New York Forex Report: Dollar Soggy Within Recent Range

New York Forex Report: Dollar Soggy Within Recent Range

New York Forex Report: The USD closed on a soft note generally Tuesday but London price action has been lackluster, leaving G10 FX narrowly mixed in quiet trading and the USD just about hanging on to key support for the DXY at 89.70. The ongoing reshuffle of senior personnel in the US government bothered markets yesterday and Asian stocks followed the US lead lower despite stronger than expected Chinese industrial production and investment (and more or less as expected retail sales) data for Feb. European markets have perked up a bit and better data lifted metals and the broader commodity complex. The AUD and CAD top the performance league amongst the major currencies versus the USD while the EUR has slipped and is a relative under-performer following cautious comments from ECB President Draghi. Developed market bonds are stable. Japanese markets staged the extra-ordinary feat of seeing not one single benchmark 10-year JGB trade today, according to Bloomberg. For the session ahead, markets will continue to monitor developments in Washington to gauge how personnel changes may shape policy decisions (reports late yesterday suggested that the president is seeking broader and more significant tariff action against China). US data releases include retail sales and PPI, with modest gains expected for both on the month (+0.3% and +0.1% respectively). USD sentiment still feels a little fragile following the unceremonious firing of Sec. State Tillerson and markets continue to view the tone of US data releases can have an important bearing on the near-term direction of the market. More generally, longer run headwinds for the USD from strengthening global growth (and rebounding investment flows to ex-USA destinations), tariffs and rising US deficits. Seasonally, we are entering the period of the calendar year where the USD typically starts to struggle a little more obviously.

NORTH AMERICA US consumer price index was released. Headline CPI softened to increase 0.2% in Feb-18 (Jan: 0.5%) while core CPI stabilised at 0.2% MoM. On an annual basis, CPI rose 2.2% (Jan: 2.1% YOY), matching expectations. Contrary to last month’s major surprise which spooked investors into a selloff in treasuries, the number was a relief to markets. The release was partially overshadowed by a sudden shuffle in the Trump administration but overall a decent labour market together with a steady inflation will continue to support Fed’s outlook on growth and inflation, further reaffirming that the central bank will gradually hike rates.

EUROPE In Spain, HICP inflation was confirmed at 1.2% YoY in February and Italy’s unemployment rate fell to 11.0% in 4Q. French payrolls rose 0.3% QoQ in 4Q to be up 1.1% YoY. The UK’s Office for Budget Responsibility published its spring economic and fiscal outlook on Tuesday. Finance Minister Philip Hammond stated that net public borrowing for FY17/18 was revised down GBP5bn to GBP45bn, with that improvement largely carried through the forecast period. These forecasts assume GDP growth of 1.7% in 2018 and 1.5% in 2019, which is marginally firmer than forecast previously.

ASIA Bank of Japan released its Monetary Policy Meeting Minutes for January’s discussion. The BOJ has announced last Friday that the central bank will keep its monetary policy unchanged, the overnight night interest rate to be kept steady at – 0.10% while yields on 10-year JGBs capped at 0%. The minutes offer glimpse into the policy making discussion, key highlights include majority of the board members agreed that inflation target is on pace and that the central bank should continue to pursue powerful monetary easing. All members voted unanimously for the monetary policy statement released immediately after the meeting

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

Technical: 1-3 Day View – The daily close below 1.2310 concerns near term bullish bias opening a move to 1.2090. Near term resistance is sited at 1.2350 has been eroded but offers ahead of 1.24 contain for now, only a close above here opens 1.2630 again

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

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

Technical: 1-3 Day View – 1.3925 is the near term pivot, as this area caps look for 1.3570 as the next downside objective, a daily close over 1.3925 opens 1.4046

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: Neutral
Trading Take-away: Neutral

USDJPY
Outlook: Short Term (1-3 Days): Bullish – 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: Neutral
Trading Take-away: Neutral

EURJPY
Outlook: Short Term (1-3 Days): Neutral – 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: Neutral
Trading Take-away: Neutral

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