London Forex Report: Draghi – Damned If You Do Damned If You Don’t

London Forex Report: Draghi – Damned If You Do Damned If you Dont

London Forex Report: ECB’s Mario Draghi’s comment that he did not anticipate further rate cut in subsequent meetings drove a rally in euro, overshadowing his announcement of expanding asset purchases and cutting interest rate further into negative territory. To spur growth, main refinancing rate and marginal lending facility rate will be decreased by 5 bps to 0.0% and 0.25% respectively while deposit rate was slashed by 10 bps to -0.4%. Monthly asset purchases will be expanded by € 20 billion to € 80 billion starting April. USD weakened the Usd Index plunged post ECB announcement on the back of strong rebounds in EUR, GBP and CHF, closing 1.14% lower at 96.06.

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

Fundamental: EURUSD closed sharply higher at 1.1217, erasing losses earlier in the New York session yesterday, as Mario Draghi said that ECB will not cut interest rates any further after it unleashed a bold easing package. Markets now turn attention to next week’s Federal Reserve meeting. It is widely expected that the US central bank would keep the short-term interest rates on hold.

Technical: Close over 1.1080/1.11 eases immediate downside pressure. Intraday support is sited at 1.1060/40 while this survives expect a further grind higher to test pivotal resistance at 1.1370. Failure at 1.10 suggests false break and opens retest of bids towards 1,0820

Interbank Flows: Bids 1.1050 stops below. Offers 1.13 stops above
Retail Sentiment: Bearish
Trading Take-away: Long

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

Fundamental: GBP followed the movement of the Euro overnight to perform a U-turn and climb up 200 pips from low of 1.4116 to high of 1.4317, following ECB’s announcement of stimulus package and Draghi’s hawkish speech. Against the Euro, the British Pound was hit hard overnight to reach 0.7840 levels as ECB president Draghi talked down the prospect of further rate cuts in his post-meeting press conference. Looking ahead, market will focus on UK’s jobs data due next week.

Technical: While 1.4240 acts as intraday support expect a continued grind higher with the next corrective objective at 1.4424. A failure at 1.42 opens a retest of bids towards 1.41

Interbank Flows: Bids 1.42 stops below. Offers 1.4350 stops above.
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: JPY dropped across the board after the decisions of the ECB but then rebounded considerably, erasing most of the losses, while USDJPY peaked at 114.44 before losing the momentum. Further Bank of Japan’s easing should be a combination of lower negative rates and increased asset purchases, according to comments from Etsuro Honda, an adviser to Japanese Prime Minister Shinzo Abe

Technical: 112.30/10 continues to support expect a further leg of corrective gains, to retest the broken neckline support at 115/116. Failure at 112 open 11 again.

Interbank Flows: Bids 112 offers below. Offers 114 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: Japan’s BSI all industry index fell to -3.2 in 1Q (4Q: +4.6), the lowest seen in 7 quarters amid disappointing performance in both manufacturing and non-manufacturing sectors. In line with the all industry report, a separate survey on the manufacturing sector also took a directional turn south, slipping to -7.9 in 1Q (4Q: +3.8)..

Technical: Close over 125.10 eases near term bearish bias.While 125 acts as support for the current advance expect a test of symmetry resistance at 128.15 as the immediate corrective objective. Failure at 124.50 suggest false upside break and opens retest of 123.

Interbank Flows: Bids 125 stops below. Offers 128 stops above.

Retail Sentiment: Bearish
Trading Take-away: Long

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

Fundamental: AUD traded slightly weaker yesterday to reach intra-day low of 0.7423 before recovering overnight, with copper prices falling in tandem with Chinese equities as worries about growth and demand in China loomed after the disappointing Chinese trade data for February. 3-month benchmark copper of LME dropped 0.9% at $4,890 per ton. Clues to future Chinese demand for metals will come at the weekend with the release of industrial production and fixed asset investment figures.

Technical: While .7400 supports intraday expect further upside pressure targeting .7679 next. Only a failure at.7300 support threatens near term bullish bias.

Interbank Flows: Bids .7400 stops below. Offers .7600 stops above.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Fundamental: CAD declined against the USD after ECB Mario Draghi’s press conference, and almost erased all the gains acquired in the previous day. Brent prices fell to $39.78 levels after reports showed that the planned OPEC and non-OPEC meeting may be cancelled owing to Iran’s reluctance to agree to production freeze.

Technical: While 1.3400 contains the recovery, downside pressure remains the driver with bears focusing on a AB=CD ultimate downside objective at 1.2966, the next interim support level to watch is is 1.3176. Only a close over 1.3650 negates the bearish bias.

Interbank Flows: Bids 1.3200 stops below. Offers 1.3400 stops above
Retail Sentiment: Bullish
Trading Take-away: Short

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