Interbank Flows: Bids 126.50 stops below. Offers 128 stops above
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Fundamental: AUDUSD hit a nine month high at 0.7707 before slowly crawling back to current levels at 0.7670s, as the market was still digesting Yellen’s dovish speech which cooled down expectations of a Fed rate hike in April. The change in expectations has meant that the AUD still remains a more appealing and higher-yielding currency. Amid the lack of domestic data this week, traders now look to next Tuesday’s RBA rate decision meeting and see if the central bank will talk down its currency.

Technical: Only a close below .7550 threatens the near term bullish bias, while this level supports intraday expect a grind higher to test .7770.

Interbank Flows: Bids .7550 stops below. Offers .7750 stops above
Retail Sentiment: Bearish
Trading Take-away: Long

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

Fundamental: Traders continued to ride a wave of positive sentiment following the speech from the Fed chairwoman Janet Yellen in the previous day, with the Canadian dollar climbing to its highest level in 2016 against the dollar, at 1.2908. Canada’s economy will take longer than two years to recover as the drop in commodity prices reduces aggregate earnings and an export rebound requires time to grow, Bank of Canada Deputy Governor Lynn Patterson commented .

Technical: Bears have the ball while 1.3160 contains upside reactions expect a retest of recent lows in the 1.2920’s to set a potential double bottom base, a failure of buyer participation here opens a run down to test structural support at 1.2830.

Interbank Flows: Bids 1.2900 stops below. Offers 1.3150 stops above
Retail Sentiment: Bullish
Trading Take-away: Short

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