Key To Markets - Discussions

[KeyToMarketsUK]

After a decent rally in early January, EURUSD shifted to a prolonged period of consolidation. So far this month, EURUSD remains neutral, but euro crosses beaten down more than 3.00%. The pound and loonie have performed strongly with 3.00% gains, followed by AUD and NZD with 2.00% against the euro. Whereas EURCHF is the superhero with a percent gain.

Economic data from euro area last week printed weaker than expected supported the ECB’s growth concerns. The latest Manufacturing and Service PMI surveys confirmed that the euro area economy edged to stagnation at the start of 2019,
according to IHS Markit.

ECB has now confirmed the downside risk in the EA, a dovish turn. Draghi confirmed that “The risks surrounding the euro area growth outlook have moved to the downside” and also highlighted that “The incoming information has continued to be weaker than expected.”

Data review: January EA PMI surveys retreated

• December Germany PPI decreased by 0.4% vs. +0.1% in Nov 2018, according to Destatis.
• The ZEW Indicator of Economic Sentiment for Germany increased slightly in January. According to the official data, the economic expectations are recorded an increase of 2.5 points to -15.00 recorded an increase of 2.5 points in January 2019, and now stands at minus 15.0 points vs. -17.5 in November, well below the long-term average of 22.4.

Having dropped to 17.5 in November, the Germany ZEW Indicator of Economic Sentiment for Germany increased slightly in January. In our view, the Germany ZEW Indicator will rebound in the coming months, probably in 2H 2019 but set to remain well below the long-term average for some more time.
ZEW President Professor Achim Wambach commented that “It is remarkable that the ZEW Economic Sentiment for Germany has not deteriorated further.”

• Germany January PMI reading fell below 50.0 to 49.9, 50-month low vs. 51.5 in December whereas Services PMI increased to 53.1, 2-month high vs. 51.8 in December, according to IHS Markit.
• Turning to EA, January Manufacturing PMI fell to 50.5, 50-month low vs. 51.4 in December and Services PMI fell to 50.8, 65-month low vs. 51.2 in December.
• Ifo Business Climate Index fell from 101.0 points in December to 99.1 points in January, dropping to its lowest level since February 2016, according to the CES.

Data preview: Market is closely watching the FOMC January meeting and U.S January job market data.
Even an element of surprise could fail to move the ball beyond the given range 1.1570-1.1270. On top of the top-tier data releases market players also watching the US-China trade talks developments. Vice President Liu Hu will visit the U.S on Jan 30.

It is widely expected that the FOMC likely to keep policy on hold in Wednesday’s meeting and the also expect the first press conference of 2019 could wrap up with a lack of surprise.
Senior economist Bill Diviney at ABN AMRO said: “We think the 2019 set of voting members will have a more dovish tilt than that of 2018”.

TECHNICAL OVERVIEW​

In our view, ahead of the action pack week the trend in EURUSD looks titled settled within the 1.1570-1.1270 range. The price action is facing stiff resistance against the 100MAs, and the technical picture remains mixed.

As we forecasted on Friday, EURUSD rebounded to the target levels. We favor now to face stiff resistance against the 100MAs seems between 1.1445-1.1455. A break of these would give an impulse move higher to the next resistance 1.1500, paving the way for a more pronounced rally to the 200MAs seems between 1.1550-1.1570.

The flip side supports located at 1.1390, 1.1330 and 1.1290.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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[KeyToMarketsUK]

Today’s data highlight is Australia Q4 CPI in the Asian session, but it is not a catalyst for AUDUSD.. Another round of US-China trade talks and FOMC meeting are the key drivers.

• Westpac Economics are forecasting headline CPI at 0.3% for the quarter, which would see the annual pace ease to 1.5% from 1.9% (mkt. 0.4%, 1.7%).

It is widely expected that the FOMC likely to keep policy on hold in Wednesday’s meeting and the also expect the first press conference of 2019 could wrap up with a lack of surprise.

• Senior economist Bill Diviney at ABN AMRO said: “We think the 2019 set of voting members will have a more dovish tilt than that of 2018”.

Ahead of today’s data and event risk, I discuss technical overview for AUDUSD, AUDJPY, and USDJPY in this article.
As traders remained cautious ahead of the data and event risk the Australian dollar weakened 0.2% against most-traded currencies, while against GBP decreased 0.6% against AUD on Brexit woes.

For AUDUSD, the hourly chart structure shows that AUDUSD likely to remain between 0.7140-0.7175 before the Q4 CPI release. As per the higher time frame (H4/Daily) the price action caught between 0.7235-0.7070. On the higher side, 0.7200-0.7235 shall be the key area where one can look at, sustained trade above 0.7235 Jan 11 high will resume the upmove taking the cross higher towards 200MAs placed at 0.7295 and 0.7330 prior swing low.

Flip side a close below the critical support level 0.7075 will push prices lower towards 0.7020/0.7000.

On a monthly basis, among AUD/crosses AUDCAD outperformed with 2.50% followed by AUDUSD and EURAUD with 1.5% each while AUDCAD fell 1.30%.

The AUDJPY closed at 78.20 on Tuesday. According to the daily chart, the critical support level is placed at 77.90, followed by 77.50. If the cross starts the northward journey, key resistance levels to watch out are 78.60 and 79.10 Jan 18 high. Sustained trade above 79.10 will resume the upmove taking the cross higher towards 50MA placed at 79.60 and 80.20 its 20MA (Weekly).

Flip side a close below the key support level 70.50 will push prices lower towards 77.00 and 76.60 levels.

