New York Forex Report: Draghi Presser In Focus

New York Forex Report: Draghi Presser In Focus

New York Forex Report: Markets generally appear a little calmer this morning. The USD is consolidating, Asian and European stocks firmed modestly while developed market bonds are flat to narrowly mixed. After the volatility and uncertainty driven by the shift towards protectionism in the US over the past week, traders appear to be sitting on the sidelines until there is some clarity on what, precisely, the White House is contemplating. We should get that today, although the White House press sec. strongly hinted yesterday that Canada and Mexico could be exempted and the president took more precise aim at the US trade imbalance with China. China reported a larger than expected trade surplus at USD33.7bn and a surge in exports earlier but the data were perhaps affected by the timing of the Lunar New Year (note a similarly large jump in export data from Feb 2015). Traders are also awaiting ECB President Draghi’s press conference (policy left on hold earlier, as was widely expected) for clues on the policy outlook. North American data releases are very much second tier in nature today (ahead of the double employment release from Canada and the US tomorrow) The fog of US policy making may linger over the markets for a little longer casting a shadow over the USD; protectionism has typically worked against the USD in the past and may do so again and we think the accumulation of fiscal (especially) and external imbalances work against the USD in the longer run.

NORTH AMERICA In the US, the Fed Beige Book maintained that the US economy is on a moderate growth path and noted signs of build-up in inflation. Job reports also reaffirmed continued growth in the US labour market. ADP showed the private sector added 235k jobs in February, down from the upwardly revised 244k jobs in January (from 234k). Nonfarm productivity decelerated and was flat in 4Q (3Q: +2.6%) vs a preliminary reading of -0.1% but unit labour costs quickened to 2.5% (3Q: +1.0%). Trade deficit widened more than expected to $56.6bn in January, no thanks to a 1.3% MoM decline in exports even as imports were flat. Consumer credit was however a tad lower at $13.9bn in January, implying cautiousness among consumers, in line with slower growth seen in personal spending released earlier. Meanwhile, MBA mortgage applications rose at a slower pace of 0.3% WOW in the week ended 2- March. .

EUROPE Eurozone 4Q GDP maintained a 0.6% QoQ growth as initially estimated, but down a notch from the 0.7% QoQ increase in 3Q, as slower growth in household and government spending offset a rebound in investment. Softening growth outlook could potentially delay ECB’s policy normalisation plans. In tandem with easing house prices surveyed by other bodies in the UK, yesterday release by Halifax showed the increase in house prices moderated for the 4th consecutive month to 1.8% YoY in the three months to February (Jan: +2.2%), its slowest in five years as softening growth outlook and rising inflation is taking a toll on consumers

ASIA Japan leading and coincident indices pulled back more than expected to 104.8 and 114.0 in January, dragged by declines in new job offers and housing starts, signalling a more subdued outlook in the next 3-6 months. Evidently, final reading of 4Q GDP confirmed a slowdown but at a lesser than expected rate to 0.4% QoQ (3Q: +0.6% QoQ), as a result slower growth in private consumption but the slowdown was mitigated by a rebound in fixed capital formation

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

Technical: 1-3 Day View – The daily close back above 1.2260 opens 1.2440, ahead of 1.2550 near term support is sited at 1.2310 a daily close below here would concern near term bullish bias

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

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

Technical: 1-3 Day View – 1.3715 achieved, profit taking pullback should encounter offers on a test of 1.3925 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

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 106.55

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): 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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