Sample Category Title

Extended pullback from 0.7739 high closed below 200SMA and penetrated daily cloud (cloud top lies at 0.7515), generating another strong bearish signal.

The pair came under increased pressure that signals further extension of corrective phase of 0.7158/0.7739 rally that already broke below its 38.2% retracement level at 0.7517.

Meantime, corrective upticks, signaled by oversold slow stochastic, should remain capped under daily Tenkan-sen (currently at 0.7593).

US jobs data are expected to give more clues about near-term action.

Res: 0.7529, 0.7568, 0.7587, 0.7593
Sup: 0.7515, 0.7489, 0.7448, 0.7426

Strong bullish acceleration extends into third day and the price is establishing above 115.00 handle after meeting targets at 115.08/36.

Thickening daily cloud is continuing to underpin, along with daily studies that are now in full bullish setup.

Bulls are eyeing next target at 115.60 (19 Jan high), with extension through pivot at 115.91 (Fibo 61.8% of 118.59/111.57) to be attracted on solid NFP numbers.

Daily Ichimoku cloud (spanned between 114.51/74) and broken 55 SMA (114.30) should contain dips.

The pair is on track for repeated weekly bullish close that confirms strong bullish stance.

Res: 115.60, 115.91, 116.62, 116.91
Sup: 115.13, 114.74, 114.51, 114.30

Yesterday's Doji signals indecision at 1.2155 support (Fibo 76.4% of 1.1986/1.2704 rally) that was dented but is still acting as valid support, following repeated rejection to close below it.

Overall strong bearish tone keeps downside in focus with firm break below 1.2155 expected to open way towards 1.1986, January's year-to-date low.

Meantime, the pair is expected to consolidate recent fall. Initial barrier at 1.2200 zone is holding for now and keeping intact next pivot at 1.2260 (falling 10 SMA).

Signals of reversal require break above 1.2300 lower platform (reinforced by daily Tenkan-sen).

Res: 1.2171, 1.2212, 1.2260, 1.2300
Sup: 1.2155, 1.2133, 1.2100, 1.2035

The Euro is maintaining positive near-term tone and attempting again into daily cloud (spanned between 1.0605/1.0653). Yesterday's rally turned near-term focus higher but close well below cloud base, kept overall bearish bias intact. Current rally could be seen as positioning ahead of fresh weakness, as thickening daily cloud continues to weigh. Selling upticks scenario is still favored, with good barriers at 1.0620/26 (Fibo 38.2% of 1.0827/1.0492/30 SMA) seen ideally capping extended upticks. Alternative scenario requires firm break above daily cloud top (1.0653), reinforced by falling 100SMA to bring bulls fully in play. NFP data are eyed for stronger signals.

Res: 1.0626, 1.0638, 1.0653, 1.0700
Sup: 1.0586, 1.0570, 1.0541, 1.0524

USD/CHF - 1.0120

Original strategy :

Buy at 1.0100, Target: 1.0200, Stop: 1.0070

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.0100, Target: 1.0200, Stop: 1.0070

Position : -

Target :  -

Stop : -

As the greenback found good support at 1.0092 and has staged a strong rebound, suggesting low is possibly formed there and consolidation with mild upside bias is seen for gain to 1.0145-50, however, break of resistance at 1.0171 is needed to signal recent erratic rise from 0.9861 low has resumed and extend further gain to 1.0200-10 but near term overbought condition should limit upside to 1.0220-25 and price should falter below previous chart resistance at 1.0248.

In view of this, we are looking to buy dollar on dips as 1.0100 should limit downside and bring such rise. Below support at 1.0073 would abort and signal top has been formed instead, risk weakness to 1.0040-45 but reckon support at 1.0009 would remain intact. 

GBP/USD - 1.2175

Original strategy :

Sell at 1.2215, Target: 1.2115, Stop: 1.2250

Position : -

Target :  -

Stop : -

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As cable has recovered after holding above support at 1.2135, suggesting consolidation above this level would be seen and corrective bounce to 1.2210-15 is likely, however, reckon upside would be limited to 1.2245-55 but price should falter well below resistance at 1.2301, bring another decline later.

