London Forex Report: Markets Whipsaw On Trade Tensions

London Forex Report: Markets Whipsaw On Trade Tensions

London Forex Report: Market hopes for a peaceful resolution to the US-China trade tensions were dashed overnight amid news that the Trump administration is considering investment curbs by the Chinese on sensitive technologies by invoking the “International Emergency Economic Powers Act”. US Commerce Secretary Ross also hinted at “limitations on foreign investment” and pending legislation to bulk up the Committee on Foreign Investment in the US. Wall Street tanked again, while the 10-year Treasury bond yield fell below the 2.8% handle to 2.77 on the flight to quality. Elsewhere, China confirmed that North Korean leader Kim Jong Un met with President Xi on a four-day trip. Kim reportedly told Xi he was committed to denuclearisation of the Korean peninsula, and was willing to hold a summit with the US. Amid cited quarter/month-end flows and with risk aversion re-emerging (UST curve bull-flattened from the back-end), the USD climbed against the majors on Tuesday with the CHF and the JPY outperforming across the board. The AUD bore the brunt of weakened global investor appetite and fell against all its peers.

NORTH AMERICA Sentiment in the US eased as shown by the Conference Board’s Consumer Confidence Surveys. The index surprisingly fell to 127.7 in March (Feb: 130.0 revised) as perceptions of both present condition (159.90 vs. 161.2) and future expectation (106.2 vs 109.2) declined. However subcomponents in the area of employment narrate an otherwise different story where the number of respondents who viewed jobs as being plentiful at the present increased compared to last month. Respondents who think that jobs are hard to obtain fell as well. In a separate note, the Richmond Fed manufacturing index which tracks manufacturing sentiments indicates a likely slowdown in the mid-Atlantic region. The index registered a reading of 15 in March (Feb: 28) on the back of a broad base decline in various sub components. Meanwhile house prices across 20 cities in the US increased at a slightly quicker pace of 6.40 % YoY in Jan-18 (Dec: +6.31% revised) against a backdrop of higher demand and lower home inventory.

EUROPE Overall sentiments in the Eurozone remained subdued in March. Consumer confidence stayed at 0.1 in March (Feb: 0.1) whereas the Business Climate Indicator slowed to register a reading of 1.34 (Feb: 1.48). This brings the Economic sentiment to soften to112.6 in March (Feb: 114.2 revised). ECB’s Nowotny sees clear possibility to reduce stimulus in the euro-area after September and thinks that the ECB will have to decide on next steps in asset purchases by summer. UK BoE report highlighted the risk to financial services from Brexit, this is hardly new news for investors. Again, pressure on the GBP appears to be flow-related, rather than fundamentally driven.

ASIA Japanese Prime Minister Shinzo Abe is likely to meet with US President Trump on 18 April to coordinate strategy ahead of Trump-Kim meeting which is expected to take place end of May

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

Technical: 1-3 Day View – As 1.24 now acts as support expect a test of 1.2530, a close below 1.24 opens a retest of 1.2330 and return to range.

1-3 Week View – As 1.2130 now acts as support expect a test of 1.2635 as the next upside objective. Weekly close below 1.19 neutralises bullish objectives opening a test of 1.14.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – As 1.4160 supports 1.4340 is the next upside objective. Only a close below 1.40 concerns near term bullish bias

1-3 Week View – As 1.3650 supports 1.45 becomes the next upside objective, only a close back below 1.34 would jeopardise the bullish advance.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – As 108.44 acts as resistance 103.22 is the next downside objective, near term resistance is sited at 105.50

1-3 Week View – The close below 108 negates the broader bullish theme and opens the psychological 100 magnet as the next downside objective, only a close above 108.50 stabilises the pair, opening 112.50
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: 1-3 Day View – Breach of 131 sets a top to target 128.25 as 131 acts as resistance. A close over 132.30 stabilises the pair opening a retest of 135

1-3 Week View – The closing breach of 131 concerns the bullish consolidation bias opening a test of 128.50 while this area supports there is a window to retest and breach cycle highs above 137
Retail Sentiment: Bullish
Trading Take-away: Short

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