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[KeyToMarketsUK]

KTM FX Weekly: Global economic calendar. New Chair Powell in focus

• Draghi, Powell and May speeches are in focus
• Manufacturing PMI surveys around the globe are the key data risk events
• GDP for US and Canada
• EA and Japan inflation figures

We are particularly interested in the new Chair Powell’s first public remarks. He is scheduled to make his first public testimony on Tuesday 2.30pm GMT. Another testimony will be presented on the Semiannual Monetary Policy Report before the Senate Banking Committee, in Washington DC (Thu).

According to analysts at Nomura “we do not expect him to intentionally signal a change in policy direction, including an acceleration in the pace of rate hikes, during his testimony” reported in a client note (Feb 23).

In the EA, manufacturing PMI surveys and EA inflation figures are monitored closely. Particularly we are focusing on Italian general election (March 04).

We are also focusing on the seventh round of NAFTA talks over the next ten days (Feb 25-Mar 05). We believe USDCAD and USDMXN will raise the volatility than usual particularly USDMXN.

In Asia, China PMI (Wed and Thursday) could be the risk to the Aussie dollar.

Chart of the week:

EURUSD weekly range 1.2165-1.2540 vs 1.2165-1.2700

The daily RSI propelling down and can observe a negative divergence (daily chart). Base support finds between 1.2200-1.2165. A daily close below could target at 1.2000. At higher time frames the major has spotted with a triple top, we believe in the near-term strength was capped.

The EUR crosses EURGBP and EURJPY trading on the verge of a breakdown.

View: Locked in sideways with a price cap.

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[KeyToMarketsUK]

KTM FX Weekly: EURUSD recovery intact

• New chair Powell testimony in focus
• Manufacturing PMI surveys around the globe are the key data risk events
• GDP for US and the EA inflation figures are the risk events
• Italian general election on March 04 offers downside to the EUR

ECB president Draghi spoke at the ECON committee of the European Parliament, Brussels. He said “the euro area economy is expanding robustly.[1] Growth is stronger than previously expected and more evenly distributed across sectors”. Regarding inflation “we anticipate that headline inflation will resume its gradual upward adjustment, supported by our monetary policy measures”.

This week ahead in the EA, manufacturing PMI surveys and EA inflation figures are monitored closely. Particularly we are focusing on Italian general election (March 04). Ahead of key weekend (Mar 04 political risk), traders can hedge positions with selling EURJPY.

Data review:

• In December 2017 the current account of the EA recorded a surplus of €29.9 billion
• The ZEW Indicator of Economic Sentiment for Germany recorded a decrease of 2.6 points in February 2018 and currently stands at 17.8 points
• Eurozone Manufacturing PMI at 58.5 from 59.6 in January 4-month low
• EA annual inflation rate was 1.3% in January 2018, down from 1.4% in December 2017
• ECB minutes revealed relative hawkish notes

Data Preview:

We are particularly interested in the new Chair Powell’s first public remarks. He is scheduled to make his first public testimony on Tuesday 2.30pm GMT. Another testimony will be presented on the Semiannual Monetary Policy Report before the Senate Banking Committee, in Washington DC (Thu). In case of the DXY comeback would be clearly a near-term weakness in the major.

According to analysts at Nomura “we do not expect him to intentionally signal a change in policy direction, including an acceleration in the pace of rate hikes, during his testimony” reported in a client note (Feb 23).

TECHNICAL OVERVIEW​

Weekly range 1.2165-1.2540 vs 1.2165-1.2700

At higher time frames the major has spotted with a triple top, we believe in the near-term strength was capped. The EUR crosses EURGBP and EURJPY trading on the verge of a breakdown.

Ahead of today’s new Chair Powell testimony the price likely to remain between 1.2250-1.2360. Further retracement could have expected below 1.2250 to 1.2200.

Noting that 50MA finds at 1.2190. Base support finds between 1.2200-1.2165. In a bullish scenario, above 1.2360 target 1.2400 and 1.2425.

View: We believe this week the major likely to hold the support zone 1.2200-1.2165.

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[KeyToMarketsUK]

KTM FX Daily: USDX forecast and FX comments

The USD rallied 0.6% and the bond yields rose on Fed new Chair Powell’s testimony. The new Chair delivered an upbeat testimony, four hikes this year is the key.

