New York Forex Report: Korea Summit Kicks Risk Sentiment Higher

New York Forex Report: Korea Summit Kicks Risk Sentiment Higher

New York Forex Report: The USD is trading broadly lower on the session so far, yielding ground to all the G10 currencies bar the JPY which is all but unchanged amid a rebound in risk appetite. Asian and European equity markets are gaining on the day while developed market bonds are mixed; Treasury bonds are moderately softer and core European bonds are lower; Gilts are under-performing but peripheral EU bonds are trading somewhat firmer as markets stabilize following the Italian election. Crude, gold and copper prices are modestly higher. The USD losses have picked up speed in early North American trading as risk appetite improves. Markets continue to mull the risk of the US imposing tariffs on foreign steel and aluminum but sentiment has been supported perhaps by signs of last ditch efforts to talk the president out of the measures and by signs of détente between North and South Korea amid reports that both countries will hold a summit meeting in April. Markets may play something of a waiting game today; the data round is limited to just factory orders and final durable goods in the US and the Ivey PMI in Canada. The announcement on tariffs (at some point this week, presumably) – unless USD losses really start to accumulate.

NORTH AMERICA US PMI services was unchanged in the final report at 55.9, up from 53.3 in Jan on improved new business growth. But the ISM gauge indicated that the services sector grew a tad softer in Feb, with the index dipping to 59.5 from 59.9 in Jan; pace of growth remains decent comparing levels in the last 6 months.

EUROPE PMI services of the Eurozone was downwardly revised to 56.2 in Feb final reading from 56.7 initially reported, dipping further from 58.0 in Jan as services sector growth normalises from a ten and a half-year high. New business growth eased to a six month low, while outstanding business growth was the slowest since Aug 2017. Signs of Brexit jitters were absent in data as UK PMI services climbed from 53.0 in Jan to 54.5, highest in 4 months, owing to firmer growth in new business and employment. Investor sentiment in the Eurozone turned softer in Mar, in line with recent downticks in sentiment-based surveys. Sentix investor confidence index slipped from 31.9 in Feb to 24.0 in Mar, lowest since Apr 2017 amid build-up in political uncertainties. Separately, retail sales growth picked up pace in Jan, rising 2.3% YoY from 2.1% previously, a sign that spending continues to hold up. MoM, sales declined but at a softer pace of 0.1% from a fall of 1.0% in Dec.

ASIA China and Japan registered more moderate growth in services sector in Feb. China’s Caixin PMI dipped to 54.2 from 54.7 in Jan; the bright spots were that sales and hiring growth improved, but headline PMI was weighed down by softer growth of new orders, likely due to seasonal factor. Japan’s Nikkei PMI ticked lower to 51.7 from 51.9 in Jan due to softer growth in output and new orders, both of which weighed down business sentiment.

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

Technical: 1-3 Day View – The daily close back above 1.2260 opens 1.2440 near term support is sited at 1.2310, resistance is sited at 1.2370, failure here and a close below 1.22 resets focus on 1.2090

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

Technical: 1-3 Day View – 1.3715 achieved, profit taking pullback should encounter offers on a test of 1.3850/70 as this area caps look for 1.3570 as the next downside objective, a close today over 1.3915 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, the close below 107.10 suggests 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): Bearish – Medium Term (1-3 Weeks): Neutral

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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