London Forex Report: JPY Testing BoJ

London Forex Report: JPY Testing BoJ

London Forex Report: On the data front, contrary to more broad-based improvement in manufacturing, PMI services turned out a little mixed, better in the US and UK but softer in the Eurozone and Japan. ISM manufacturing climbed1.1-points to 54.5 in March which was the highest reading this year while Markit PMI edged back up the expansionary threshold to 51.3. Equities fell sharply to close at session lows following weakness overseas and the US Treasury’s move to limit tax inversions. Treasuries rallied amid a flight to quality fuelled by concerns around global growth. Yields declined in global fixed income and other safe haven assets, like JPY and gold, strengthened as equities pulled back. USD strengthened, rising on firmer than expected US data. The USD Index fell sharply going into US mid-day before recovered slightly thereafter to close 0.13% higher at 94.63.

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

Fundamental: EUR remained confined within a range on Tuesday, ended with the 1.1382 level after trading as low as 1.1334 on the back of US strong services PMI readings. The USD attempted to comeback, however, was unable to sustain its gains, particularly against the EUR and the JPY as risk aversion dominated the financial markets.

Technical: Price achieved the symmetry swing objective at 1.1420, printing a hight of 1.1438 before pulling back below the figure, intraday supported is sited at 1.1330 failure here opens pivotal 1.1220 support. While 1,1330 continues to support expect a test of offers towards 1.15 next.

Interbank Flows: Bids 1.1330 stops below. Offers 1.1450 stops above.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Fundamental: After failing to retain the 1.4300 handle on Monday, the GBP extended its decline towards the 1.4120 area yesterday, weighed by the negative mood that surrounds financial markets. Global uncertainty and the upcoming ‘Brexit’ referendum are weighing on the UK economy and growth will remain subdued this quarter, according to Markit Economics.

Technical: A breach of 1.4120 exposes 1.4050 pivotal support to set the platform to test the topside of the broader 1.45/1.40 range. A failure to hold 1.4050 opens a retest of year to date lows at 1.38 ahead of 1.37 weekly swing objective.

Interbank Flows: Bids 1.4050 stops below. Offers 1.45 stops above
Retail Sentiment: Bullish
Trading Take-away: Short

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

Fundamental: USDJPY was the big story in G10 after the currency’s quick sell off followed by a sudden bounce back. The pair edged down past yesterday’s lows as Asian, European, and US equities continued to trade in the red, but it was a headline from a WSJ article “Shinzo Abe Says Countries Must Avoid Competitive Currency Devaluations” that sent USDJPY on a nosedive. The pair dropped from 110.50 to briefly pierce the formidable figure the market has been waiting to reach, touching 109.92 the low before immediately bouncing off and gapping back up near pre-headline levels

Technical: Continue to play the broader range of 110/114 with the range lows at 110.60/40 the key support pivot, a closing breach of the range is required to help define the next directional play. A downside failure opens 105.50 as the next major downside objective.

Interbank Flows: Bids 109.50 offers below. Offers 111 stops above
Retail Sentiment: Bullish
Trading Take-away: Short

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

Fundamental: While other developed nations saw quicker momentum in March, Japan remained vulnerable to downturn in economic growth. The latest survey from Nikkei depicted slower expansion in the services sector (March: 50.2 vs Feb: 51.2), mirroring the deterioration in the manufacturing sector seen in last week’s release. This raises the stakes for Japanese government to increase consumption tax again next year as domestic demand continues to soften

Technical: Failure at 126.50 suggests false upside break and opens retest of 123. 124.60 is the next structural support pivot intraday. Only a close over 126.80 eases immediate downside pressure

Interbank Flows: Bids 124.50 stops below. Offers 126 stops above.
Retail Sentiment: Bullish
Trading Take-away: Short

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

Fundamental: In a widely expected decision, the RBA decided to keep the policy rate remain unchanged at a record low 2% after the RBA meeting held yesterday. Aussie edged to a session high of 0.7627 from 0.7568 right after the RBA meeting. However, it slipped again from the early European session and it is now trading at 0.7553 against USD. As one of the major commodity currencies, Aussie is susceptible to the movement of oil prices.

Technical: Only a close below .7550 threatens the near term bullish bias, while this level supports intraday expect a grind higher to test .7770. A failure at .7550 opens pivotal .7450 support.

Interbank Flows: Bids .7500 stops below. Offers .7650 stops above.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Fundamental: CAD weakened to a one-week low against the USD after disappointing Canadian trade figures and as risk appetite worsened, though losses were trimmed as oil prices turned higher. Canada’s trade deficit unexpectedly jumped to C$1.91 billion in February from C$628 million in January as exports slumped by their most in nearly seven years.

Technical: Retest of recent lows in the 1.2920’s set a potential double bottom base as intraday price pierced lower to test structural support sited 1.2830/50 which attracted decent bids. As this area supports we have the potential to set a base for a broader correction. with 1.33 as an initial upside objective. The major hurdle to the upside is symmetry swing resistance sited at 1.3230.

Interbank Flows: Bids 1.30 stops below. Offers 1.3250 stops above
Retail Sentiment: Neutral
Trading Take-away: Neutral

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