The market reacted positively to the dollar flows while the US equities dropped. The dollar comeback hits the most traded currencies overnight.

The Aussie and Kiwi dollar were beaten down hard down 0.90% and a percent each. The euro down 0.70% and the GBP down nearly 0.6%. The precious metals Gold and Silver was beaten down 1.50% each.

In the USD pack emerging market currency ZAR down 1.50% and the TRY down nearly 0.90%. The safe heavens JPY and CHF down 0.5% and 0.15% respectively.

In our earlier articles, we pointed couple of times the USDX likely to hold the 88.00.

Month-end review: In February the volatility has risen with a sell-off in equities. The risk aversion favored the JPY over most-traded currencies, especially against G10 currencies. We believe the US dollar rally will limit near-term, but the broader risk stays lower for now.

March 2018 forecast: We forecast the dollar index (KTM: USDX) will remain between 91.50 and 88.00, a breach above 90.75 could strengthen this view. A weekly close above 90.50 could extend the rally further to 92.00.

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[KeyToMarketsUK]

KTM Monthly FX: JPY cross technical studies

• AUDJPY: Parallel support finds at 81.95 and 81.50
• CADJPY: Near-term bottom will be placed in a week or two
• CHFJPY: Mirror image to CADJPY
• EURJPY: Buy trade available
• GBPJPY: Another breakdown
• USDJPY: Sideways, locked in the downtrend
• NZDJPY: Parallel support finds at 76.00 and 75.50

AUDJPY: The cross has been retracing for six straight weeks down over 6.10%. Having a monthly low at 82.79 and currently trading at 82.80 in Thursday early Asia session. Parallel support finds at 81.95 Aug 2015 low and 81.50 April 2017 low. Noting that between April -June 2017 the cross printed a triple bottom between 81.80-81.50. We consider this zone as a near-term support level below this 79.80 it’s 61.8% fib reaction exists (73.30-90.30 rally) possible medium-term support.

CADJPY: The cross has retraced 50.0% of the previous rally (74.80-91.63). Before retracing to 83.00 it was spotted with a double top and breaks the range. Near-term support finds at 82.20 and 81.80. The 61.8% fib reaction finds at 81.20 and earlier swing low finds at 80.55.

The cross has been retracing for four straight weeks. From 2011 Oct low72.13 the cross has recorded the highest downfall thrice for five weeks and five times recorded for four weeks correction. Base on this information we forecast a near-term bottom could be placed in a week or two weeks’ time frame.

The underlying indicators are supporting our forecast. The Daily RSI lies at 24.30 and the oscillator will change to bullish in a week time. In case of a rebound we forecast targets 84.50 and 85.50 initially and 86.60 later.

CHFJPY: The cross weekly chart mirror image to CADJPY weekly. Spotted with a double top at 118.60-118.55 and retraced more than 50.0% of the previous rally (107.68-118.60 ). Key support level finds at 112.50 and 111.80 break target 110.00 and 108.00. A weekly close below 112.80 could confirm the distribution pattern (like CADJPY). In this case 108.00 possible.

The daily RSI lies at 29 nearly oversold but the oscillator remains bearish. Incase of a rebound 114.50 will be the first destination.

Near-term support zone 112.50-111.80.

EURJPY: The cross down 5.40% in February, having a monthly low at 130.30. Finally, the price lost the 200MA. Below 130.00 scope to retrace further to 50MA (weekly) finds at 129.30. We believe the downside risk (last week’s forecast) associated only in the near term.

Over the medium term, the cross has a solid support between 127.50 and 129.00. At this point, we expect a decent bounce to 131.00 and 132.00 initially and even 134.00 could be expected.

Ahead of Italian general election (Mar 04) we expect the cross will swing heavily next week. The daily RSI lies at 28.80.

Buying zone 129.30-127.50 sl 126.00 target 133.50/134.00

GBPJPY: The cross gave a fresh breakdown below 146.95 which was a previous double bottom (Oct and Nov). Having a monthly low at 146.75 sitting tad above 50MA (weekly)lies at 146.50. Break below target 144.00/143.80.

Nothing at 100MA (weekly) finds at 143.80 and the 61.8 fib reaction (135.85-156.60 rally) finds at 143.50. The daily RSI finds at 29.00 and the oscillator remains bearish.