USDJPY trade back at virtually unchanged levels, with dollar index (KTM: USDX) modestly lower On Tuesday. The price halted after rising to 110.00 and failed to gain a footing above the double top pattern at 110.00. The daily indicators give a mixed outlook with oscillator negative crossover and RSI lacks conviction. Support at the 109.00has held firmly in recent days keeping the momentum in a narrow range between 109.00-110.00. To confirm a change in trend, the price needs to erase the double to pattern at 110.00. In this case, 110.80 and 111.30 are the next destinations in the near term.

On the downside, a break below the 20MA sits at 109.00 may trigger loses towards 108.60, 108.00 and 107.60.

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[KeyToMarketsUK]

Fed on hold and shifted gear to patience mode; G10 currencies loves to make the way higher against the USD; Gold at eight months high; Ripple rallied 12%; Market wrap.

As everyone expected the Committee decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent and expressed the word “patience” which is dovish.

“The Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.”

Fed on hold but not dollar, it took a toll on this dovish word “patience”and sold heavily against the G10 counterparts. AUD and NZD lead among G10 block with a percent gain.

At one stage the AUD rose 1.50% posted a high at 0.7270, two-month high and ran through the target we set on Wednesday. Better than expected Q4 CPI reading and dovish Fed statement makes Aussie dollar “hot” overnight. Besides soaring, iron ore price in China is an additional bullish factor to AUD.

The antipodeans surprise the traders by forming a higher top & high bottom for the first time since Jan 2018 and April 2018 respectively.

The further return of USD weakness allows EM currencies to perform better. Turkish Lira and South African Rand rose nearly 2.0%.

Mexican Peso weakened against the USD on the weak Q4 GDP. The cross USDMXN spotted with a double bottom pattern and consolidating in a rectangle. Moreover, the daily indicators are incredibly bullish. Sustained trade above 19.30 will resume the up move taking the cross higher towards 19.45 and 19.60 in the near term.

In majors, EURSUD and GBPUSD continued to consolidate in tight ranges. 1.1500 and 1.3220 are the key resistance levels to watch out in Thursday’s session.

Turning to commodities, Gold was the first who push the price higher out of the range followed by AUD in FX. The weak dollar pushes the yellow metal to eight-month higher, but pauses at 80.0% fib reaction. The immediate, meaningful resistance seems between 1323.50-1326.00$ above these could push further higher to 1350$, 1365$ and 1375$ July 2016 high.
Supports located at 1315$ and 1308$.

Interestingly the price action from 1300$-1323$ has been driven on a negative RSI divergence.

Turning to Cryptocurrencies, Ripple rose more than 12% and spotted with a double bottom formation. The daily indicators are bullish.

At higher time frame, the price has solid support finds between 0.2430 and 0.1920.

However, forex and Commodity markets are expected to remain highly volatile ahead of tomorrow’s January NFP data. Among G10, we are watching USDJPY closely as US-China trade talks started and technically holds the pivotal 108.65, so far.

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[KeyToMarketsUK]

Interesting trendline capping the rallies:

Selling pressure remains very strong, an interesting trendline (descending) is still in evidence in the daily chart.

USDJPY price is steady on Asia session today, having earlier rejected at 20MA. The four-hour chart setting is negative. The price action was peaked ahead of the extreme dovish Fed meeting. The weak daily RSI and the bearish turnaround of the daily RVI should cap the rallied in the coming days. Against this backdrop, a lasting break of the 109.20 and 109.70 key barriers sounds tricky, and we rather fear a decline to support at 108.40, 108.00/107.70 levels.

Note that a break below 107.70 would underpin bearish momentum, paving the way for a decline to 107.20/107.00.

The neckline capping the rallies:

Before retraced to 108.50 on Jan 31st, the price traced out a near-term top near 109.90-110.00 in mid-Jan 2019 via the formation of a double top pattern.

For bulls, only a sustained trade above 110.00 would ease downside pressure. In this case, the price could rally towards 111.00 and 111.25.

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[KeyToMarketsUK]

FX market this week: Central Bank monetary policy meetings (RBA and BOE) among top-tier data/events to keep forex traders busy.​

Again Central bank meetings are likely to be the big focus point for the forex traders in this week (Feb 04-08) along with other top-tier macro data points across the globe. On top of these, headlines on US-China trade talks and latest developments of Brexit are likely to keep investors busy.

Overall, this week is expected full of action with the G10 currencies, few of them namely AUD, GBP, and NZD. Near-term volatility woes will be dictated by the headlines of US-China trade talks and RBA outlook with USDJPY and AUDUSD are in the spotlight.

In Asia, this morning Australia Building Approvals, Dec 2018 due, not a market mover. Turning to Europe and U.S, it will be light headlight sessions and traders waiting for RBA policy meeting and Retail sales and Trade data (Tue).

In January 2019, the U.S Dollar liberated against the G10 counterparts with the US, 10Yr Yields closed at 2.63, the lowest level in
a month. The Australian dollar and the pound lead with 3.50% each and followed by Kiwi, Loonie and Norwegian Krone with 3.00% each.

The following are the top-tier data releases and events that will keep forex traders busy:

• Mon: Building Approvals, Australia, December 2018, EA PPI and Italy Prelim CPI
• Tue: International Trade in Goods and Services, Australia, December 2018, Retail Trade, Australia, December 2018, RBA monetary policy meeting, EA Services PMI survey, ISM Non-manufacturing PMI.
• Wed: Speech by Philip Lowe, Governor, Sydney, Germany Factory orders, US Trade Balance and NZ Q4 labor market statistics.
• Mega Thu: Fed Chairman Powell due to speak in Washington DC, EU Economic forecast and BOE monetary policy summary.
• Fri: RBA Statement on Monetary Policy< Fed member Bullard speaks, German Trade balance, Italy IP and Canada jobs data.

