Sample Category Title

Highlights:

• Nominal manufacturing sales dipped 0.2% in February, above market expectations for a 0.7% decline. The dip followed a downwardly revised 0.1% gain in January but outsized 2.4% (previously 2.1%) and 2.2% increases in December and November, respectively.
• Weakness was concentrated in a 5.3% drop in motor vehicle sales and price-led 5.0% drop in petroleum & coal sales (petroleum & coal volume sales declined a more modest 2.0%). An outsized 27% jump in the volatile aerospace component provided the main offset although machinery shipments also rose an encouraging 3.1%.
• Sale volumes inched up 0.1%
• Inventories increased 1.6% after a 1.1% increase in February. The inventory-to-sales ratio increased but from very depressed levels in January and February.

Our Take:

The modest dip in manufacturing sales in February was somewhat smaller-than-expected, particularly given the series of strong reports in the often-volatile series leading up to February (sales increased an average 1.6% per month October to January) that pointed to risk of a near-term correction and an earlier-reported drop in exports in the month. The February result would have been weaker if not for a 27% jump in the volatile aerospace component (sales declined 1.0% excluding aerospace); however, nominal sales were also restrained by lower prices, particularly for petroleum & coal products. Looking through monthly volatility, strong earlier readings and a 0.1% tick higher in February left sales in volume terms up 10% (at an annualized rate) in Q1 to-date. February sales volumes were up 4.1% from a year ago, marking the fastest annual gain since December 2014. Survey based measures (eg. the Markit Canada Manufacturing PMI and CFIB's Business Barometer) of manufacturing activity have also generally improved in 2017 to-date to provide further evidence that the sector is on a somewhat firmer footing. The same can broadly be said for the overall economy. While today's report is in line with our view that GDP was little-changed in February, that would follow three months of outsized gains (averaging 0.5% over the last three months) and leave growth in Q1 as a whole tracking in line with our forecast for a 3.8% increase.

USD/JPY is showing little movement in the Thursday session, as the pair trades just above the 109 line in the North American session. In economic news, there are no major Japanese events on the schedule. In the US, key numbers were mixed. PPI came in at -0.1%, missing the estimate of 0.0%. There was better news from unemployment claims, which remained unchanged at 234 thousand, beating the estimate of 242 thousand. Later in the day, the US releases UoM Consumer Sentiment, which is expected to drop to 97.1 points. On Friday, the US releases consumer spending and inflation numbers.

The yen improved to 5-month highs this week, as jittery investors have moved away from the US dollar in favor of the safe-haven Japanese yen. Escalating geopolitical concerns, particularly over Syria and North Korea, are weighing on the US dollar. The US bombed a Syrian military base last week, in response to a chemical attack by Syrian warplanes. Russia has strongly condemned the US move, chilling relations even further between the US and Russia. President Trump has declared that he has sent "an armada" to the Korean peninsula in response to North Korea firing ballistic missiles, and the escalation in rhetoric between North Korea has unnerved the markets. Also, Donald Trump said in a newspaper interview that the value of the US dollar was too strong and that he was in favor of a low interest rate policy. Trump's comment has further weighed on the greenback and boosted the yen.

Earlier this week, Federal Reserve Chair Janet Yellen said that with the economy close to full employment and 2 percent inflation, the Fed was in a better position to reduce its support for the US economy. The minutes of the March meeting indicated that the Fed plans to trim the $4.5 trillion balance sheet, which has ballooned as a result of the huge asset-purchase program which started in response to the financial crisis in 2008. Yellen emphasized that the Fed's policy stance is neutral, as interest rate increases will be gradual, given that the economy is growing at a moderate pace. The Fed is widely expected to raise rates twice more in 2017, with the next rate expected in June. At the same time, some Fed policymakers are in favor of three more rate hikes, which would bring the total this year to four moves.

USD/CHF - 1.0063

Original strategy :

Buy at 0.9995, Target: 1.0100, Stop: 0.9960

Position : -

Target :  -

Stop : -

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As the greenback has surged again after staging a strong rebound from 1.0008, suggesting the fall from 1.0108 has ended there and consolidation with mild upside bias is seen for test of resistance at 1.0090, however, a firm break above there is needed to retain bullishness and signal the fall from 1.0108 has ended, bring a retest of 1.0108 but only a break of this week’s high at 1.0108 would confirm recent upmove from 0.9813 has resumed for headway to 1.0140-45 and later towards another previous resistance at 1.0171. 

In view of this, would not chase this rise here and would be prudent to stand aside for now. Below the Tenkan-Sen (now at 1.0040) would bring test of 1.0025, break there would signal an intra-day top is formed, bring another fall to 1.0007, once this level is penetrated, this would revive bearishness and extend fall to previous support at 0.9995, then towards 0.9970 (50% Fibonacci retracement of 0.9831-1.0108). 

Daily Pivots: (S1) 1.0004; (P) 1.0047; (R1) 1.0072; More.....

USD/CHF is still staying above 0.9980 support for the moment. Intraday bias remains neutral with cautiously bullish outlook. Corrective fall from 1.0342 should have finished with three waves down to 0.9812. Above 1.0107 will target 1.0169 resistance. Decisive break there will confirm this bullish case and target 1.0342 key resistance next. However, below 0.9980 will dampen this bullish case and turn bias back to the downside for 0.9812 low.

In the bigger picture, we're still maintain that firm break of 1.0342 key resistance is needed to confirm underlying bullish momentum in the cross. However, the corrective nature of the fall from 1.0342 to 0.9812 is starting to give the medium term outlook a bullish favor. Hence, in stead of looking for topping signal around 1.0342, we'd now pay closer attention to upside acceleration as USD/CHF approaches this level again.