USDJPY: Weekly pivotal finds at 105.40 below this 105.00 and 104.50 exist. Additional weekly support finds at 103.50 it’s 100.fe (118.65-107.30-114.70). A daily close above 108.20 target 110.00, chances are remote.

As we pointed in our earlier articles we are waiting for 103.50 it’s 100.0fe nearly coincides with 80.0% of the fib reaction (99.65-118.65 rally).

NZDJPY: Retraced more than 80.0% of the previous rally (76.00-81.42) having a monthly low at 76.85. Parallel support finds at 76.00 and 75.50 below scope to retrace further to 73.50 ABC correction target. The daily RSI lies at 31.00 and the oscillator remains bearish.

Over medium-term support, zone finds between 73.00 and 72.80 it’s 80.0% fib reaction (70.00-83.90 rally).

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[KeyToMarketsUK]

KTM FX Daily: EURGBP getting ready to punch the neckline

The euro cross rose 0.60% on Thursday having a low 0.8836 and currently trading at 0.8900 on early Asia session.

On the daily chart, we spotted an inverse H&S pattern a neckline breach needed to strengthen this view. In case of a footprint above neckline target 0.9000 whereas key resistance seems at 0.9030.

GBP is facing renewed downward pressure from UK political concerns. Today’s risk event is Theresa May’s speech about Britain’s post-Brexit relationship with the European Union, in London.

On the other side the euro associated with the Italian general election risk (Mar 04). The cross locked sideways between 0.8930-0.8680. The near-term exchange rate movement remains in the Brexit headlines.

At higher time frames the cross spotted with a double bottom and re-tested the 20MA thrice.

We expect the euro cross will face a rough week ahead as ECB policy meeting scheduled on Mar 08 (Thu).

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[KeyToMarketsUK]

KTM FX Weekly: Global economic calendar. EURUSD recovery intact update and USDZAR bul

• Focus shifts to the ECB meeting from political risk
• Certainly, central banks are in focus RBA, BOC, BOJ and ECB
• Jobs data for Canada and US
• Global trade war has grabbed the central stage

Last week again the equities were declined and the safe haven currency JPY elevated further. Germany’s SPD party votes on coalition deal with CDU, EUR tagged with bulls. The brand-new week offers more fun rides and multiple trading opportunities. Apparently, we are more particular on EURUSD, AUDUSD and in JPY crosses as well (AUDJPY, CADJPY, EURJPY and USDJPY).

Weighing the week: The week will start with the weekend political developments from German and Italy. As we pointed in our last week’s EUR weekly FX forecast “EURUSD recovery intact” we retain the same theme this week as well for 1.2470 and 1.2540 levels. We believe the ECB will repeat its guidance on rates.

We also believe no change in policy face from the RBA, BOC, ECB and BOJ.

View: Buying EURAUD target 1.5990/1.6030, EURJPY (dip buying), CADJPY (dip buying).

The Reserve Bank of Australia meets on Mar 06, 2.30pm AEDT. Weekly AUDUSD pivotal finds at 0.7650. AUD was one of the worst performer last week, this week likely to remain sideways followed by a breakdown. Weekly AUD trend cast on the GDP 4Q (Wed) and trade balance (Thu).


Lower oil prices, NAFTA uncertainty and the Boc rate cycling are the factors weighted the CAD in the past month. The new month added another risk to the CAD, the US tariffs to the steel and aluminum.
The brand-new week wraps with the BoC interest rate announcement, on Mar 07 8.30am (ET). We are particularly focused on CADJPY.

In our last week’s JPY technical studies article, we pointed “Near-term bottom will be placed in a week or two”. We still believe the same in this week as well.

In the US, we get ISM non-manufacturing PMI (Mon), ADP jobs data and Beige book (Wed) and NFP(Fri). Selling USDJPY and stay long EURUSD are the favorable trades. In the emerging currencies, USDZAR elevated above the 3months descending trendline. Buy the dip at 11.70 sl 11.20 target 12.30. A daily close above 12.30 could open to 12.70.

Recent volatility in equity markets and traders interest in Japanese investment strengthen the Yen. In February the volatility has risen with a sell-off in equities. The risk aversion favored the JPY over most-traded currencies, especially against G10 currencies.
We believe the JPY will outperform further in the near-term. Into fiscal year-end. Ahead of central banks meeting, we forecast JPY crosses will find a minor bottom.