In view of this, would not chase this fall here and would be prudent to stand aside in the meantime. Below said support at 1.2135 would signal recent decline has once again resumed and extend weakness to 1.2100, however, loss of near term downward momentum should prevent sharp fall below 1.2070-75 and price should stay above 1.2050, risk from there is seen for a rebound later.

Today, the main event will be the release of the US employment report for February. Nonfarm payrolls are expected to have risen by 190k, less than the 227k in January, but still a solid number that is consistent with further tightening in the labor market. We see the risks surrounding the NFP forecast as skewed to the upside, considering that the ADP report for February showed the private sector added 297k jobs, far more than the anticipated 190k and that initial jobless claims were unusually low throughout the month. The unemployment rate is expected to have ticked down, while average hourly earnings are forecast to have accelerated on both a monthly and a yearly basis. This would be a sign that the softness in January's earnings was just an outlier, and coming on top of a robust NFP number, it may seal the deal for a March rate hike. The probability for a hike next week currently rests at 90% according to the Fed funds futures. In case the employment data are as strong as anticipated, or even better, that percentage could surge even further and thereby bring the dollar under renewed buying interest.

ECB: More optimistic, but still too early to debate tapering

The ECB kept its stimulus program unchanged yesterday, as was widely anticipated. In the accompanying statement, the Bank maintained its dovish forward guidance, reiterating that interest rates will remain at present or lower levels for an extended period of time, and that the Bank stands ready to increase its QE program in terms of size and/or duration if the outlook becomes less favorable.

The press conference following the decision had a more hawkish tilt though. Although President Draghi initially reminded investors that there is still no convincing upward trend in underlying inflation, he continued by pointing out that a dovish sentence from his introductory statement had been removed. The sentence said: "If warranted, to achieve its objective the Governing Council will act by using all the instruments available within its mandate". Draghi indicated this was removed to signal there is no longer that sense of urgency in taking further actions. Perhaps in an even more optimistic twist, the President said that the TLTRO loans are about to expire, and that there has been absolutely no discussion about having another round. He further indicated that the Council previously discussed dropping out the word "lower" from its guidance on interest rates. This may be one of the Bank's next moves.

In our view, these relatively hawkish comments from Draghi suggest that the days of aggressive ECB easing may be behind us. As a result, EUR/USD surged breaking above the 1.0570 (S1) barrier to hit resistance slightly below the 1.0630 (R1) hurdle, which is the upper bound of the sideways range the pair has been trading since the 17th of February. We believe that the euro could remain supported in the next few days, at least in the absence of incoming French polls showing that Le Pen is gaining ground on her rivals. However, we would avoid EUR/USD, considering that today's US jobs data could prove the trigger for a retreat. Investors may settle near the 1.0630 (R1) hurdle waiting for the report, and could push it lower in case of strong numbers, targeting once again the 1.0570 (S1) barrier as a support. A clear dip below that level is possible to open the way for the 1.0525 (S2) level. Instead, EUR/GBP may be a better proxy for potential near-term euro gains, given that the House of Commons could overturn the "soft Brexit" amendment that the House of Lords passed regarding a "meaningful vote" on the final Brexit deal.

As for the rest of today's highlights: During the European day, we get Norway's CPI data for February. The headline rate is forecast to have remained unchanged, while the core rate is expected to have ticked down. Although something like that could bring NOK under renewed selling interest, we doubt that it will have a material impact on the Norges Bank's neutral stance on policy.

From the UK, we get industrial production data for January, and from Germany, we get the trade balance for January.

We also get Canada's employment data for February. The consensus is for the unemployment rate to have held steady and for the net change in employment to have remained in positive territory, albeit marginally. We see the risks surrounding the unemployment rate forecast as skewed to the downside, and we see the case for the overall report to be stronger than expected. We base our expectations on the nation's Markit manufacturing PMI for the month, which showed the strongest increase in employment for 27 months. In case of a better than anticipated report, the Loonie could reverse some of its recent losses. Considering that the US and Canadian data are released at the same time, even in case the Canadian data notably beat expectations and USD/CAD declines, we would expect any such reaction to remain short-lived. The pair could pullback and challenge the 1.3460 (S1) support level, but we still see a short-term uptrend on the 4-hour chart. As such we expect such a retreat to encourage the bulls to initiate new positions and if they prove strong enough to overcome the 1.3530 (R1) level, they may target the key obstacle of 1.3600 (R2). Our view of further near term advances in this pair is also supported by the combination of a hawkish Fed, a dovish BoC, and the latest slide in oil prices. As for the bigger picture though, we prefer to wait for a clear close above 1.3600 (R2), a zone which was proven a strong resistance back in November and December, before we get confident on the resumption of the prevailing longer-term uptrend.