Reserve Bank of Australia and Bank of England meetings:
This week AUDUSD, GBPAUD, and GBPUSD will react to the upcoming Central bank meeting, especially GBPAUD. We expect both the banks keep the interest rates steady. Given the recent Central Banks dovish turn the Fed and ECB, we focus more on RBA’s language.

The Reserve Bank of Australia monetary policy meeting due on Feb 05, 2.00pm (AEST). It will be an uneventful as the market participants expect to keep the policy setting s steady. Recently printed Q4 CPI data beat analysts expectations for the first time in the past two years, which is to a surprise the market. The data rose 0.5% compared to 0.4% in Q3. On an annual basis, rose 1.8% vs. 1.9% Q3.

Turning to the Bank of England monetary policy meeting we expect the bank to keep rates steady. Ahead of the Brexit deadline we expect the MPC is in no rush to hike the rates until clouds cleared over Brexit outcome.
The bank is likely to wait until a transition period is secured before moving again. This makes May the most likely date for a next rate hike, according to Moody’s Analytics.

Chart of the week: GBPAUD

The cross has been consolidating in a tight range between 1.8510-1.7610. Ahead of the RBA and BOE monetary policy meetings, we expect the price action unlikely to change the range in the near term, but at the higher time frame, the downside prevails as long as 1.1825 is resistance (weekly basis).

For a trading purpose, a move above 1.8110 needed to rally further towards 1.8190/1.8220 and 1.8290. Furthermore, a daily close above 1.8300 could offer further upside towards 1.8440 and 1.8500.
For bears, a downside break below 1.7850 could pave all the way to 1.7750 and 1.7620 initially and followed by 1.7500.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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[KeyToMarketsUK]

EURUSD was choppy at the start of trading on Monday, but economic data outcomes are capping the rallies. In my view, dips should be well protected and could come out of the ranges in the coming weeks. The return of dollar weakness could strengthen the G10 basket.

Eurozone manufacturing sector moves closer to stagnation, according to HIS Markit. The January PMI and the other set of data points revealed that the economy is still running in lower gear led by trade concerns and political developments within Europe, especially the German economy is experiencing a downturn.

Data review:

• The preliminary flash estimate for the fourth quarter of 2018 GDP up by 0.2% in the euro area.
• Euro area annual inflation is expected to be 1.4% in January 2019 according to a flash estimate from Eurostat.
• Eurozone Manufacturing PMI registered 50.5, down from 51.4 in December, unchanged from the flash estimate, according to HIS Markit.

Data preview:
German Industrial Production to be the big focus point for the euro traders this week (Feb 04-08). Back in November 2018 German IP fell by 1.9% mom, sharpest decline since 2015. Whereas we expect the IP slightly rebound in Dec 2018.
Any rebound is likely to be too weak to push industrial activity back into expansion territory, but private consumption and government expenditures should have been enough to prevent the entire economy from falling into a technical recession, according to ING.

TECHNICAL OVERVIEW​

EURUSD volatility is very low over the past few months, but recent Fed’s dovish turn could be the catalyst for euro bulls. The technical landscape for EURUSD hasn’t changed since mid-November 2018.

The price recouped from 1.1215 and managed to breach the narrow range in early January 2019. Since then the new range is capped by 200MA. We believe the return of the dollar weakness is the very catalyst for the major to break higher through the new range of 1.1570-1.1270. A move beyond Jan 2019 high would unfold next leg of the rally towards 1.1680 and 1.1770 (short covering move).

We advise traders to trade with a cautious bias and follow strict stop losses below 1.1200 for longs. Last month’s impulse move has laid a foundation of higher low pattern between 1.1300-1.1270.

Ahead of the German IP data the key support finds at 1.1390 followed by 1.1300/1.1270. If the price starts moving higher, key resistance levels to watch out are 1.1500/1.1515 and 1.1570.

On the daily chart, the price is developing a bearish H&S pattern with shoulders seems between 1.1495-1.1515. If price fails to close above in a day or two, could retrace back to the neckline 1.1300.

Turning to FX positioning, Since Monday, January 28, positioning has shifted slightly. Within G10, the largest short is in EUR; the largest long is now in USD according to Morgan Stanley.

In an FX Positioning Tracer note, Strategists Gek and Andrew said: “EUR positioning more short.”

They reported “A notable reduction in Japanese retail accounts’ long EUR positions drove the aggregate EUR positioning score into the more short territory. EUR sentiment improved on the margin, and we estimate that macro hedge funds were buyers of EUR, but these changes were smaller than increased short positioning by Japanese retail accounts. Significant short EUR positioning could lead to outsized positive moves as macroeconomic data stabilize”.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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[KeyToMarketsUK]

• We are taking profit on our short EURUSD trade entered on February 05 at 1.1435 targeting a move to the neckline 1.1300/1.1270. We continue to forecast EURUSD to range within the range of 1.1200-1.1515 in the coming week. We also expect a room to further downfall.
• Dollar dominance, downshift in euro area growth, global growth revisions and local and global political unrest impacting the single currency. Recent EZ PMI surveys indicate the economy has started the new year on a flat note.
• The week ahead brings Germany Q4 GDP, EA flash GDP, and US CPI. We also focus on a few FOMC speeches and headlines of US government shutdown from February 15.

Again, the dollar trend is likely to be the big focus point for the forex traders this week (Feb 11-15) along with other risk events around the corner. On top of these, headlines on US-China trade talks and the latest developments of Brexit are likely to keep investors busy.

Overall, this week is expected full of action with the G10 currencies, few of them namely EUR, GBP, and NZD. The headlines on the US budget will dictate near-term volatility woes.

Data review:
PMI Services Index was unmoved on December’s 49-month low of 51.2 at the start of the year, according to IHS Markit.
Germany factory orders had decreased in December 2018 to -1.6% vs. -0.2% in November 2018.
In December 2018, production in the industry was down by 0.4% from the previous month, according to Destatis.

