New York Forex Report: Markets Mark The Ides of March

New York Forex Report: Markets Mark The Ides of March

New York Forex Report: Current USD strength reflects a surge in betting on a March 15 Fed rate hike that is unparalleled in recent history; market pricing via Fed fund futures put the probability of a 25bps rate hike at 40% as of Monday morning but currently, the probability of a hike is priced at 82%. The surge in expectations is all the more remarkable as US GDP data revisions yesterday showed softer growth and weaker PCE inflation, supposedly the Fed’s preferred measure of price trends. Fed rhetoric late yesterday was supportive of higher March probabilities but a significant part of the swing in expectations had already occurred by the time Williams and Dudley spoke. Key short-term spreads have moved significantly in the USD’s favour this week and constitute a strong, primary source of support for the USD and will certainly handicap the CAD if the BoC stresses an outlook for unchanged monetary policy going forward in its policy statement today. Another heavy round of US data reports, the Beige Book and Fedspeak today will further shape market expectations; Fed Chair Yellen’s remarks Friday may be the ultimate arbiter for the March 15th FOMC, however. Stronger than expected GDP data supported the AUD (a relative out-performer) in the context of a generally strong USD.

FX Majors: EUR Italy’s HICP rose a stronger-than expected 0.2% MoM, lifting annual inflation to 1.6% YoY from 1.0% YoY previously. Separately in Spain, mortgage approvals rose 6.9% YoY in December. Manufacturing PMIs are due today in Europe, though the final manufacturing number for the Eurozone not expected to differ from the flash. Germany will see inflation data where we expect 0.6% m/m and 2.1% YoY for both CPI and HICP. GBP In the midst of Brexit talks, GfK consumer confidence indicator slid further into negative territory in February. The index was down to -6 last month after a reading of -5 in January. JPY Japan’s housing starts staged a surprised 12.80% YOY increase in January after a 3.90% YOY growth in December, rising by the quickest pace in three months. On the other hand, construction orders decelerated to 1.10% YoY in January (December: +7.10% YoY) and small business confidence was also a tad softer at 47.7 in February.

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

Technical: Expected retest of 1.0521 base plays out forming interim double bottom, a closing breach opens a move to 1.0450 next, only over 1.0650 arrests near term bearish bias.
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Range trade persists with price testing range support, equidistant swing objective at 1.2679 capping corrective advance. Near term support sited at 1.2345 with range resistance sited at 1.2580
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Only a 112 sustained breach will open 110.70 symmetry swing support underpinned by 109.90 50% retracement of the move from August 2016 lows. Near term resistance sited at 113.80, a close over 114.50 reasserts upside targets primarily at 115.50
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 118.70 downside objective achieved as near term resistance sited at 120.50 caps corrections bears target 117.69 next, only a close over 121.50 stems near term selling pressure.
Retail Sentiment: Bearish
Trading Take-away: Long

Commodities FX: GOLD fell for a second day, by 0.34% to 1,248.44 per ounce as traders trimmed long positions ahead of Trump’s speech. OIL settled down 4 cents to $54.01 on concerns that demand growth may not be sufficient to soak up U.S. crude inventories that have been rising for the past seven weeks, and is forecasted to increase another 2.9 million barrels for the last week in a report to be released later today. AUD Australia GDP reading surprised on the upside, rising 1.10% QoQ in 4Q after a contraction of 0.50% QoQ in 3Q and avoided a technical recession. Household consumption rose 2.60% QoQ last quarter, overturning the 2.70% QoQ contraction in 3Q. Exports growth doubled to 2.20% QoQ (3Q: +1.00% QoQ) while capital investment rose 1.60% QoQ in 4Q (3Q: -1.10% QoQ), contributing to upturn in the headline GDP number. In addition, performance of manufacturing index surged to the highest since 2002 to 59.3 in February (January: 51.2 CAD The major risk event this week for CAD is the Bank of Canada rate decision is coming today, unchanged policy is the consensus. Overall, the market consensus for Canadian rate hikes is at a miniscule 2 bps over the next 12 months according to the OIS.

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

Technical: The next upside objective is sited at .7750 as price continues to consolidate at elevated levels. Near term support is sited at symmetry swing level .7600 ahead of pivotal .7449
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: Breach of 1.3210 opens anticipated move back to test 1.3370.Price action remains erratic as price attempts to base above pivotal 1.30. Near term support is sited at 1.32.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: As 1225 acts as support bulls target symmetry swing resistance sited at 1299, only a close below 1200 concerns near term bullish bias.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: Rejection from equality objective area at 55.30, a close below symmetry support at 50.68 confirms a medium term high and opens a retest of pivotal 49.00. Near term resistance is sited at 54.50.
Retail Sentiment: Bearish
Trading Take-away: Long

Posted in Forex Analysis, New York Forex Report, tagged with on