London Forex Report: Goldilocks Employment Report

London Forex Report: Goldilocks Employment Report

London Forex Report: US nonfarm payroll surprised on the upside with a 242K gains in February and net two months revision was +30K, bolstering the case of sustained job market recovery underpinned by job gains in the services sector. Unemployment rate held steady at 4.9% while participation rate inched 0.2ppt higher to 62.9%. The surprise 0.1% MoM fall in average wages was the only dark spot in the job report, casting a shadow over income growth and inflation.China was also in the limelight over the weekend amid its annual NPC meeting. The China government further nudged growth forecast lower to 6.5-7.0% for 2016 (vs “around” 7.0% in 2015) but inflation rate forecast was left unchanged at 3.0% (2015 average inflation rate 1.4%). Budget deficit target was higher at 3.0% of GDP, up from 2.3% of GDP in 2015, signalling the China government is firing on all cylinders on both the fiscal and monetary fronts to keep growth supported. USD weakened, the USD Index slipped 0.25% to 97.34 as dip in US wages trumped strong gains in nonfarm payrolls.

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

Fundamental: EUR gained 0.40 percent against dollar to an intraday high of 1.1042 as the US wage drop data outweighed the nonfarm payroll data. EURUSD moved away from the low traded 1.0825 on 2 March and the pair is now standing firm above 1.0900 handle. Markets now turn their focus to European Central Bank meeting due 10 March.

Technical: A close over 1.1080/1.11 eases immediate downside pressure. Intraday support is sited at 1.09 while this survives expect a further grind higher to test pivotal resistance at 1.11. Failure at 1.09 opens retest of bids towards 1,08

Interbank Flows: Bids 1.09 stops below. Offers 1.11 stops above.
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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

Fundamental: GBP rose to its highest in nearly two weeks against dollar yesterday after the release of disappointing US hourly wage data, the pound printed its best week since late 2009. GBPUSD surged to an intraday high of 1.4247, the highest since 22 February. The pound also surged against Euro on last Friday under the pressure on expectations that ECB is likely to ease more in the next meeting. However, the upside of Sterling is limited with the Brexit issue remaining on the table.

Technical: While 1.41 acts as intraday support expect a continued grind higher to test pivotal 1.4250, a close above here eases bearish bias, with the next corrective objective at 1.4424.

Interbank Flows: Bids 1.41 stops below. Offers 1.4250 stops above.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Fundamental: USDJPY climbed to 114.25 after the nonfarm data had been released. However, the pair retreated afterward and it is last traded at around 113.65. Despite improved risk sentiment due to rebounded oil prices and stable global stock markets, USDJPY still lacks upward momentum.

Technical: Bulls will be looking for 112.50/113 to continues to support expect a further leg of corrective gains, to retest the broken neckline support at 115/116. Failure at 112.50 open 11 again.

Interbank Flows: Bids 113 offers below. Offers 114.50/70 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: ECB meets this week March 10. WSJ wrote ECB has little choice but to deliver a substantial further stimulus; Wolfgang Münchau in said ECB has not run out of ammunition but the number of effective policy tools is clearly finite. It should not dismiss them casually, or it might risk losing what little credibility it has left.

Technical: While 123.80 offers intraday support expect a continued grind higher to test pivotal 127. A failure at 123 refocuses bearish sights on the psychological 120 en route to a weekly downside objective at 118/117, only a close over 125.10 eases bearish bias.

Interbank Flows: Bids 123 stops below. Offers 126 stops above.
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: AUD stood firm at 0.7345 in the Asian session Friday, it gained further against the USD to the intraday high of 0.7443, a peak has not seen since August 2015. The Australia dollar gained almost 3 percent against dollar, and more than 2 percent against the Euro and Yen last week. The interest rate futures are now pricing the probability at 22.51% that RBA will cut rate on the next meeting.

Technical: While .7300 supports intraday expect further upside pressure targeting .7458 next next a close over here targets .7530 next .7500 test next. Only a failure at.7150 pivotal support threatens bullish bias.

Interbank Flows: Bids .7250 stops below. Offers .7460 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 strengthened against USD due to the surge of oil prices and soft US hourly wage data. As WTI crude stood firm above 36, USDCAD dropped to 1.3309, its lowest since November 2015. Bank of Canada will have the rate meeting on 9 March while a probability of nearly 90% priced by the markets that BoC will on hold this meeting.

Technical: While USDCAD trades sub 1.3510 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 1.3350.

Interbank Flows: Bids 1.3350 stops below. Offers 1.3500 stops above
Retail Sentiment: Bullish
Trading Take-away: Short

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