Data preview:
Local and global political unrest impacting the single currency on an addition to this France and Italy remained the remained the primary sources of weakness, with both countries registering declines in activity during January, according to IHS Markit.

In the euro area, we keep an eye on Germany Q4 GDP number (Thu). Back in Q3 Germany economy contracted 0.2% vs. Q2. The Federal Statistical Office (Destatis) reports that, in the third quarter of 2018, the gross domestic product (GDP) shrank by 0.2% on the second quarter of 2018. This was the first decline recorded in a quarter-on-quarter comparison since the first quarter of 2015.
In Q4 we expect the growth engine could quiet at 0.1%.

Besides, in the US we will see CPI data (Wed) and a few FOMC speeches.

TECHNICAL OVERVIEW​

The single currency slumped overnight on the back of dollar strength across the board. The EURUSD fell 0.40% to 1.1267 and could expect further retracement if lost 1.1200. Currently the price stands at the lower end of the range, and now it could be downgraded further to wave C.

The pair failed to cling on to its gain after a breakout above 1.1500, pulling back sharply and breaking below the significant support at 1.1400. Given the daily indicators are bearish and the daily stochastics is also downbeat, caution remains in order at the lower end of the channel.

A break below the 1.1265 Nov 28 low would drag further to 1.1240 its 100.0fe (A-B-C corrective pattern of 1.1570-1.1290-1.1515)) before retracing fully to 1.1200.

Whereas support zone at the 1.1300-1.1270 has held in recent weeks keeping the momentum in focus of large consolidation. On the downside, a break below 1.1200 may trigger losses towards 1.1060 before 1.1000. At higher time frames, the corrective structure of wave C is pointing to 1.1000 (1.1815-1.1215-1.1570).

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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[KeyToMarketsUK]

KTM Commodity Daily: Gold Park the brake at the support zone​

Gold price failed to gain a footing above the 80.0% weekly basis triggered a retracement to the parallel support at 1320.50$. The yellow metal extended its rebound and retested the crucial hurdle at the key fib reaction. The indicator gave a mixed outlook as the stochastics about to turn bearish. Especially the RSI has been painting negative divergence, and we cautioned traders twice this week.

Support at the 1320.50$ held in Asia today a breakdown could shift the focus towards 20DMA at 1317.00$. Overall, the support zone finds between 1320.00-1317.00$. A break below the 20DMA may trigger losses to 1302.00$. To maintain the current rally, the bulls need to hold 1302$. Resistances seems to be at 1328.00$, 1335.00$ and 1350.00$

• Bulls: As long as 1302.00$ is supporting, watch out for 1345.00$ and 1350.00$.
• Bears: Sell on raise favors the trend with sl above 1376.00$ (closing basis) it’s July 2016 high coincides with the 38.2% fib reaction of 1920.00$-1046.00$ correction. Strong resistance zone seems between 1350.00$-1360.00$.

What if the price close above?
On the upside, protracted buying may trigger on a break above 1376.00$ (Weekly closing). In this case, the price may pave the way for higher prices through 1415.00$ and 1480.00$ levels in the coming months.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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[KeyToMarketsUK]

KTM FX Daily: GBP/XXXs run through the targets​

• We forecasted that the GBP setting was bullish to go beyond hurdles last week. We still expect GBP to trade with higher volatility.
• The recent rally has laid the medium-term foundation, and further impulse may probably be provided by the mid-March 2019.
• Reports of delayed Brexit deadline is a hot topic, seems GBP buyers craving for Sun.

The pound moved sharply higher with breaking the key resistances on the news “Extending Brexit Deadline.” The fresh rallies of GBP crosses and against the USD are consistent, and we are long GBP against the basket of CHF, EUR, JPY, and USD.
UK Prime Minister Theresa May said Tuesday that she’d give Parliament a chance to delay Brexit.

Vox reported that “May told Parliament on Tuesday, February 26, that if an upcoming second vote on her Brexit deal fails, members of Parliament could vote to either leave the European Union without a deal on March 29, 2019 or seek a “short limited extension” to the deadline.”.

On the back of this news, the cable jumped to a four-week high, now focus on the nearest resistance 1.3300 above here 1.3360 exists.

Now we turn our focus on the other European currencies NOK and SEK with the G10 basket. We believe the deadline delay or clouds erase over UK’s uncertainty should benefit these currencies. Besides in majors EURUSD likely to claim further headroom if settles above 1.1400.

At the closing trading hours, the GBP was up 1.30% against CHF and USD followed by CAD and NZD by a percent. Against AUD and GBP was up by 0.90%.

FX insights:

• GBPUSD: Resistance 1.3300 and 1.3360, run through the 1st target.

• GBPNZD: Resistance 1.9285, it’s 50.0% fib reaction while traced out a triple top (so far). Above here 1.94050 are the next key barrier.

• GBPJPY: pauses at the 20MA (monthly) above here 147.80, 148.40 and finally 149.70 could be possible. Run through the 1st target.
• GBPAUD: Traced out a double top pattern (so far) at 1.8520 above here 1.8730 in focus.
• GBPCHF: Run through the second target. The resistance between 1.3270-1.3300 above here 1.3330-1.3350 its 200MA (Weekly) are in focus. Overall, limited headroom in the near term but the medium term could expect 1.3440.
• EURGBP: Support finds at 0.8550 its 200EA (Weekly) coincides with the 80.0 fib reaction.
• 

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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[KeyToMarketsUK]

KTM Commodity Daily: Taking profit on Platinum long trad​

• The Platinum metal prices have seen a superb rally 5% in the past two weeks, ran through the second target we set in mid- February.
• Above 200MA for the first time since March 2018; Continued to rally this week too, with breaking the two-month range.
• We continue to favor being long, and now the price has facing still parallel resistance at 876$ and 886$ its 20MA (Monthly).