EUR/USD

Support: 1.0570 (S1), 1.0520 (S2), 1.0500 (S3)

Resistance: 1.0630 (R1), 1.0675 (R2), 1.0715 (R3)

USD/CAD

Support: 1.3460 (S1), 1.3425 (S2), 1.3380 (S3)

Resistance: 1.3530 (R1), 1.3600 (R2), 1.3660 (R3)

The US and China are facing many conflicts this year given the more hawkish stance from the Trump Administration. While the risk of a trade war has gained the most attention (see the box below right for some of our recent research), another area of tension has moved to the forefront recently – the threat from North Korea.

On Monday 6 March, North Korea fired four or five missiles into Japanese waters in a response to ongoing annual US-South Korea joint military exercises, code-named Foal Eagle. The actions of North Korea are raising tensions in many ways in the region, not least between the US and China. Former US President Barack Obama highlighted North Korea as the most pressing foreign policy issue for Donald Trump in a meeting following the presidential election.

THAAD adds to US-China tensions

The rising nuclear threat from North Korea has given the US and South Korea a stronger case for taking defensive measures. They have accelerated the deployment of a US missile defence system called THAAD (Terminal High Altitude Area Defense) in South Korea. THAAD is a system that can shoot down ballistic missiles in their terminal phase. While both the US and South Korea maintain it is only for defensive measures, China is strongly opposed to the deployment, as the radars could potentially cover large parts of Chinese territory as well. China is now boycotting South Korean department store chain Lotte, as the company made a land swap deal with the government for the area where THAAD is deployed. China is also banning tourism to South Korea to hit back at them. A spokesperson for the Chinese Foreign Ministry Geng Shuang stated that ‘we will take steps to maintain our security interests' and urged the parties concerned to stop deployment and refrain from going too far along the wrong track.

EUR/USD - 1.0613

Original strategy  :

Buy at 1.0560, Target: 1.0660, Stop: 1.0525

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.0560, Target: 1.0660, Stop: 1.0525

Position : -

Target :  -

Stop : -

Yesterday’s strong rebound after finding support at 1.0525 suggests the retreat from 1.0640 has ended at 1.0525 and consolidation with mild upside bias is seen for further gain towards said resistance at 1.0640, however, break there is needed to retain bullishness and signal another leg of the erratic rise from 1.0493 low is underway for retracement of early decline to 1.0660-65 (50% Fibonacci retracement of 1.0829-1.0493) and possibly towards resistance at 1.0680 but price should falter well below 1.0700-05 (61.8% Fibonacci retracement).

In view of this, we are looking to buy euro on dips as 1.0560 should limit downside and bring another rise later. Below said support at 1.0525 would abort and risk test of 1.0493-96 but only break there would shift risk back to the downside and signal recent decline from 1.0829 has resumed for further selloff to 1.0470 and then towards previous support at 1.0454.

'Day two of our 48 hour run of heavy event risk is ahead. And, traders are no doubt hoping for more reaction to the March NFPs.' - John Kicklighter, Daily FX

Pair's Outlook

The common European currency traded near the 1.06 mark against the US Dollar on Friday morning. However, the rate showed signs of an upcoming retreat. The move higher was the throughout the week expected consolidation of the US Dollar, as the Greenback retreated. The jump of the rate was stopped by the upper trend line of the medium term descending channel, which is supported by the 55-day SMA at 1.0609 level. Due to that reason and the expected positive US fundamentals the rate is likely to decline during the day. However, the pair's decline will be hindered by the weekly PP at 1.0582.

Traders' Sentiment

SWFX traders are neutral on the pair, as 50% of open positions are long. Meanwhile, 58% of trader set up orders are set to sell the Euro.