EUR/USD - 1.0781

Original strategy  :

Buy at 1.0725, Target: 1.0840, Stop: 1.0690

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.0725, Target: 1.0840, Stop: 1.0690

Position : -

Target :  -

Stop : -

As the single currency retreated after rising to 1.0825 yesterday, suggesting minor consolidation below this level would be seen and pullback to 1.0750-60 cannot be ruled out, however, reckon support at 1.0719 would limit downside and bring another rise later, above indicated resistance at 1.0825-29 would extend further rise to 1.0850-60 but loss of near term upward momentum should prevent sharp move beyond 1.0880 and price should falter below 1.0900, risk from there has increased for a retreat to take place later.

In view of this, would not chase this rise here and we are looking to buy euro on subsequent pullback as 1.0719 support should limit downside and bring another rise later. Below 1.0690-00 would defer and suggest top is possibly formed, risk weakness to 1.0640 (previous resistance now support) but still reckon indicated support at 1.0600 would remain intact.

USD/JPY - 111.12

Original strategy  :

Sell at 112.00, Target: 110.80, Stop: 112.35

Position :  -

Target :  -

Stop : -

New strategy  :

Sell at 112.00, Target: 110.80, Stop: 112.35

Position :  -

Target :  -

Stop : -

As the greenback recovered after falling to 110.73, suggesting consolidation above this level would be seen and corrective bounce to 111.55-60 is likely, however, still reckon upside would be limited to 112.00-10 and bring another decline later, a break of said support at 110.73 would signal recent decline is still in progress and may extend further fall to 110.50 but near term oversold condition should prevent sharp fall below 110.20-25 and reckon 110.00 would hold from here. 

In view of this, would not chase this fall here and would be prudent to sell cable on recovery as 112.00 should limit upside. Only above indicated previous support at 112.26 would abort and signal low is formed instead, bring a stronger rebound to 112,59 but resistance at 112,87-90 should cap upside.

'Current bullish rally is part of wave C, that may see more gains in sessions ahead, ideally towards the upper channel line.' – Gregor Horvat, Elliot Wave Financial Service (based on investing.com)

Pair's Outlook

On Thursday morning the common European currency against the Greenback remained below the combined resistance of the weekly R1 at 1.0814 level and the 38.20% Fibonacci retracement level at 1.0826. Although the resistance was holding, various clues were indicating that it will be broken sooner or later. In the case that unfolds, the currency exchange rate would surge to the next combined resistance cluster, which is located around the 1.0885 mark. The cluster consists of the weekly R2, 200-day SMA, the upper Bollinger band and an upper trend line of a medium term ascending channel pattern.

Traders' Sentiment

Traders remain bearish as 62% of open positions are short on Thursday. Meanwhile, 54% of trader set up orders are to sell the Euro.

'In our view there are significant headline risks for GBP exchange rates over coming weeks and months.' – Commonwealth Bank of Australia (based on PoundSterlingLive)

Pair's Outlook

In spite of strong volatility, the Cable managed to remain relatively unchanged on Wednesday, retaining its position above the monthly PP. The Pound keeps taking advantage of the Buck's weakness due to lower US Treasury yields, therefore, another positive outcome and a surge beyond 1.25 is possible. The GBP/USD pair has only one solid resistance on its path, namely the cluster around 1.26, which could prevent the Sterling from reaching its target—the 23.60% Fibo at 1.2672. Nevertheless, today's bullish potential is likely to be very limited, as there are no strong market movers present. Meanwhile, technical studies are also unable to confirm the possibility of a positive outcome.

Traders' Sentiment

Today 63% of traders are long the Pound (previously 60%), but the share of sell orders is significantly higher, taking up 71% of the market.

'There is certainly a bit more bullishness in the yen over the last two weeks and we are seeing that continue.' – Silicon Valley Bank (based on Business Recorder)

Pair's Outlook

As was anticipated, the US Dollar weakened against the Japanese Yen for the seventh day in a row yesterday, but with losses slightly exceeding expectations. The given pair closed below the monthly S1, managing to retain its position above 111.00, where demand could now trigger a rebound. Technical indicators in the daily timeframe are unable to confirm this possibility, but the weekly ones are giving bullish signals. Although, technically, the Buck should now experience a bullish correction, we should not rule out the possibility of bears continuing to push the exchange rate lower, with the nearest significant support being only around 110.00.

Traders' Sentiment

There are 69% of all open positions being long today (previously 64%), while 51% of all pending orders are to sell the US Dollar.

'There is a strong technical resistance at $1,250 and that seems to have been felt strongly at this juncture.' – Barnabas Gan, OCBC (based on Reuters)

Pair's Outlook

During the early hours of Thursday's trading session the yellow metal was in a retreats, which was initiated by the end of Wednesday's trading. Although initially it might seem that the 50.00% Fibonacci retracement level at 1,248.96 has reversed the direction of the bullion that is not true. The commodity price was pushed lower by a long term downwards aimed trend line, which can be drawn by connecting the August and September heights with the high level of February. It is, however, a high possibility that the metal will attempt to break this resistance and surge to the 1,256 level, where the next resistance level is located at.