We now decided to take partial profit on that long trade entered on February 22 at 831$ targeting a move to 844$, 875$ and 900$ levels. On Wednesday the price printed a high at 872.50$ and the time of writing currently trading at 868$. We exit the trade at 866$ for a profit of nearly 5.00%.
We continue to forecast Platinum to head higher to 885$ and 900$ in the near-term. So we wait for another better opportunity to return to long.

The daily indicators are close to overbought territory whereas the weekly and monthly are remaining upbeat. On the upside, the trend is supportive, but the market needs to take out the early November high 876.50$ to confirm the direction once again, additional resistance seems to be at 886$ its 20MA (monthly).

The flip side, the price has been well supported at 845$ and 830$ a break below 830$ may pave the way for lower prices back to the lower end of recent range.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

What is your Technical View?
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[KeyToMarketsUK]

• The dollar recouped since last week’s low and managed to close the month on a positive note in February.
• Besides the EURSUD manages to hold the 1.1300 again and we believe the setting for EURUSD cast on this week’s ECB meeting.
• European Central Bank monetary policy meeting among top-tier data/event to keep euro traders busy.

Data review:

• Final Eurozone Manufacturing PMI at 49.3 in February vs. Flash: 49.2 and January Final: 50.5, according to IHS Markit. The reading is slipping below 50.0 for the first time since June 2013.
• Euro area annual inflation is expected to be 1.5% in February 2019, up from 1.4% in January, according to a flash estimate from Eurostat.

Data preview:

ECB:
It’s unlikely that the interest rate will move so all eyes on the Draghi’s communication during the press conference. As we noted earlier, there is a chance of a significant downgrade to growth and inflation. Moreover, economists expect debate on TLRO (Targeted Long-term Refinancing Operation) which is going to expire in June 2020.

“The central bank will likely focus on replacing the long-term refinancing operations. Downgrades to the macro path should provide the backdrop for an announcement of extra bank funding, either at the upcoming March meeting or in April” Said analyst team at Morgan Stanley in a note.

Moody’s analytics team forecast that the central bank will be revised down the GDP to 1.3% in 2019 and 1.6% in 2020, respectively.
“We are penciling in that the bank’s GDP and inflation forecasts for 2019 will be revised down; core inflation has hovered around 1% for a long time, which means that the ECB’s expectation that it will average 1.4% in 2019 looks fanciful” Moody’s Analytics reported.

TECHNICAL OVERVIEW​

The price action has been trading in a tight range of 1.1220-1.1570 for last four-months (November 2018-February 2019), The consolidation last extended to the same-months on December 2016-March 2017 followed by a big break higher. This time we are not expecting a big break higher unless the rate differential supports.

Well the daily RSI lacks the conviction to move higher, and the oscillator has turned bearish. These settings suggest a continuation of range trading again in this week.

On Monday, March 04 the price was rejected at the major moving averages 50MA and 100MA that are placed between 1.1380-1.1390, suggesting strong resistance zone on the higher side. Ahead of the ECB meeting (March 07) sustained trade above 50MA-100MA will resume the up move taking the single currency higher towards the next crucial resistance 1.1440.
Whereby it has to go beyond significant resistance of 1.1440 for heading north towards 1.1500 initially followed by 1.1700/1.1740.

Besides, a close below the strong support 1.1200 will push prices lower to 1.1150 initially before touching 1.1100.
View: We remain cautiously NEUTRAL as we continue to study the action.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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[KeyToMarketsUK]

KTM FX Weekly: Economic calendar (March 11-15); Chart of the week: GBPUSD​

The dollar index fell on Friday and but gained 0.90% during the week. The kiwi dollar bucks the trend on Friday with 0.7% on Friday and gained 0.15% last week among G10 currencies. Besides GBP lost 1.70% and the EUR lost 1.2% followed by CAD 0.95% and JPY and CHF by 0.90% each.

On March 08, the U.S dollar across the board on mixed February non-farm payroll. Total nonfarm payroll employment changed little in February +20,000, and the unemployment rate fell by 0.2% to 3.8%, the U.S. Bureau of Labor Statistics reported whereas the average hourly earnings have increased to 3.4%.

On the back of the mixed data, USD down across the board, flip side Silver rose nearly 2.00% and Gold by 1.30%. The Dow Jones futures were down by a percent and later rebound strongly by the end of the day.

Overall the dollar index (KTM: DXY) suggested bullish bias but failed to breach mid-Dec 2018 high. The index requires a strong foot above 98.00 to extend is a new move towards the significant number 100.00 and 100.60. Whereas the flip side, support exists at 96.90 then 96.30.

Turning to precious metals, Gold rallied to 1300.75$ nearly completed my target. Now support exists at 1290.00$ and 1280.00$. The RSI is slowly picking up, and the oscillator has been turned to bullish. Based on these facts, we could expect recovery towards the resistance 1303.00$ ahead of 1312-1314$ its 20MA and 50.0% fib reaction. But selling on rising favors the trend.

The broader G10 currencies are closed to their lower ranges and continue to remain in ranges for the week (March 11- 15) expect GBP. GBPUSD weekly pivotal finds at 1.2880 below here focus shifts to 1.2770 its 61.8% fib reaction then 1.2660.

This morning in Asia, dollar edges up higher marginally after Friday’s fall.

