New York Forex Report: Politics & Monetary Policy Pressure Markets

New York Forex Report: Politics & Monetary Policy Pressure Markets

New York Forex Report: US equities and the USD remain under pressure within current ranges, with Cohn’s resignation news not helping sentiment around President Trump’s trade tariffs. Monetary policy in the US should return to the spotlight today and into the end of the week, with the ADP employment report forecast to show a private sector jobs growth of around 200k in February. Such an outturn will add to confidence for a similar outturn in Friday’s official numbers. Continued strength in the labour market will maintain focus on prospects for wage growth, which jumped to a post-crisis high of 2.9% last month. Fed Chairman Jerome Powell last week said that the US economic outlook had strengthened, but he also noted he did not see strong evidence yet of a “decisive move up in wages”. NY Fed President Dudley and Atlanta Fed President Bostic speak today, after Brainard and Kaplan yesterday remained upbeat (the former’s comments more noteworthy given her dovish stance). The Bank of Canada are expected to leave their interest rates unchanged at 1.25% and probably retain a more neutral stance in regards to forward guidance until NAFTA is resolved. The UK focus is likely to be on developments in the Brexit negotiations. European Council President Donald Tusk is expected to brief reporters on a future trade deal with the UK. The briefing follows last week’s release of the European Commission’s draft negotiating text and UK PM Theresa May’s speech. BoE’s Haldane avoided mentioning monetary policy in his speech last night.

NORTH AMERICA Factory orders in the US fell 1.4% MoM after rising 1.8% in Dec, weighed down by relatively sharp decline in durable goods orders, which fell 3.6% after rising 2.7% in Dec. Discounting generally volatile impact of orders of transportation, factory orders growth eased to 0.4% in Jan from 0.9% in Dec.

EUROPE The Markit retail PMI for the Euro area picked up 1.5pts to 52.3 in Feb, suggesting that retail sales picked up last month following two consecutive months of decline. UK’s BRC retail monitor reported that like-for-like sales rose 0.6% YoY in Feb, albeit fractionally stronger than last month. Growth in sales at all stores picked up to 1.6% YoY

ASIA In Australia, retail sales rebounded on a monthly basis, though rising just 0.1% MoM in Jan from a 0.5% decline previously, missing the 0.4% growth markets were looking for. Annually, retail sales growth eased to 2.2% YoY from 3.9% in Dec, led by softer expansion in spending on food, household goods and expenditure at café & restaurants. Meanwhile, the construction sector grew at a quicker pace in Feb, as suggested by an increase on the AiG performance of construction index to 56.0 from 54.3 in Jan. Growth in the sector was driven by increased activity, slightly firmer new construction orders and hiring, but even so, wages grew at a softer pace.

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, 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): 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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