Also read:
EURUSD recovery intact and JPY techncial studies full stories in our blog.
http://www.keytomarkets.com/blog/newsletters/ktm-fx-weekly-eurusd-recovery-intact/
http://www.keytomarkets.com/blog/newsletters/ktm-monthly-fx-jpy-cross-technical-studies/


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[KeyToMarketsUK]

KTM FX daily: BOJ and NFP trading view

What’s on today?

BOJ and NFP

BOJ: We forecast that the Bank of Japan (BOJ) board is going to keep all its policy settings on hold. We particularly focus on the press conference of governor Kuroda, as the JPY strengthened by 4.50% against the USD. This is in opposite to what happened so far as USDJPY is trading low, post-US elections. Therefore, we maintain our bullish stance on EURJPY and CADJPY in the near-term.

NFP: In terms of US data, we believe nonfarm payrolls to rise by 200k and the average hourly earnings to be rise by 0.3%.

USDJPY: Since 21st of February, the cross remained in a narrow range of 105.20-107.90. We forecast a break below 105.00, regardless of the RSI levels and further weakness towards 104.50 and 103.50 could also be possible. It might reach a target low of at 103.50 (118.65-107.30-114.75) based on the corrective A-B-C pattern.

Trading with an intraday perspective, 106.75 is the key resistance to watch. Today’s range is 108.00-105.00. A daily close above 106.80 could boost the corrective rally for 108.00/108.20, an extreme case 109.00 even possible. The corrective rally will offer another chance to sell between 108.00-109.00.

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[KeyToMarketsUK]

KTM Weekly: FX snapshots

Forex: During the last week’s US trade tariff, ECB, BOJ, and NFP were unable to deliver clear FX trends on a weekly basis.

Equity: Stronger US jobs data on Friday, lifted the equities higher, which turned the weekly percentages on a positive note. In the US all the three benchmark indexes posted their best weekly performance in three weeks.

Crypto: The most famous digital currency Bitcoin was down by nearly 29% last week, which has re-tested the near-term support levels.

This week’s, US inflation data should fix the FX weekly trends.

FX snapshot:

• AUDUSD: Triple bottom
• EURUSD: Double top
• GBPUSD: Neutral
• NZDUSD: Rangebound
• USDJPY: Rebound resuming
• Gold: Minor consolidation likely
• Brent: Support elevated
• Bitcoin: Re-tested the support zone

NOTE: Read the FX snapshots full story on our KTM blog

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[KeyToMarketsUK]

KTM BRENT Weekly: Held the trendline

In the near term, the Brent oil seems to have a real reason to retrace further. Fundamental reasons are growing concerns over US output and tight OPEC supply. Technical reasons are posted a bearish H&S pattern and underlying indicators are remains bearish.

Positioning: The hedge funds and money managers cut their bullish exposure for the first time in three weeks.

Reuters reported Energy services firm Baker Hughes said on Friday that energy companies last week cut oil rigs for the first time in almost two months.

From a technical trading perspective, the price action has closed below the 20MA, however, has not broken the ascending trendline (below chart).

The daily underlying indicators suggest that rally to resistance at 65.70-66.00 should attract selling interest, with support at 63.00/63.30$ and 61.60/61.00$. Below the neckline (below chart) the focus will move down to 200MA at 58.30 and 250MA 57.00$.

In the very near-term if the price tested below the 63.00$ March 01 low, we forecast further retracement to support zone finds between 61.60$-61.00$.

Market traders are looking for OPEC and IEA reports will be released on Wednesday and Thursday respectively.

View: Over the coming days, we would suggest any rally to the January high or beyond unable to sustain.

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[KeyToMarketsUK]

KTM FX Daily: NZDUSD- Minor consolidation

The cross trades down by 0.10% having an early Asia session low at 0.7300. It has posted a double bottom between 0.7175- 0.7185 and a double top between 0.7355. The underlying indicators remained bullish and the price consolidating at the mid-point of the range (0.7435-0.7175).

Ahead of next week’s Fed and RBNZ policy meetings the cross likely to trade within the given range of 0.7435-0.7175.

Beyond the double top, the cross likely to rally further to the resistance seems at 0.7435 (triple top). Potential upswing will emerge if the price breach the triple top, in this case, 0.7480 and 0.7550 could possible.