Traders' Sentiment

Traders are neutral bearish on the metal, as 51% of open positions are short. Meanwhile, 65% of trader set up orders are to buy the bullion.

EUR/USD – Euro Unchanged, German Consumer Confidence Dips

EUR/USD has edged lower on Thursday, as the pair trades at 1.0770. On the release front, GfK German Consumer Climate dipped to 9.8 points, shy of the forecast of 10.1 points. Later in the day, the eurozone releases consumer confidence data. The US will publish unemployment claims and New Home Sales. Federal Reserve Chair Janet Yellen will speak at an event in Washington, and FOMC members Neel Kashkari and Robert Kaplan will also deliver speeches on Thursday. On Friday, Germany and the eurozone release Manufacturing PMIs, and the US will publish durable goods orders.

German consumer confidence lost ground for a second straight week, as the GfK indicator fell to 9.8, its lowest level since November 2016. The drop is largely a result of higher inflation, as consumers are more concerned that their purchasing power has been reduced. Still, the German economy, the largest in Europe, remains in solid shape, as the economy is expected to expand 1.5% in 2017. German data is regarded as a bellwether for the eurozone, so the markets will be keeping a close eye on the upcoming German Manufacturing PMI report.

With a dearth of economic releases this week, the markets have been focusing on speeches from FOMC members. Earlier this week, Chicago Fed President Charles Evans said he expected the Fed to raise rates two more times this year. This projection was in line with the Fed’s dot point plan (which remain unchanged) as well as last week’s rate statement. Although one could make a strong case that three rate hikes in 2017 would be impressive, the markets appear disappointed, and would like four hikes, given the strong performance of the US economy. The Fed’s cautious approach has soured sentiment towards the greenback, resulting in the dollar heading lower against its major rivals, including the euro. On Wednesday, EUR/USD touched a high of 1.0825, its highest level since the start of February.

EURUSD

The EURUSD was indecisive yesterday. The bias is neutral in nearest term. Overall price is still in a bullish phase, still respecting the EMA 200 and the trend line support as you can see on my H1 chart below. Immediate resistance is seen around 1.0820. A clear break above that area would expose 1.0873 area but note that from a daily chart perspective 1.0830 – 1.0873 area remains a good place to sell with a tight stop loss. Immediate support is seen around 1.0775. A clear break below that area could trigger further bearish pressure testing 1.0725 and the EMA 200/trend line support. On the upside, a clear break above 1.0873 would activate my bullish mode.

GBPUSD

The GBPUSD was indecisive yesterday but overall still able to maintain its bullish bias so far. As you can see on my H1 chart below price is moving inside a bullish channel and above the EMA 200 suggests a valid bullish outlook. The bias remains bullish in nearest term testing 1.2570 region. Immediate support is seen around 1.2420. A clear break below that area would be a threat to the bullish phase testing the EMA 200 and 1.2350/00 region. Overall I remain neutral.

USDJPY

The USDJPY had a bearish momentum yesterday bottomed at 110.73 but closed higher at 111.15 and hit 111.54 earlier today in Asian session. As you can see on my H4 chart below, we have 2 pin bars (hammer) formed around 111.30 key support suggests a potential bullish pullback. The bias is bullish in nearest term testing 111.80 – 112.00. A clear break and daily close above that area would expose 113.00 region. Key support is seen around 110.73 (yesterday’s low). A clear break and daily close below that area would activate my bearish mode.

USDCHF

The USDCHF attempted to push lower yesterday bottomed at 0.9881 but closed a little bit higher at 0.9913. The bias is neutral in nearest term probably with a little bullish bias testing 1.0000 region. On the downside, key support is seen around 0.9870. A clear break and daily close below that area would continue the bearish scenario testing 0.9800 region. Overall I remain neutral.

Today, market participants will turn their attention to the US, where the House of Representatives is expected to vote on whether to repeal and replace the Affordable Care Act (Obamacare) with President Trump's new alternative, The American Healthcare Act (Trumpcare). A few weeks ago Trump pledged to deliver a "phenomenal" tax reform plan, but only after he took care of the health care issue. As a result, we think that this vote will be closely watched by investors. If the bill is voted down, markets could begin to speculate that tax reform is likely to take much longer to be introduced and implemented. This could also heighten doubts as to whether the new administration can deliver on its fiscal promises altogether, thereby raising uncertainty around the subject and leading to further downside correction in the assets that have priced in the "Trump effect", such as the dollar and US equities. Escalating political uncertainty could also benefit safe havens, like JPY and gold.