Week ahead:
It is a crucial week ahead for Brexit, the House of Commons will vote on Theresa’s May Brexit deal.
“Reaching a deal cannot be ruled out, but an extension of the 29 March deadline looks more likely.” Nordea Markets reported.
Danske Bank said “If the government loses the vote, there will be a vote on Wednesday on whether to rule out leaving the EU without a deal. If the Commons vote to take no-deal off the table, there will be a third vote on Thursday on whether to ask the EU for an extension of Article 50. We judge that there is a 15% probability that May’s deal will pass on Tuesday”.

On top of the Brexit headlines, UK January GDP will be in focus. Turning to EZ, we will get February CPI on Friday.
“We expect the CPI report to confirm that inflation rose slightly to 1.5% y/y at the middle of the second quarter from 1.4% in January.” Moody’s Analytics reported.

Elsewhere in the US, we will get Retail sales, IP and CPI.

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Parliament vote to reject no-deal Brexit

The pound recouped its Tuesday losses in the overnight trade and managed to breach the February high. Against the G10 basket, the pound gained between 1.50-2.00% while the EURGBP manage to hold the 0.8470 Tuesday’s low.
We still believe that the stage is very much set to delay its deadline as the UK Parliament rejected no-deal Brexit. Today on Thursday Parliament will again vote on delaying Brexit.

“That vote will take place on Thursday, and if it is passed – and the EU agrees to it – the UK will not leave the EU as planned on 29 March. Mrs. May said there could be a short delay to implement a deal agreed in the next few days, or a longer delay if no agreement is reached.” BBC reported.

The cable spikes through the February 2019 high at 1.3350, rallies to 1.3380 shies at 50.0% fib reaction 1.3390/1.3400. It seems the stage is very much set up for the cable to go beyond 1.3400 level. Last three days price action has laid the support at 1.2960. A move beyond 1.3400 would unfold next leg of the rally towards 1.3580/1.3620 its 61.8% fib reaction.

We more focus on the daily RSI, which has been traced out a double top pattern. The RSI breakout needed to forecast a successful and safe rally further higher.

Besides, the euro cross EURGBP manages to hold the 0.8470 Tuesday’s low. There is a Brexit vote story going on which develops some sharp GBP moves. It will be interesting to see if we close below 0.8470-0.8450 zone by today. Note that the daily RSI has been stabilizing around 35 levels, based on this fact we expect the downside risk is limited to 0.8400/0.8380 levels (two-day forecast).

The resistance stands at 0.8560 and 0.8650/0.8675.

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KTM FX Weekly: Global economic calendar (March 18-22)​

FX market this week: Central Bank monetary policy meetings (FOMC and BOE) among top-tier data/events to keep forex traders busy.​

Central bank meetings are likely to be the big focus point for the forex traders in this week (March 18-22) along with other top-tier macro data points across the globe. On top of these, the latest developments of Brexit are likely to keep investors busy.

Central bank meetings: FOMC, BOE, SNB and Norges Bank.
Except for Norges Bank all the central banks are likely to keep its policy path reasonably unchanged.
Overall, this week is expected full of action with the G10 currencies, few of them namely AUD, CAD, CHF, EUR, GBP, USD, and NZD.

Review: Last week the dollar surrendered against the G10 counterparts with the US, 10Yr Yields closed at 2.59, the lowest level since January 03, 2019.

The following are the top-tier data releases and events that will keep forex traders busy:

• AUD: RBA Monetary Policy meeting minutes (Tue) and February Labour Force data (Thu)
• CAD: Inflation number month-on-month (Fri)
• CHF: SNB Monetary Policy Assessment (Thu) followed by a Press Conference
• EUR: German ZEW Economic Sentiment (Tue) and EZ PMIs (Fri)
• GBP: CPI Yoy (Wed) and BOE Monetary Policy summary (Thu)
• USD: FOMC meeting followed by a press conference (Wed)
• NZD: Current account (Tue) and GDP (Wed)

Central Bank Meetings preview: Global economic growth has slowed, and downside risks to growth have increased in the past few months. In a recent communication, major central banks have changed the tone. Back in January 2019, the Fed changed the tone to dovish followed by ECB. Now the market is expecting a rate cut from RBA.

Here is a gist of what analysts anticipate from central bank meetings.

FOMC: Market participants focus on the Fed’s dots lot. We expect another hike will take place in either September 2019 or in December 2019. In case of continued dovish bias could open the G10 currencies to squeeze especially AUD, EUR, and NZD.
Westpac said, “The FOMC’s March meeting will not only provide an updated qualitative assessment of the outlook, but also the first set of revised quantitative economic forecasts since the Committee’s collective dovish turn at the start of this year.”

Norges Bank: The market is waiting for the second rate hike, which we expect to happen this week by 25bps. In December 2018 meeting, Governor Øystein Olsen said: “Our current assessment of the outlook and the balance of risks suggest that the policy rate will most likely be raised in March 2019.”
Danske bank: we expect Norges Bank to raise its policy rate by 25bp to 1.00% and signal one further rate hike this year.
Morgan Stanley said, “We expect Norges Bank to hike by 25bp and keep its policy path relatively unchanged as strong domestic data offset the weaker external environment.”

BOE: The BOE will keep on hold until clouds over Brexit cleared.
Westpac said “Since the BOE’s last update, economic activity has remained middling. Importantly, there’s been no real progress on Brexit negotiations. Parliament intends to seek an extension to the negotiation period, but for businesses, this means the continuation of the economic uncertainty that has been a significant drag on investment plans. Against this backdrop, there’s no chance of a change in the Bank Rate this month, and the BOE will emphasize the conditionality of its forecasts.”

SNB: We expect the Swiss National Bank set to keep the interest on hold at -0.75%.

Chart of the week: AUDCHF

As long as 0.7040 is supporting (double bottom) , watch out for 0.7260, note that 200MAs spread between 0.7165-0.7180.