Month support: 0.7150

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[KeyToMarketsUK]

KTM FX Dialy: The Risen Risk Appetite

The US dollar index (KTM symbol: USDX) was up by 0.45% on Thursday after Larry Kudlow appeared on CNBC. Larry Kudlow is the president’s new National Economic Council (NEC) director, who replaced Gary Cohn, after his resignation last week.

Kudlow mentioned that he would like to see the dollar “a wee bit stronger”. He also made a trade recommendation by saying: “I would buy King Dollar and I would sell gold”. Post these comments by Kudlow, the market responded bullish, as a result, the precious metal went down by 0.65% with a low at $1314.94.

Also, other precious metals such as silver, platinum and palladium were down by 0.90%, 0.80% and 0.35% respectively.

In general commodity prices possess an inverse correlation with the value of the US dollar, and therefore Copper is down by 0.80% at 3.122 on a stronger dollar.

The prices of major world currencies fell due to the come back of the US dollar overnight. The Aussie dollar was down by over a percent, loonie and the kiwi dollar were also down by a percent each. The major EURUSD down by 0.70% and the price re-tested the 50MA. Among other major currencies, the cable (GBPUSD) down by 0.5% and traced out a near-term price top between 1.3995-1.3988 via the formation of a triple top pattern posted on the daily chart.

For the week ahead, investors are waiting for U.S Federal Reserve’s decision on interest rates, which might affect the dollar and helps to define the trends of the Forex, Commodity and equity markets. We expect the Fed to hike 25bps in its next week’s meeting. In case of a hawkish projection, we forecast that the USDJPY will be the clear outperformer. Technically, the A-B-C corrective pattern pointing to 103.50.

In early January 2018, the dollar index was posted at a high of 92.33, which later depreciated by 4.50% in less than a three-month period. As we pointed out in our early articles, the dollar index was then stabilized at 88.00, and rebounded to 90.85 (March 01 high) and currently trading at 90.10. The underlying indicators are giving a mixed signal with the daily RSI pointing upwards and the oscillator study indicating a bearish crossover. Based on these studies we forecast that the dollar index to remain in a range bound territory between 89.30 and 90.85.

What’s on today?

We have EA CPI, Canada Manufacturing sales and US building permits and IP.

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[KeyToMarketsUK]

KTM Weekly: Global economic calendar

The Key event in the Financial markets will be the Fed monetary policy announcement. In addition to this, the focus also shifting to the RBNZ rate statement, BoE meeting and EU summit.

Central bank meeting: We have a Fed meeting on Wednesday and BoE meeting on Thursday scheduled.

Preview:

FOMC MEETING (March 21): March 20-21 Fed meeting is the Powell’s first meeting as Chair. We expect the FOMC to raise the federal funds rate to 1.50-1.75% (target range by 25bps) at its March 20-21 meeting. We do expect that the Fed is likely to upgrade the economic outlook for 2018 and 2019.
Will FOMC projections signal four hikes? As we pointed in our last week’s article, the upcoming March meeting is likely to be wrapped with a hawkish bias. Market participants are particularly watching on the dot plots (projections) which are available in the Summary of Economic Projections (SEP).

The CME FedWatch tool is showing a 94.4% probability of a 25bps rate hike.

View: We expect four Fed hikes in 2018, but more confirmation will be available at the June meeting. After the appointment of new Chair Powell, the market is anticipating a hawkish bias. Any sign of hawkish clues will send USDJPY higher to 108.00 whereas EURUSD will drift back to the support level 1.2160.

RBNZ rate statement (March 21): We expect the RBNZ will leave the OCR (Official Cash Rate) at 1.75% again. We do expect the tone will be buoyant with a cautious note.
View: For NZDUSD the near-term price action has already been capped. A daily close below 0.7170 target 0.7110/0.7110 levels.

BoE meeting (March 22): Although we don’t expect any changes to the key rate, we expect the interest rate hike will be delivered at the May meeting. We and the market is pricing a 25bps rate hike at the May meeting.
We believe the EU transition agreement is likely to be agreed at the EU summit. By taking Brexit risk into consideration we are particularly interested to trade on GBPUSD, EURGBP and GBPCHF. The Brexit related news flow will drive the trend either side.

View: We forecast a bullish reaction for GBPUSD only above 1.4000.

