London Forex Report: UK Russian Tensions Rise

London Forex Report: UK Russian Tensions Rise

London Forex Report: Global risk appetite remained somewhat nervous on lingering US trade protectionism concerns, with Wall Street and USD declining whilst US Treasury bonds gained further. Larry Kudlow, who has been appointed by president Trump as economic adviser, signalled a strong USD and a tougher China stance, on top of advising the FOMC to not “overdo” rate hikes as “growth is not inflationary. Just let it rip”. On pursuing “phase two” of the tax reform, he said the Trump administration would seek to make tax cuts for individuals permanent, and include a lower capital gains rate. UK PM May said the UK will expel 23 Russian diplomats and additional measures will be announced. Russia said they will retaliate against UK for expulsions.

NORTH AMERICA unexpected 0.1% MoM decline in retail sales in February (Jan: -0.1% revised), dragged by a broad based decline in most sectors including auto and gasoline raises concerns that US consumers are turning more cautious with their spending. Retail sales have been declining in the last three months. Producer prices eased to 0.2% MoM in Feb-18 (Jan: +0.4%), which brings PPI growth to 2.8% YoY (Jan: +2.7%) matching expectations. This is consistent with a tepid wage growth and headline inflation in Feb-18, signifying that inflation remained contained without major acceleration as worried by investors previously. Mortgage applications sustained a 0.9% WoW increase in the week ended 9-Mar, compared to the 0.3% gain in the preceding week.

EUROPE Eurozone industrial production fell 1.0% MoM in January (Dec: +0.4%), the biggest fall in more than a year. Markets have been expecting a milder drop of -0.5%. Energy production dwindled by 6.6% MoM whereas both durable consumer goods and intermediate goods abated as well. Annual production growth was also lower at 2.7% YoY (Dec: +5.3%).

ASIA China retail sales disappointed but industrial production and fixed asset investment outperformed. February data shows that the Chinese economy remained resilient although it is worth noting that the figures are on the upside due to seasonal distortion as Lunar New Year was celebrated week long in Feb-18. Overall the economy is still expected to moderate for the remaining of the year

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

Technical: 1-3 Day View – Offers ahead of 1.24 contain for now, a close above here opens 1.2630 again, range is contracting a close below 1.23 opens 1.2140.

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: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – The daily close over 1.3925 opens 1.4093, however a close today below 1.3920 suggests a false break and another retest of 1.37 bids

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

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, return to trend confirmed on a daily close below 106.50, near term resistance is sited at 107, with near term support sited at 106.04

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

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 128.50 as 132 caps corrections. A close over 133 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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