London Forex Report: US Manufacturing On The Mend

London Forex Report: US Manufacturing On The Mend

London Forex Report: US data continued to post signs that the manufacturing sector is on the mend. Following upbeat empire manufacturing index from an earlier release, Philadelphia fed business outlook index turned positive for the first time in seven months, rebounding from -2.8 in Feb to 12.4 in March. Job market data was also positive, with initial jobless claims coming in at 265k last week (previous week: revised to 258k). Last week’s print marked 54 straight weeks of claims staying below the 300k threshold, underscoring a tight job market. Separately, current account deficits shrank to $125.3 billion in 4Q from $129.9 billion in 3Q. USD slumped for a second day, as dimming outlook for tighter monetary policy from the Fed continued to weigh. The USD Index slumped preceding European trade and traded sideways thereafter to close 1.2% lower at 94.76.

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

Fundamental: In the Euro area, a final report on inflation affirmed that price levels dropped 0.2% YoY in Feb (Jan: +0.3% YoY). Prevailing deflationary pressure leave rooms for ECB to expand its stimulus measures. Separately, trade deficits narrowed by € 1.3 billion to € 21.2 billion in Jan due to quicker decline in exports. EUR extended its gains against the USD, surging to five-month highs at 1.1342 levels.

Technical: Expect a further grind higher to test pivotal resistance at 1.1370 en route to the 1.1420 symmetry swing objective, while 1.1240 supports intraday. Only a close below 1.1050 eases immediate bullish pressure

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): Bullish – Medium Term (1-3 Weeks): Bearish

Fundamental: BOE maintained rate at a record low of 0.5% in its meeting yesterday while keeping asset purchase target at £ 375 billion. The accompanying policy statement acknowledged the increasing uncertainty of Brexit which will further aggravate prevailing downside risks on growth and inflation. However, the statement suggests that a rate cut is not likely and a rate hike has not been taken off the table as “it is more likely than not that bank rate will need to increase over the forecast period to ensure inflation returns to the target in a sustainable fashion”

Technical: Close over 1.43 eases immediate downside pressure bulls now target a retest of offers and stops above 1.4668, bulls have the ball while 1.43 supports downside corrections

Interbank Flows: Bids 1.43 stops below. Offers 1.4550 stops above
Retail Sentiment: Bearish
Trading Take-away: Long

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

Fundamental: USDJPY reached a 17-month low after the Fed expressed its cautious stance towards increasing interest rates. The pair touched 110.65 before crawling back to current levels at 111. BoJ Governor Kuroda emphasized that the bank’s monetary policies do not target exchange rates. JPY traded even stronger after the news release as the market attempted to test the Japanese authorities to see where they stood on the JPY

Technical: Retest of bids sub 111 attracts profit taking, a sustained breach here will leave the psychological 110 exposed, a close over 113 is required to neutralise the immediate downside threat

Interbank Flows: Bids 110 offers below. Offers 112.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Short

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

Fundamental: The Euro Zone CPI was -0.2 percent YoY, in line with markets’ expectations. However the trade balance data dropped to around 6.2 billion, downward revised 24.3 billion from a month earlier

Technical: 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 127.50 stops above
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Fundamental: Australian dollar climbed to an eight-month peak yesterday in the wake of solid domestic figures and dovish comments from the US Federal Reserve. The AUD rose to 0.7656 as heavy selling of the USD and recorded the highest since July last year. A surprise drop in Australian unemployment to 5.8 percent also aided the Aussie as it seemed to lessen the risk of cut in rates for the next month.

Technical: .7672 upside target achieved profit taking pull back should find fresh buyers at .7590 for the next upside leg to target .7729 next. Only a failure at.7400 support threatens near term bullish bias

Interbank Flows: Bids .7590 stops below. Offers .7700 stops above
Retail Sentiment: Bearish
Trading Take-away: Long

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

Fundamental: The Canadian dollar strengthened to a nearly five-month high against the US dollar while it sunk on lower Federal Reserve rate hikes expectations and the oil market rally stretched further. US oil prices surged 5 percent to burst above $40 a barrel, boosted by a plan among some of the world’s biggest producers to meet next month to discuss supporting the market

Technical: AB=CD corrective downside objective at 1.2966 achieved, while 1.3160 contains profit taking bears target 1.2680 as the next downside objective. Only a close over 1.34 negates immediate bearish bias.

Interbank Flows: Bids 1.29 stops below. Offers 1.3150 stops above
Retail Sentiment: Bullish
Trading Take-away: Short

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