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[KeyToMarketsUK]

KTM commodity Weekly: In recovery mode – $67.60 is the major resistance

Oil price gave an upside break through the symmetrical triangle, which is pointing to near term resistance zone between $66.40 (50.05 fib reaction) -$66.70 its 50MA. Weekly key resistance at $67.65 coincides with the 61.8% fib reaction.

Past three weeks price action remained within a narrow range With the daily RSI and oscillator studies remaining bearish. This suggests that rallied to resistance at $66.70-$67.60 should again attract the selling interest with support against the March 01st low at $63.10 and below that, the focus will move down to February 09th low $61.60.

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[KeyToMarketsUK]

KTM FX Daily: G10 FX environment

DXY: Minor consolidation

The dollar index rose by 0.50% on Tuesday ahead of FOMC rate decision. The index (DXY) manage to close above 20&50MA and the daily underlying indicators are remaining bullish. Even on the weekly chart, the RSI is gradually moving higher and the oscillator is remaining bullish. Based on these studies, we forecast a bullish USD in the way of a short squeeze.

USDJPY: The degree of elevation

As we pointed in our earlier article, the USDJPY was elevated to our first target 106.60. A daily close above 106.60 could boost the corrective rally for 107.30 and 108.00/108.20.

EURUSD: The angle of correction

The major is locked in a range bound territory but with a bearish tag. As shown in the below chart, the corrective A-B-C structure aiming at 1.2060, noting that 20MA (weekly) lies at 1.2100. The underlying indicators on the daily and weekly are remaining bearish.

AUDUSD: Scope to retrace further

The cross has broken below the parallel support 0.7712 and closed below the 0.7700 mark on Tuesday. The daily and weekly studies RSI and oscillator are remaining bearish. After breaking the parallel support, we forecast two targets pointing to 0.7650 and 0.7620 its 100MA (weekly).

NZDUSD: On the verge of a breakdown

The daily RSI and oscillator studies are pointing lower. Any near-term rebound will fizzle out. Based on the below chart, we forecast a medium-term target at the 61.8% fib reaction finds at 0.7020. The near-term price action has already been capped. A daily close below 0.7170 targets 0.7110/0.7110 levels.

Commodity:

Gold: Make/break

The price tested the 100MA and held in Tuesday session. A break below 100MA, could retrace further to the 50.0% fib reaction 1302.00. Weekly support zone seems to be between $1302.00-$1299.00 below this, 1286.00 it’s 61.8% fib reaction and 1280.00 it’s 250MA exists. Resistances remain constant between 1341.00-1345.00 breach above rally could extend to 1360.00$.

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[KeyToMarketsUK]

KTM Daily: Not hawkish enough

• Fed says that the economic outlook has strengthened
• The policy bias remains unchanged since its January meeting
• The Committee pushed the Federal Funds median rates for 2019 and 2020

The Federal Open Market Committee has raised rates by 0.25%, which brought the fed funds target rate band to 1.50-1.75%. Since December 2015, this was the 6th time that the Federal Reserve has raised the rates. Addition to the decision on the rate hike, the committee also released an updated statement, which suggested another upgrade in Fed’s economic forecast.

Furthermore, post-meeting statement, the committee also said that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate. Regarding inflation, they mentioned that it is expected to move up on a 12‑month basis in coming months and would stabilize around the 2 percent objective over the medium term.

Whereas, in the January statement the committee mentioned, that the economic activity has been rising at a solid rate. It seems the committee modestly downgraded the economic activity. On inflation, “On a 12-month basis, both overall inflation and inflation for items other than food and energy have continued to run below 2 percent”. It seems that the projection for inflation is strengthened.

The Board of Governors of the Federal Reserve voted unanimously in the March meeting to raise the interest rates. However, the committee split between three and four hikes in 2018. As we pointed in our earlier article, we remain to our forecast, “expect four Fed hikes in 2018, but more confirmation will be available at the June meeting”. The median 2018 dot plot is unchanged, whereas, for 2019 the dots are elevated slightly. The committee pushed the Federal Funds rate from 2.7 to 2.9 for 2019 median and for 2020 pushed from 3.1 to 3.4, a hawkish takeaway.

On labor market, the committee said, “conditions will remain strong”. The Summary of Economic projections table reveals that the committee revised the unemployment forecast to 3.8% in 2018, 3.6% in 2019 and 2020 whereas the circa (longer run) remains at 4.5%.