GBP/USD - 1.2527

Original strategy :

Buy at 1.2485, Target: 1.2585, Stop: 1.2450

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.2485, Target: 1.2585, Stop: 1.2450

Position : -

Target :  -

Stop : -

As cable has continued trading with a firm undertone after this week’s rally, adding credence to our view that low has been formed at 1.2365 on Monday and upside bias remains for the rebound from there to extend gain to 1.2585-90, however, break of previous resistance at 1.2616 is needed to retain bullishness and extend further subsequent rise to 1.2650-60. 

In view of this, would not chase this rise here and would be prudent to buy cable on pullback as 1.2481 support should limit downside and bring another upmove later. Below the lower Kumo (now at 1.2455) would defer and suggest top is formed, risk test of 1.2433 (previous resistance) first.

Daily Pivots: (S1) 108.67; (P) 109.26; (R1) 109.58; More....

At this point, intraday bias remains on the downside with 110.10 support turned resistance intact. Sustained break of 50% retracement of 98.97 to 118.65 at 108.81 will target 61.8% retracement at 106.48 and possibly below. Nonetheless, break of 110.10 will indicate short term bottoming and turn bias back to the upside for 112.19 resistance.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. Sustained trading below 55 week EMA (now at 111.15) will indicate that the second leg from 98.97 has completed at 118.65. And in that case, USD/JPY would start the third leg down through 98.97 low to 61.8% retracement of 75.56 to 125.85 at 94.77. On the upside, break of 115.49 resistance should resume the rise from 98.97 for a test on 125.85 high.

Daily Pivots: (S1) 1.2499; (P) 1.2524; (R1) 1.2567; More...

Intraday bias in GBP/USD remains on the upside for 1.2614 resistance. Break there will resume whole rise from 1.2108 and target 100% projection of 1.2108 to 1.2614 from 1.2365 at 1.2871. But overall, price actions from 1.1946 low are viewed as a consolidation pattern. We'd expect strong resistance around 55 week EMA (now at 1.3015) to limit upside and bring down trend resumption. But for now, further rise will be favored in near term as long as 1.2365 support holds.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. There is no sign of medium term reversal yet. Sustained trading below 61.8% projection of 2.1161 to 1.3503 from 1.7190 at 1.2457 will target 100% projection at 0.9532. Overall, break of 1.3444 resistance is needed to confirm medium term bottoming. Otherwise, outlook will remain bearish.

EUR/USD - 1.0630

Original strategy  :

Sold at 1.0665, Target: 1.0565, Stop: 1.0680

Position : - Short at 1.0665

Target :  - 1.0565

Stop : - 1.0680

New strategy  :

Hold short entered at 1.0665, Target: 1.0565, Stop: 1.0680

Position : - Short at 1.0665

Target :  - 1.0565

Stop : - 1.0680

Although the single currency staged a strong rebound after finding support at 1.0589, as this move from 1.0570 is viewed as retracement of recent decline, reckon upside would be limited and bring retreat later, below the upper Kumo (now at 1.0606) would bring test of said support at 1.0589 but break there is needed to signal the rebound from 1.0570 has ended, bring retest of this Monday’s low, below there would extend the decline from 1.0906 to 1.0550-55 (50% projection of 1.0906-1.0635 measuring from 1.0689), then 1.0525-30.

In view of this, we are holding on to our short position entered at 1.0665. A firm break above intra-day resistance at 1.0678 would abort and suggest low has been formed at 1,0570, bring a stronger rebound to 1.0698-02 (50% Fibonacci retracement of 1.0827-1.0570 and previous resistance).

USD/JPY - 109.17

Original strategy  :

Sell at 109.90, Target: 108.90, Stop: 110.25

Position :  -

Target :  -

Stop : -

New strategy  :

Sell at 109.90, Target: 108.90, Stop: 110.25

Position :  -

Target :  -

Stop : -

The greenback has dropped again after brief recovery to 109.87, adding credence to our bearish view that recent entire decline from 118.66 top is still in progress, hence downside bias remains for recent selloff to extend further weakness to 108.40-50 (100% projection of 118.66-111.55 measuring from 115.51), however, loss of near term downward momentum should prevent sharp fall below 108.20-25 (1.618 times projection of 112.20-110.13 measuring from 111.58) and 108.00 should hold, bring rebound later.

In view of this, would not chase this fall here and would be prudent to sell dollar on recovery as said resistance at 109.87 should limit upside and bring another decline later. Above previous support at 110.13 would abort and suggest low is formed, bring a stronger rebound later to the upper Kumo (now at 110.45). 

Daily Pivots: (S1) 1.0611; (P) 1.0642 (R1) 1.0697; More....

EUR/USD recovered to 1.0677 but failed to take out 1.0688 resistance and retreated. Intraday bias remains neutral first. Near term bearish outlook is unchanged. Corrective rise from 1.0339 is likely finished after being rejected by 55 week EMA. And, the larger down trend is ready to resume. Below 1.0569 will turn bias to the downside for 1.0494 support first. Break will confirm this bearish case and send EUR/USD through 1.0339 to 100% projection of 1.1298 to 1.0339 from 1.0905 at 0.9946. On the upside, however, break of 1.0688 resistance will delay the bearish case and turn focus back to 1.0905 resistance instead.

In the bigger picture, as long as 1.1298 key resistance holds, whole down trend from 1.6039 (2008 high) is still expected to continue. Break of 1.0339 low will send EUR/USD through parity to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. However, considering bullish convergence condition in weekly MACD, break of 1.1298 will indicate term reversal. this would also be supported by sustained trading above 55 week EMA.