New York Forex Report: Euro Inflation Readings Cool As Does Euro

New York Forex Report: Euro Inflation Readings Cool As Does Euro

New York Forex Report: While airtime was heavily devoted to the triggering of Article 50 and the subsequent Brexit related proceedings, it was actually reports of ECB sources suggesting that markets had “way over-interpreted” recent communications around the potential for monetary tightening that had a greater impact yesterday (implied probability of an ECB deposit rate hike by year-end fell from almost 50% to around 35%). EURUSD, having initially held support around 1.0775, broke lower to the next support zone at 1.0740-1.0710, as inflation readings come off hard according to this mornings data, Spanish HICP 2.1% YoY in March from 3% compared to 2.7% expected. German state CPIs tumble, all now below ECB’s 2% target With regard to GBP, as expected, there was little response to the act of physically triggering Article 50 it was already well flagged, no new information was provided and UK macro markets were, and are, in the middle of ranges.

USD Hawkish Fed speakers that touted the possibility of four rate hikes this year dominated headlines. Fed Williams said that he “would not rule out more than three increases in total for this year”, now that the US economy has “largely attained” full recovery from recession. Fed Rosengren also suggested that four rate hikes maybe needed, indicating that it may be appropriate to hike rate in June, September and December as “the economy’s likely to be strong enough and growing fast enough that that would be consistent with raising rates roughly every other meeting”. On a similar note, Fed Evans said the Fed will raise rates at least twice this year, with a possibility of up to four hikes although he cautioned that this would require an improvement in fundamentals. Dollar Index rose 0.29% to 99.99 after jumping in US morning on a couple of hawkish remarks from Fed officials

EUR A Reuters report (29 Mar) on the European Central Bank (ECB) quoted unnamed ‘sources’ saying that ECB policymakers are wary of making fresh policy-message shift in April, as they were worried about potential yield surge. It also noted that the ECB wanted to communicate reduced tail risk not step to the exit after the March message was “way over-interpreted”.

GBP UK households were borrowing less in February as inflation hit a three year high. Net consumer borrowing dropped to £1.4 billion in February (January: £1.6 billion) as personal loans, overdraft and car loans increased 11.10% while credit card debt increased 9.30%. On another report, mortgage approvals rose at a slower pace of 68.3k last month (January: 69.9k).

JPY Japan’s small business confidence climbed to a reading of 50.5 in March (February: 47.7), surging to the highest level since March 2014. Manufacturers and services providers were more optimistic about the economy as downside risks from global events dwindled.

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

Technical: 1-3 Day View – The breach of 1.08 support threatens a broader correction as 1.0830 caps upside attempts there is a chance to challenge pivotal 1.07 support, over 1.0850 opens 1.0969 equidistant swing objective.

1-3 Week View – While 1.10 contains corrective attempts higher focus remains on a retest of 1.03 ahead of 1.0118 extension objective form 2015/17 consolidation. Only over 1.14 sets upside focus on 1.1876
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – 1.2570 upside objective achieved potential for profit taking pullback to test support sited at 1.24 as this area supports expect a test of triangle resistance sited at 1.2640 only below 1.2370 concerns near term bullish bias.

1-3 Week View – While below 1.2864 bears set sites on 1.10 as the broader downside objective, a weekly closing breach of 1.2660 will set up a move to test the weekly bearish line in the sand
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – 111.75 range support breached the daily close below here suggests downside range break and opens 108.43 equidistant swing objective to the downside, near term resistance is sited at 111.75. Only over 112 stems near term selling pressure.

1-3 Week View – as 110 weekly symmetry swing support survives on a weekly closing basis bulls will look for a grind higher to retest 115, a close below 108 which represents an equidistant swing from the cycle, negates the broader bullish theme.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – Anticipated test of 119.30 attracts profit taking as 121 caps upside attempts bears target a test of 118.22 as the next downside objective. Only over 121.80 arrests near term selling pressure.

1-3 Week View – As symmetry swing support sited at 117.69 survives on a closing basis bulls will continue to target weekly symmetry swing resistance sited at 124.42, a weekly close above here would set a broader base for further upside.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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