Post the announcement, Gold climbed above 50MA and on the other side, the dollar index posted a breakdown. The initial reaction was unfavorable to the dollar and the comments on the below table are our quick thoughts.

Nutshell: The Fed says that the economic outlook has strengthened. Whereas the policy bias remains “further gradual increases in the federal funds rate” unchanged since its January meeting. We believe more rates are coming and the economy will continue to strengthen. Overall, we consider inflation will be the only risk factor spotted in the statement.

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[KeyToMarketsUK]

KTM FX Daily: CAD expose risk to February inflation

February inflation remains stable

Today’s data risk event is Canada February CPI. We expect the inflation to have increased by 0.4% from 0.7% in January and on YoY increase by 1.9% from 1.7% in January. The core inflation is likely to remain stable at 0.50% MoM and 1.2% on YoY basis.

The Consumer Price Index (CPI) is an indicator of changes in consumer prices experienced by Canadians. The CPI is widely used as an indicator of the change in the general level of consumer prices or the rate of inflation. Source: BOC

In the January Monetary policy report, the Governing Council of the Bank of Canada said, “Inflation is expected to remain close to 2 percent over the projection horizon”. The report also revealed, “The December 2017 Consensus Economics forecast for CPI inflation is 1.9 percent in 2018.”

In 2016, the Government and the Bank of Canada renewed Canada’s inflation-control target for a further five-year period, ending December 31, 2021. The target, as measured by the consumer price index (CPI), remains at the 2 percent midpoint of the control range of 1 to 3 percent. Source: BOC

Apart from the domestic data risk, the Canadian dollar also exposes risk from NAFTA negotiations and US tariffs. The Bank (BOC) is continuing to monitor NAFTA renegotiations. For the BOC, today’s February inflation readings are important. In setting monetary policy, the Bank focusses on “core” inflation measures that better reflect the underlying trend of inflation.

FX comment: CAD traders will pay attention to the inflation figures and next week’s GDP readings.

USDCAD: Rejected at the 61.8% fib reaction (1.3793-1.2060 correction). Support will be available between 1.2800-1.2770 with resistance seems to be at 1.3000.

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[KeyToMarketsUK]

KTM Weekly: Global economic calendar. AUDNZD and CADJPY are sitting above support lev

• GDP data for Canada, UK and US
• The trade war between US-China grabbed the central stage

This week ahead of Easter holidays, we have US PCE price index and Q4 GDP, 3rd estimate are the key data risk events scheduled. The week after Easter is more interesting, as we are due to get PMIs for March.

Review: As analysts expected, the Federal Open Market Committee has raised rates by 0.25%, which brought the fed funds target rate band to 1.50-1.75%. The Fed says that the economic outlook has strengthened. Whereas the policy bias remains “further gradual increases in the federal funds rate” unchanged since its January meeting. We believe more rates are coming and the economy will continue to strengthen. Overall, we consider inflation will be the only risk factor spotted in the statement. As we pointed in our earlier article, we remain to our forecast, “expect four Fed hikes in 2018, but more confirmation will be available at the June meeting”.

Data preview:

GDP data for Canada, UK and US

On the data front, we expect the 3rd estimate of US Q4 GDP to grow in at 2.7% from 2.5%. Whereas, the UK GDP will remain at 0.4% and Canada January GDP to grow slightly higher in at 0.2% vs 0.1%.

PCE price index: We expect a growth in February by 0.2% vs 0.3% in January.

Apart from the data event, a couple of Fed members are due to speak this week. Market participants are watching for fourth rate hike clues.

FX themes:

• Renewed concerns about US-China trade war likely to support further JPY appreciate in the near term, especially against the USD
• For USDJPY, the price is trading at 16-month low spotted with a daily RSI positive divergence, whereas the oscillator is remaining bearish
• The other JPY cross CADJPY manages to hold the parallel support. While the 80.50 which represent the earlier weekly swing low (a parallel support) should hold to maintain the near-term rebound to 81.80/82.00
• The AUD is exposed to China growth, so we are closely watching the AUDUSD and AUDNZD crosses
• This week again, the major EURUSD likely to bound in a broad range between 1.2540-1.2240
• Gold gave a bullish break and completed our given targets 1347.00 and 1350.00$ in Monday early Asian session.