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KTM FX Dialy: AUDUSD technical overview​

The outlook remains favorable for the cross, which has already rebounded strongly since early March low at 0.7000. A small ascending channel has formed in the daily chart, and the daily indicators are very upbeat.

Under these conditions, keep an eye on the resistance zone between 0.7180-0.7200, as a breakout above this zone would strengthen the upward momentum, with a new target the resistance levels around 0.7240 and 0.7290.

Note that, 200MAs spread between 0.7215-.07240.
Flipside supports located at 0.7095, 0.7040 and 0.7000.

Interestingly the cross pauses the rally at the higher end of the 14-month descending channel, which coincides with 100MA. Lack of local macro economic data until the end of the month, the near-term trend depends on the USD action.

Further dollar weakness could push the cross above the bearish channel.

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We are expecting the central bank will hold the OCR at 1.75% in and also expect the central bank to highlight the growth risk in the global and domestic economy.​

“We expect to keep the OCR at this level through 2019 and 2020. The direction of our next OCR move could be up or down.” RBNZ stated in February.

NZ Gross domestic product grew 0.6% in the December 2018 quarter, after a 0.3% rise in the previous quarter, according to the Stats NZ but, below the RBNZ forecast 0.8%. Besides, the annual rate slowed too. “Annual GDP growth for the year ended December 2018 was 2.8%.” down from 3.1% in September 2018.

If the RBNZ issues the March OCR statement without the downside risk note to the domestic economy, NZD will spikes across the board especially against AUD, CHF, and JPY in the G10 block. The flip side, if risks highlighted as expected, then NZD will down between 0.70%-1.00% against AUD, CAD, EUR, GBP and USD in a day or two.

Ahead of the RBNZ OCR review, supports for the AUDNZD located at 1.0310/1.0300 and 1.0275 below here focus shist to 1.0230/1.0200 levels. If the cross is moving higher resistance seems to be at 1.0375 and 1.0400 above here 1.0435 exists its 50MA.
The daily indicators RSI and the oscillator are remaining bullish. Based on the recent price pattern and the indicators footprint, we believe the cross offers downside risk in the medium term (maximum 1.0230-1.00). If started moving higher, we could expect targets at 1.0500 and 1.0800 in the coming months.

NZDUSD: Range 0.6980-0.6850
The daily RSI lacks conviction whereas the oscillator has turned bearish crossover. A move below 0.6890 could open all the way to 0.6850 and 0.6830/0.6810. So far, the cross traced out a near-term top at 0.6940 above here 0.6970 December 2018 high and 0.6980 its 100MA (monthly exists) exits.

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Despite strong China PMIs AUD remains neutral but CNH up marginally by 0.15%.​

Over weekend’s Official China manufacturing PMI rose to 50.5 in March from 49.2 in February. This morning’s Caixin Manufacturing PMI, a private survey shows that manufacturing activity unexpectedly grows in March.
We learned that China factory activity finished on a positive note in 1Q 2019.
The respective PMI data posts above the neutral 50.0 mark at 50.8, according to IHS Markit. An index reading above 50.00 indicates an overall increase in that variable, below 50.00 an overall decrease.

Commenting on the China General Manufacturing PMI data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said “With a more relaxed financing environment, government efforts to bail out the private sector and positive progress in Sino-U.S. trade talks, the situation across the manufacturing sector recovered in March. The employment situation improved greatly. “

IHS Markit and Caixin said in a note that sentiment regarding the 12-month business outlook improved to a ten-month high, amid hopes of further improvements in market conditions.

Technical view: Both the Copper and CNH have supported but not rallied post the Caixin data. At the time of writing AUDUSD gradually moving above 50MA and currently trading at 0.7120. On a lower time frame chart (H4), the supporting indicators still advantageous for bulls. In this case, watch out for 0.7150-0.7170. The flip side support zone remains between 0.7040-0.7060 below here 0.7000 exists.

Among AUD crosses, GBPAUD lost more than 0.20% and settled below 50MA. Turning to the other cross USDCNH, rejected at 20MA this morning and lost 0.25%. Support finds at 6.69970 followed by 0.6730-0.6700 levels.

As the China PMIs beat market expectations, we expect AUDJPY bulls could try to breach the upper end of the resistance.

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KTM FX Weekly: Another disappointing activity data in Q1​

The euro maintained its downtrend on last month of 1Q 2019 due to weaker economic data and dollar strength but managed to hold the early March 2019 low of 1.1175.​

The single currency dips against the dollar on the first of 2Q 2019, due to weaker eurozone inflation. We learned that overnight’s data could be one of the strings for ECB to ease further.

The much-awaited eurozone growth rebound program did not materialize in the first quarter; especially the factory activity remained below 50.0 with German at 80-month low and Italy at a 70-month low.

But Thomas Harr at Danske Bank said “In my view, there is still a good chance that global and Eurozone growth will improve in coming quarters, as I believe that the US and China will reach a trade deal (see our latest piece here), while Fed’s dovish shift and China’s stimulus will help.”

With the upside surprise in China PMIs surveys, we believe some signs of recovery in China finally has arrived which is a full contraction to the eurozone PMIs. On top of the China PMIs, even U.S ISM manufacturing PMI overnight showed signs of recovery. Readers can remind Flash EZ PMIs indicated further contraction and even an initial stage of the recession in the manufacturing sector.

“Greatest contraction of the manufacturing sector for nearly six years in March” IHS Markit said in the New release on April 01.
If the China PMIs rebound further next month as well, we expect the eurozone growth will be bounced in the coming quarters.

Data review:
Eurozone Manufacturing PMI at 47.5 in March (Flash: 47.6, February Final: 49.3) according to official data.

IHS Markit also reported the countries ranked by March Manufacturing PMI. The table shows that PMIs fell between 3-month and 80-month low, whereas Spain showed an optimistic reading at a 2-month high.