USD/JPY tumbled yesterday, breaking below 111.60 (R1), the lower bound of the range that contained the price action since the 11th of January. The rate hit support at 110.70 (S1) and then rebounded to challenge the key hurdle of 111.60 (R1) as a resistance. A rejection of the plan today is likely to encourage sellers to take advantage of that resistance zone and perhaps aim for another test near 110.70 (S1). If they prove strong enough to overcome that support, then we may experience extensions towards the psychological round figure of 110.00 (S2).

On the other hand, if the House votes for the bill, we could see a relief bounce in USD and US stocks as the risk of extended tax reform delays diminishes and as market participants become more confident that Trump can implement his overall agenda. In this case, USD/JPY could emerge back above 111.60 (R1) and signal its return back within the range it had been trading since early January.

Having said that though, even if it passes the House today, it has to be approved by the Senate, perhaps as early as next week. Therefore, although a House pass could spread some market euphoria, there is still a lot to be done before we have a concrete outcome.

RBNZ remains on hold, keeps the door open for further easing

The RBNZ kept its Official Cash Rate unchanged yesterday, as was widely anticipated. The meeting statement did not contain any major surprises and as such, there was a relatively limited reaction in NZD. The officials noted that the trade-weighted exchange rate has fallen 4% since February and that although this is encouraging, further depreciation is needed to achieve more balanced growth. With regards to inflation, the Bank noted that it is expected to return to the midpoint of the target band over the medium-term, an upgrade from the previous statement where it expected this to happen "gradually". Last but not least, the officials kept the door open for further easing by reiterating that numerous uncertainties persist, particularly in the global outlook, and that policy may need to adjust accordingly.

NZD/USD traded somewhat higher ahead of the decision to find once again resistance near the 0.7075 (R1) obstacle and the downtrend line taken from the peak of the 7th of February. In the aftermath of the meeting, the rate slid again, but the slide remained limited above the 0.7015 (S1) support line. We hold the view that the short-term path is negative, but we would like to see a clear break below 0.7015 (S1) before we assume that the recovery started on the 14th of March is over and that we are back in the direction of the trend. Such a break is possible to initially aim for the next support of 0.6970 (S2).

As for the bigger picture, the outlook of the pair remains cautiously negative as well, in our view. The RBNZ has been very vocal about wanting a weaker Kiwi, and has even threatened to intervene in the FX market in previous meetings. Combined with the fact that it has kept the door for further easing open and that domestic economic data are mixed, the currency could stay on the back foot for a while. Nevertheless, in order to get more confident on larger declines, we would like to see a decisive close below the strong support of 0.6880.

As for the rest of today's highlights

During the European day, the only major indicator we get is UK retail sales for February. Both the headline and the core rates are expected to have risen following two consecutive months of declines. Coming on top of the latest acceleration in the nation's CPIs, rebounding retail sales could fuel further market expectations over a reduction in BoE stimulus and thereby, bring GBP under renewed buying interest.

From Eurozone, we get the preliminary consumer confidence index for February.

From the US, we get new home sales for February and initial jobless claims for the week ended on the 17th of March. New home sales are forecast to have risen for the second consecutive month, while initial jobless claims are expected to have ticked down, something that would drag the 4-week moving average somewhat lower too.

As for the speakers, today's agenda includes only Fed Chair Janet Yellen. Even though she is one of the most important speakers in the financial world, we do not expect her to deliver any new market moving information. It has only been a week since we heard her views at the press conference of the latest FOMC meeting and there have been no major changes in the US economy's outlook since then.

USD/JPY

Support: 110.70 (S1), 110.00 (S2), 108.80 (S3)

Resistance: 111.60 (R1), 111.90 (R2), 112.40 (R3)

NZD/USD

Support: 0.7015 (S1), 0.6970 (S2), 0.6945 (S3)

Resistance: 0.7075 (R1), 0.7110 (R2), 0.7170 (R3)

The Euro remains biased higher and eyes immediate target at 1.0827 (02 Feb high/Fibo 38.2% of larger 1.1614/1.0339, May 2016 / Jan 2017 descend), with extension towards 200SMA (1.0884) seen on break. The pair hit new high at 1.0823 on Wednesday, coming just ticks ahead of its initial target, but Thursday's action shows signs of further easing, after previous day ended in red. This suggests further consolidation before fresh bulls emerge, with dips expected to be contained by hourly cloud base (1.0768) to keep structure intact. Otherwise, signals of deeper correction could be expected on break below hourly cloud that would expose pivotal supports at 1.0700 zone (rising Tenkan-sen/Fibo 38.2% of 1.0493/1.0823 upleg). The pair will be also focusing events today: speech of Fed Chief Yellen, House vote for healthcare bill and releases from US jobs and housing sector, for stronger signals.

Res: 1.0803, 1.0827, 1.0884, 1.0931
Sup: 1.0780, 1.0768, 1.0719, 1.0697