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[KeyToMarketsUK]

KTM FX Weekly: EURGBP resuming the short-term rebound

Last week’s BoE policy decision well supported the GBP against the most traded currencies and especially against the euro. We believe the euro cross weakness likely to accelerate again in the coming weeks as we forecast a rate hike in May 2018. The higher wage growth added more fuel to the May rate hike expectations.

Data review:

The CPI 12-month rate was 2.7% in February 2018, down from 3.0% in January 2018
UK wage growth accelerates in the three months to January was 2.8% from 2.6%
The unemployment in the three months to January rate was 4.3% down from 4.4%
February monthly retail sales increased by 0.8% from -0.2%
The MPC voted by a majority of 7-2 to maintain Bank Rate at 0.5%

Data preview:

On the data front, we have UK current account and Q4 GDP data (Thu)

TECHNICAL OVERVIEW​

The euro cross fell below the key support level 0.8685 during last week but finally closed above. As we pointed in our earlier articles, we need a weekly close below 0.8680 to forecast a fatal flaw.

The daily RSI is recovering from oversold and the oscillator study has been changed to bullish. Based on these factors we could expect a short-term rebound but needs to settle above 0.8840 to escape further correction.

Weekly support: 0.8700 and 0.8660.

For a trading perspective, the cross-posted an inverse H&S pattern on the H1 chart. A move above 0.8765 target at 0.8800 it’s 100.0fe with support at 0.8700 (below chart)

View: Selling the rally favors trend.

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[KeyToMarketsUK]

KTM FX: USDX 2Q forecast

The dollar index has gone sideways with a massive whipsaw effect since January 2018 low and been trying to form a base. As we forecasted in our earlier article, in the Q1 the price held the support level 88.00.

Escalating rate hikes:

The Federal Open Market Committee has raised rates by 0.25%, which brought the fed funds target rate band to 1.50-1.75%. Since December 2015, this was the 6th time that the Federal Reserve has raised the rates. We believe more rates are coming and the economy will continue to strengthen.

As we pointed in our earlier article, we remain to our forecast, “expect four Fed hikes in 2018, but more confirmation will be available at the June meeting”.

USDX: Before retraced to 88.50 on Tuesday the price was spotted with a bearish H&S pattern. The daily RSI is posting a higher low and the oscillator is remaining bearish. Whereas on the weekly chart the RSI was posted a double bottom addition to this, the oscillator is remaining bullish. Based on these facts we forecast in Q2 the trading range will remain between 86.50-93.00 levels. A break down below 88.00 could retrace further to 86.50 levels. Alternatively, close above 91.00 would be rebound further to 93.00.

USD pairs technical overview: Coming….

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[KeyToMarketsUK]

KTM FX: GDP for UK and Canada are in focus

The data releases will pick up in the Europe session and we are watching particularly on UK final GDP and Canada GDP.

We expect UK Q4 GDP and Canada January GDP will remain flat by 0.4% and 0.02% respectively.

GBPUSD: Before retraced to 1.4065 on Tuesday session the cable was posted a double top at 1.4245. This week’s GBP weakness lead by the disappointing retail sales and dollar rally.

In a client report, the Deutsche Bank strategist Robin Winkler said, “GBP TWI has rallied each of the last fourteen years during the month of April”.

We believe in the coming month the cable will trade in the range between 1.4350-1.3700 levels.

Ahead of today’s GDP data the level 1.4040 will act as a pivotal below this, 1.40/1.3985 exists its 20MA. The daily RSI has been sloping down and the oscillator study is remaining bearish.

USDCAD: We believe in the near term the price likely to remain between 1.3020-1.2800. Recent price action pointing to the lower gear, to confirm this view we need a close below 1.2800. In this case, 1.2660/1.2620 could expect in the coming weeks. Ahead of today’s GDP data resistance seems at 1.2950 above this 1.3000/1.3020 exists. The daily RSI has been sloping down and the oscillator study is remaining bearish.

GBPCAD: The cross is trading on the verge of a breakdown and the underlying indicators are pointing to the South. As shown in the below chart, the price is trading at the lower end of the descending triangle. Ahead of today’s data risk events, support zone remains between 1.8130-1.8090 below this, target 1.8030/1.8000. Alternatively, a move above 1.8300 targets 1.8380 whereas potential resistance seems to be between 1.8380-1.8420. At this point, we expect a turnaround.

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