Source: IHS Markit

Euro area annual inflation down to 1.4% with core inflation dropped t0 0.8%, according to Eurostat.

Data preview:
Data wise, EZ Services PMIs will be released followed by German industrial production and factory orders data. Turning to events, we get minutes from the March ECB meeting on Thursday.
In March meeting, ECB lowered its 2019 GDP forecast and revised upward for EZ’s unemployment rate. On top of these, the central bank injected new stimulus launch of a new TLRO in September 2019 and ending in March 2021.

TECHNICAL OVERVIEW​

The euro maintained its downtrend on last month of 1Q 2019 due to weaker economic data and dollar strength but managed to hold the early March 2019 low of 1.1175. The prices continued to fall in March but within the range. It seems now prices falling at a slower pace, and the downtrend appears to extend further.

Nevertheless, looking at the recent four-month consolidation pattern, breaking down the low will decide the further direction. A decisive close below the strong support 1.1150 its 61.8% fib reaction will drag the price towards 1.1150 and 1.1000, will be a new 2019 low.

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KTM FX Weekly: EURUSD tested and held the parallel support, probably a double bottom

We’re now into April European Central Bank monetary policy meeting this week by which time the ECB is unlikely to deliver a new theme. So, we’ve got a sense for how would come into April’s meeting compared to March meeting and what is clear is that we don’t expect much action from ECB.

The GDP downgrade brought in by the ECB last month has had a pretty significant impact previous month on the single currency. In March meeting, ECB lowered its 2019 GDP forecast and revised upward for EZ’s unemployment rate. On top of these, the central bank injected new stimulus launch of a new TLRO in September 2019 and ending in March 2021.

Data review:
We learned that last week’s data PMI surveys could be one of the strings for ECB to ease further. So, let’s take a closer look at that data.

• Eurozone Manufacturing PMI at 47.5 in March (Flash: 47.6, February Final: 49.3) according to official data.
• Eurozone Services Business Activity Index: 53.3 (Flash: 52.7, February Final: 52.8) according to official data.

Commenting on the Services PMI data Chris Williamson, Chief Business Economist at IHS Markit said: “The overall pace of economic growth will likely weaken in the second quarter as the malaise spreads to the service sector.”

Data preview:
In the euro area, our focus remains on the ECB meeting (Wednesday). We expect Mario Draghi to highlight again that the economic data remains weak than anticipated and that risks to the outlook continue to grind down.

“Incoming data had continued to be weak, in particular in the manufacturing sector. The growth outlook in the March 2019 ECB staff projections had been revised down substantially for 2019 and, to a lesser extent, for 2020.” ECB March 6-7 meeting minutes highlighted.

Danske Bank said “We expect Draghi to repeat his ‘delayed, not derailed’ message from last week – so no new policy signals from the ECB. However, we expect Draghi to strike an overall cautious tone and the ECB to keep its downside risk assessment on growth. We do not expect TLTRO3 modalities to be announced next week (only in June).”

Moody’s Analytics said, “We don’t expect the bank will unveil any major details regarding its new TLTRO programme for long-term loans in April; we expect it will do so in June, as some of the members of the bank’s governing council have suggested.”
Turning to data risk events, we will get Germany final March CPI (Thursday) and February Industrial Production on Friday.

TECHNICAL OVERVIEW​

The EURUSD ran through the target we set on Monday, up by 0.50% led by a couple of positive technical factors. The single currency traced out a near term bottom via double bottom formation between 1.1175-1.1185. Underneath the RSI has been propelling higher and the oscillator just has been turned back to bullish crossover.

The price has come close enough to the 61.8% fib reaction in early March since them consolidating between 1.1175-1.1450. From a bigger time frame perspective, the pattern is still showing a final leg down to 1.1000 levels.

Whereas the return of the dollar weakness held the respective fib reaction and trigged an impulse rise.
Now the support stands at 1.1200 followed by 1.1170. Note that any break below 1.1170 exposes further leg room to 1.1100 and 1.1000 levels.

For bulls, as long as 1.1170 is support, watch out for 1.1330 by this weekend.

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KTM FX Daily: Things to know going into Thursday​

The G10 currencies trading mixed Thursday in Asia morning against the dollar index, besides the USD is marginally higher 0.05% at the time of writing.

FOMC March 19-20 meeting Minutes highlighted that “The market-implied path for the federal funds rate in 2019 declined slightly over the period, while investors continued to expect no change to the target range for the federal funds rate at the March FOMC meeting. The market‑implied path of the federal funds rate for 2020 and 2021 shifted down a little.”.

The dollar index (KTM: USDX) managed to hold the 50MA on Tuesday and Wednesday, and currently trading tad above at 96.50. Its 100MA finds at 96.30 below here 96.15 exists its 100EA. The daily RSI is propelling down, and the oscillator is remaining bearish.

Besides in the April ECB meeting, the Governing Council kept the benchmark rates and forward guidance unchanged.
In the press conference, Draghi high lightened “Incoming data continue to be weak, especially for the manufacturing sector, mainly on account of the slowdown in external demand.”
He also repeated “The risks surrounding the euro area growth outlook remain tilted to the downside, on account of the persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets.”.

EUR reaction to the meeting: The major EURUSD swiftly fell 50 points from 1.1288 to 1.1229 overnight and recovered to 1.1275 by the end of the day. Intraday resistance seems to be between 1.1290-1.1300 its 50MA above this 1.1330 exists. The flip side support finds at 1.1250, 1.1230 and 1.1190. The setting is positive for intraday but only above 1.1290/1.1300.

Data to watch today:
Lack of high impact data risk traders focuses on several FOMC members speeches.

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