New York Forex Report: Markets Await ECB Rate Decision

New York Forex Report: Markets Await ECB Rate Decision

New York Forex Report: Despite continued rally in oil prices and bigger than expected rebound in US existing home sales, markets turned cautious again with the approach of ECB MPC meeting today. Although the ECB may not slash its main refinancing and deposit rates again, President Draghi’s reaffirmation of a dovish policy bias is expected to keep markets on toes. US existing home sales rebounded and climbed 5.1% MoM to annualized pace of 5.33million units in March, showing that low mortgage rates and a robust job market continued to support momentum in the property market. However, declines in the number of permits approved and housing starts released earlier this week suggest growth remains uneven across the housing sector. USD rebounded despite no apparent catalyst aside from better US housing data. The USD Index rallied at the start of US trade, closing 0.55% higher at 94.49 likely on risk aversion in European majors heading into ECB decision on policy today

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

Fundamental: EUR dropped to an intraday low of 1.1286 ahead of ECB meeting over fears that comments from ECB would hurt the European currency. Markets widely expect that ECB will remain on hold from further easing in the rate meeting. However, any dovish remarks from Mario Draghi will surely hurt the Euro. Apart from the meeting, Euro-Zone Consumer Confidence will also be released.

Technical: The sub 1.13 close suggests a retest of bids at 1.1220. Only over 1.1360 negates near term bearishness

Interbank Flows: Bids 1.1280 stops below. Offers 1.1350 stops above
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Fundamental: GBP was initially driven lower on the session by the latest Retail Sales data which was weaker than expected in March. However, downside was capped by the latest Public Sector Net Borrowing data which showed the Govt borrowed less than expected in March.

Technical: While 1.43 supports downside reactions expect test of offers over 1.4450. Failure at 1.43 opens a near term base test at 1.4240 next.

Interbank Flows: Bids 1.43 stops below. Offers 1.4450 stops above
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Fundamental: USD remains supported following better-than-expected US existing home sales data, suggesting the housing market recovery remained intact despite signs that economic growth stalled in the first quarter

Technical: The downside ratchet now targets 105.50 as the next major downside objective.Trend resistance is sited at symmetry and structure confluence at 110.70 which should attract fresh selling for renewed weakness.

Interbank Flows: Bids 107.50 offers below. Offers 110.50 stops above
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Fundamental: A final release of Japan’s machine tool orders affirmed that orders declined 21.2% YoY in March (Feb: -22.5% YoY) amid drag from weak foreign demand. Bank of Japan Governor Kuroda said yesterday he told Group of 20 finance leaders gathering in Washington last week that the central bank won’t hesitate to ease monetary policy further if needed to hit its 2 percent inflation target

Technical: Bears now target weekly symmetry objective at 120.60, resistance is sited at 124.50. Only a close over 126.80 eases immediate downside pressure.

Interbank Flows: Bids 120.50 stops below. Offers 124.50 stops above
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Fundamental: AUD remains near highs supported by a rebound in risk sentiment this week on the back of a strike by Kuwaiti Oil workers. Upside currently capped by firmer USD.

Technical: 7770 upside objective achieved. While .7500 supports the advance bulls target .7880 as the next upside objective

Interbank Flows: Bids .7500 stops below. Offers .7880 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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

Fundamental: Bank of Canada Governor Stephen Poloz said on Wednesday that it could take Canada more than three years to recover from a shock caused by low oil prices and Canada was still having to deal with low interest rates, weak inflation and sub-par growth

Technical: While prior support at 1.2740/60 acts as resistance expect a test of bids at 1.2560 as the next downside objective.

Interbank Flows: Bids 1.2550 stops below. Offers 1.28 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines