Market analysis and trade recommendations by FBS

[FBS]

EUR/USD: what do the banks say?

We have searched for the fresh EUR/USD recommendations from the major banks and here’s what we’ve found.

Bulls

Nordea: Keep EUR/USD long (from $1.3450), next support area $1.3380/1.3450. Stop loss is at $1.3340, while take profit is at $1.3850. The ECB won’t cut rates, reasons plentiful: the labor market has turned the corner, the credit impulse turned up and the lending survey tone positive, the PMIs and other sentiment/survey data have improved, market-based inflation expectations are rocks solid even with the softer headline CPI.

Bears

SEB Bank: Short-term the minor consolidation since Friday afternoon is seen soon breaking down to a fresh low in the $1.3440/50 area.

JP Morgan: The ongoing straight attack and break below the support at $1.3507/06 to challenge $1.3436 which upon its break would open the way for a deeper decline. Only above $1.3506 would temporally keep the door open for another corrective leg up to $1.3802.

Barclays Capital: Consider selling EUR/USD as a tactical trade to position for the ECB meeting this week. Target is at $1.3400. The ECB will cut rates either in February or in March. Euro will fall anyway.

Danske Bank: We would not be surprised to see such a move and continue to see downward pressure on both EUR/USD that fell below 1.35 on Friday and EUR/GBP the next couple of days

Commerzbank: It’s likely to sell off further towards initially the 200-day MA at $1.3376. We have a minor support en route at $1.3423, the 78.6% retracement of the move up from November. Very near term we would allow for a small near term rebound, however intraday rallies should now find resistance at 1.3525/55. Above $1.3640 the key resistance is the $1.3740/46 recent high and Fibo retracement.

TD Securities: EUR/USD short-term view is bearish, with a potential target of $1.3174 achievable.

 

[FBS]

Feb. 14: Asian session

Japanese Topix index slid 1.2%, while the Nikkei 225 dropped 1.3%. The MSCI Asia Pacific Index of shares was little changed after falling as much as 0.2% earlier today.

USD/JPY slid to 101.56. Demand for safe havens increased making yen appreciate. AUD/USD tested $0.9030 during the Asian trading hours after consumer prices increased in China, the nation’s biggest trading partner, but then returned below $0.9000. NZD/USD tested $0.8367 before easing down to $0.8338.

EUR/USD is consolidating in the $1.3680 area after it rose by about 90 pips yesterday. GBP/USD is consolidating below yesterday’s high at $1.6673, the highest level since May 2011.

 

[FBS]

Italy will have new government

Italy’ Prime Minister Enrico Letta will step down today as the leadership of his centre-left party deserted him for Matteo Renzi (136 votes to 16).

Critics say that Letta hasn’t been able to carry out much-needed administrative reforms and stimulate economic growth. Italy is suffering from near-record levels of unemployment a public debt of more than 2 trillion euro. The nation’s GDP shrank by 9% in 7 years.

Renzi, 39, is now expected to be asked by the President Napolitano to form a new government. He will be Italy’s third unelected premier in as many years.

 

[FBS]

Mar. 10: Asian session

Asian shares fell after reports showed the biggest drop in Chinese exports since 2009 and tensions in Ukraine continue. MSCI Asia Pacific Index dropped by 1%. Japanese Nikkei is also down by 1%. The market’s sentiment was hurt as well as Chinese yuan fell on the central bank’s decision to cut the reference rate by the most in 1 1/2 years.

USD/JPY is testing 103.00 to the downside after peaking to 103.76 on Friday. Japanese GDP grew in Q4 an annualized 0.7% from the previous quarter, less than a preliminary estimate of 1%. The current-account deficit widened to the maximum since 1985.

Commodity currencies extend the downside after having peaked on Friday. The key bearish factors are the upbeat US NFP on Friday and weak China trade data (29B trade deficit vs. expected surplus of 14B) released on Saturday. AUD/USD opened the week with a bearish gap and weakened below $0.9040 after having faced resistance at $0.9135 on Friday. NZD/USD opened with a gap to the upside, but closed it by weakening to $0.8460. Kiwi remains pressured after hitting a 4-month top of $0.8520

EUR/USD rose to $1.3892, but is trading below Friday’s peak at $1.3915. GBP/USD edged up to $1.6440, but is trading below Friday’s peak at $1.6785.


Key option levels (Mar. 10)

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (14:00 GMT).

Here are the key options expiring today:

EUR/USD: $1.3800, $1.3840, $1.3850 (large), $1.3900;

GBP/USD: $1.6675;

USD/JPY: 102.00 (large), 102.05, 102.20, 102.50 (large), 103.00 (large), 103.50 (large);

AUD/USD: $0.8925, $0.8930, $0.8940, $0.9000, $0.9080, $0.9105 (large), $0.9110, $0.9130 $0.9150;

NZD/USD: $0.8360, $0.8370, $0.8415, $0.8430, $0.8440;

USD/CAD: 1.1050 (large), 1.1100, 1.1150, 1.1200;

EUR/JPY: 143.00 (large);

EUR/CHF: 1.2205, 1.2210;

EUR/GBP: 0.8180, 0.8350.

EUR/USD holds below the $1.3915 peak

EUR/USD strengthened towards the $1.3900 mark in the Asian morning, but holds below the Friday’s 2-year peak of $1.3915. Better-than-expected US NFP on Friday hindered the continuation of EUR-rally. On Monday French industrial production disappointed the markets, contracting by 0.2%. The pair will likely wait until Tuesday for more decisive moves.

Technically, the pair approached a strong resistance in the $1.3900/4000 area. This is the 2008-2014 resistance trend line and the top of the monthly Ichimoku. The ECB-driven move brought the pair into this area, but was not strong enough to overcome it.

We believe EUR/USD still has a potential to hit $1.4000, but there is a clear need for the market to correct lower. Key support lies at $1.3830 and $1.3780 – look to buy euro on dips. Slide below $1.3700 would return the negative outlook.

EUR/USD: Elliott waves (Mar. 10)

Weekly. The pair keeps forming of the rising correctional wave [D], which is close to completion.

Chart. Weekly EUR/USD

Daily. The wave [D] is a double Zigzag w-x-y. Euro’s now forming the final wave of the second Zigzag [C].

Chart. Daily EUR/USD

H4. We are probably seeing the beginning of construction of wave (5). In the coming days the pair will continue rising within the impulse 3, the market will generate a horizontal correction, after which the growth in the wave 5 will continue. The approximate trajectory is shown at the picture.

Chart. H4 EUR/USD

 

[FBS]

Mar. 17: Asian session

Asian stocks mostly fell on Monday as concerns over Ukraine escalated after the Crimea referendum on Sunday. Russian exit polls show that 95.5% of Crimeans voted to break away from Ukraine and join the Russian Federation. Investors nervously await for the West’s response to Crimea’s vote, which has drawn international condemnation. MSCI Asia Pacific Index recovered by 0.18% in the session, while Nikkei 225 lost 0.35%. USD/JPY strengthened from the Friday's low of 101.20 to 101.65. Chinese shares rose as the yuan dropped after the government widened the currency’s trading band.

Commodity currencies are trading a bit higher. AUD/USD recovered to $0.9065. Westpac economists revised their forecasts for the RBA monetary policy: they no longer see RBA cutting rates in 2014. NZD/USD is trading around $0.8550, extending the consolidation in the $0.8520/60 range. Gold hit a fresh 6-month high in the early Asia, strengthening to $1388.

EUR/USD is trading a little lower around the $1.3900 mark. GBP/USD sitting at $1.6640.


CFTC: USD longs keep falling

Here are the essentials of the latest Commitments of Traders (COT) report, released on March 14 by the Commodity Futures Trading Commission (CFTC) for a week ended on March 11.

According to the report, large speculators decreased their overall USD bullish position from $11.6 billion in the week ended on March 4 to $10.6 billion in the week ended on March 11. USD longs keep on falling for a fifth week in a row. The US dollar aggregate position remains at the lowest level since Nov. 5, 2013 ($7 billion).


Trade signals from Danske Bank (Mar. 17)

*Danske Bank uses trailing stop orders (moved together with the price)

EUR/USD: Buy at $1.3859 with a target of $1.4000 and a stop at $1.3831

USD/JPY: Short at 101.75 with a target of 100.76 and a stop at 102.43

GBP/USD: Long at $1.6603 with a target of $1.6719 and a stop at $1.6565

USD/CHF: Short at 0.8759 with a target of 0.8632 and a stop at 0.8807

AUD/USD: Long at $0.9035 with a target of $0.9204 and a stop at $0.8975

USD/CAD: Buy at 1.1035 with a target of 1.1225 and a stop at 1.0950


What to expect from EUR/USD?
Kira Iukhtenko, FX BAZOOKA analyst

EUR/USD extended the upside over the past week. At the beginning of the week euro paused a little, but bounced from the $1.3830 support and moved to the upside with renewed energy. The pair hit a fresh high of $1.3966 on Thursday – highest since 2011. Rally slowed later in the day as better-than-expected US data increased the QE tapering expectations on the March 19 meeting.

All in all, the market remains quite optimistic on the EUR/USD prospects, despite the attempts of the European officials to calm the demand spurred by Draghi on a March meeting. We see a good chance to test the $1.4250 area in the coming weeks, but this week we still expect a bearish correction to extend towards the $1.3720 support.

Technical factors confirm the need for retracement. The pair keeps on testing the major resistance area $1.3900/4000 and lacks an immediate power to break above it. This is the 2008-2014 resistance line and the upper boarder of the monthly Ichimoku Cloud. There is a MACD divergence on the weekly chart.

Near-term support lies at $1.3830 (61.8% Fibo from the 2011-2012 decline) and $1.3800. The market will remain bullish until the $1.3720 holds.

 

[FBS]

What to expect from the Fed?

The US Federal Reserve will announce the results of its March policy decision on Wednesday at 18:00 GMT. The new Fed's chief Janet Yellen will start her first press-conference at 18:30 GMT.

According to the market consensus, the FOMC decision will include another $10 billion cutback in the pace of asset purchases, slowing QE3 to $55 billion per month. Fed's qualitative "forward guidance" (6.5% unemployment and 2.5% inflation thresholds) is likely to be replaced with a more qualitative guidance. The new guidance is expected to underline that rates will remain unchanged well beyond the end of the QE program ("low for longer" fed funds rates). Markets will of course react to any changes to the Fed projections for growth, unemployment and interest rates.

BNP Paribas: We anticipate relatively neutral market impact on USD from the meeting. As long as Chairman Yellen largely attributes weak US activity to the weather, USD should stay resilient.


Mar. 19: European session

European stocks paused from a two-day rally, with investors awaiting the US Federal Reserve's policy decision at 18:00 GMT. Markets have rallied earlier in the week as Ukraine woes eased a little. Although Crimea moves into Russia, investors interpreted the yesterday's Vladimir Putin's speech, in which he said he wouldn't seek a further division of Ukraine, as a step away from an escalation of the crisis.

EUR/USD trades around $1.3920, staying above the key $1.3880 near-term support. GBP/USD strengthened to $1.6645 on the upbeat UK labor market data. Claimant count fell by 34.6K in February (forecast: - 23.3K). January claimant count change reading was revised from 27K to 34K. As expected, unemployment rate stayed at 7.2%. BoE March meeting show all 9 MPC members voted to leave policy unchanged.


Mar. 19: Asian session

Asian stocks were mixed on Wednesday ahead of the outcome of the FOMC first policy meeting under its new chief Janet Yellen. The Fed is widely expected to continue to reduce the QE size by $10 billion. Traders are also focused on the Fed’s forward guidance, with many expecting the cancellation of a 6.5% unemployment threshold. China concerns remain a negative factor for the risk sentiment. The MSCI Asia Pacific Index rose by 0.2%, while Nikkei 225 added 0.3%.

Currency markets had a calm session. USD/JPY consolidates, capped at 101.60 and supported by the 101.30 mark. Data showed Japan trade deficit unexpectedly widened to 1.13 trillion. According to a Reuters poll, released today, 7 out of 16 economists expect the BoJ to ease further in July.

Commodity currencies are trading under a slight bearish pressure. AUD/USD retraced lower to $0.9115 after testing the $0.9135 resistance (200-day MA) to the upside at the very beginning of the session. NZD/USD followed the Aussie, retracing from the yesterday’s high of $0.8640 towards the $0.8600 mark.

EUR/USD remains in a sideways $1.3950/3880 range, hanging at $1.3920 as of writing. GBP/USD sits at $1.6590 following the yesterday’s dip to $1.6545. Great Britain will release a bunch of employment data and monetary policy minutes at 9:30 GMT.


Nomura: buy USD/JPY ahead of FOMC

Nomura traders bought another $10 million of USD/JPY from 101.75 and with a stop at 100.00. Nomura thinkst the FOMC meeting could be a catalyst for dollar gains vs. the yen.

"Specifically, we think removal of guidance related to the 6.5% unemployment threshold will weaken the Fed’s forward guidance on the margin, which could see some increase in US rates and USD support," Nomura clarifies.

GBP/USD back above $1.6600

Cable recovered from a 1-month low hit yesterday at $1.6544 to $1.6620. The market is waiting for a bunch of UK data to come at 9:30 GMT (MPC March minutes, labor market numbers and later – UK annual budget). Weakening performance and its acknowledgement by the UK authorities may push traders to speculate that this will delay interest rate hikes for a longer period than currently expected.

Cable is trading under a moderate bearish pressure since mid-February, retracing from highs above $1.6800. Major near-term support lies in the $1.6545/40 area (55-day MA, 8-month uptrend). Break below here could open the way towards $1.6260/30 support (September high and the 23.6% retracement of the move up from July 2013).

Trade signals from Danske Bank (Mar. 19)

*Danske Bank uses trailing stop orders (moved together with the price)

EUR/USD: Long at $1.3915 with a target of $1.4075 and a stop at $1.3869

USD/JPY: Short at 101.75 with a target of 100.76 and a stop at 102.43

GBP/USD: Short at $1.6625 with a target of $1.6538 and a stop at $1.6675

USD/CHF: Short at 0.8747 with a target of 0.8632 and a stop at 0.8790

AUD/USD: Long at $0.9035 with a target of $0.9204 and a stop at $0.9054

USD/CAD: Long at 1.1035 with a target of 1.1225 and a stop at 1.1070

 

[FBS]

Mar. 20: Asian session

Asian markets moved lower on Thursday on concerns that the US could push up interest rates earlier than expected. In a press-conference after the FOMC meeting, Chairwoman Janet Yellen said the Fed could raise rates "something on the order of six months" after the bank shuts down its bond-buying program. Markets were surprised: it means that rates could be raised as early as April 205 —ahead of the late 2015 market expectation. As expected, the central bank reduced its QE program by $10 billion to $55 billion. US dollar strengthened versus the other major currencies.

USD/JPY jumped to 102.70 on the FOMC news, but retraced to 102.30 in early Asia. Nikkei 225 index lost 1.3%.AUD/USD consolidates 20 pips above the yesterday’s through at $0.9000.NZD/USD extended the yesterday’s drop, hitting a session low of $0.8520 on weaker-than-expected New Zealand Q4 GDP (+0.9% vs. expected +1.0%, Q3 reading revised down to +1.2%). Gold hit a low of $1326 today (lowest since the end of February).

EUR/USD has recovered some ground to $1.3840 after the yesterday’s 120 pips drop to $1.3810. GBP/USD followed the euro, recovering from the low of $1.6510 to $1.6540. USD/CHF hit a high of $0.8810 in the US session. Swiss National Bank will announce its monetary policy decision at 8:30 GMT.


SNB maintains the EUR/CHF peg

The Swiss National Bank left the minimum exchange rate unchanged at 1.20 francs per euro and is ready to enforce it if necessary “by buying foreign currency in unlimited quantities, and to take further measures as required”. The 3-month Libor rate was also kept unchanged at the 0.0–0.25% range.

The regulator explains that the CHF is still high and “with the 3-month Libor close to zero, the minimum exchange rate continues to be the right tool to avoid an undesirable tightening of monetary conditions in the event of renewed upward pressure on the Swiss franc.” SNB's current inflation forecast is at 0% for 2014 and at 0.4% for 2015, in both cases 0.2% lower than the previous estimates. In 2016 the central bank expects a 1.0% rise.

The SNB acknowledged the continued recovery in the EU in Q4 of 2013, but pointed out that risks remained, such as low inflation, uncertainty about the health of Europe's banking system, political tensions and weakness in key emerging markets.

 

[FBS]

Mar. 31: Asian session

Asian shares rose. The MSCI Asia Pacific Index climbed 0.5%. Japanese Nikkei rose by 0.65%.

USD/JPY opened with a small gap up at 102.94, but then edged a bit down. Japanese preliminary industrial production fell by 2.3%. US dollar strengthened a bit before Federal Reserve Chair Janet Yellen speaks and ahead of figures tomorrow that may show US manufacturing strengthened this month.

Commodity currencies are retracing from the Friday’s highs in Asia. AUD/USD extends the correction from the recent peak of $0.9300. Aussie found support at $0.9220 as of writing. Aussie is seen under pressure ahead of the tomorrow RBA meeting (no policy changes expected). NZD/USD follows the Australian counterpart, weakening from the Friday’s high of $0.8695 to $0.8660. NZ business confidence came below the forecast in March (67.3 vs. previous 70.8). Gold has slightly recovered from the Friday’s low of 1285.

EUR/USD is trading in the $1.3750 area after opening with a gap up at $1.3762. On Friday the single currency dipped to $1.3700 and formed a “hammer”. Euro’s under pressure ahead of the central bank’s meeting this week. GBP/USD opened with a gap up at $1.6654, but then slid down by 20 pips.

CFTC: EUR net longs down

Here are the essentials of the latest Commitments of Traders (COT) report, released on March 28 by the Commodity Futures Trading Commission (CFTC) for a week ended on March 25.

According to the report, net long EUR positions fell from the last week's 5-month high of 52K to almost 40K contracts. Canadian dollar was the biggest mover of the week: net short contracts fell from 70K to 33K this week.

EURUSD

GBPUSD

USDJPY

AUDUSD

NZDUSD

USDCAD

 

[FBS]

EUR/USD capped at $1.3800

EUR/USD has recovered some ground on Monday, bouncing from the 55-day MA at $1.3710 towards the $1.3800 figure. However, analysts of the major investment banks are cautious about the euro ahead of the ECB policy meeting on Thursday. The regulator is expected to pull the currency down by an additional easing or at least by a more aggressive verbal intervention.

Credit Agricole holds a medium-term EUR/USD short from $1.3780 with a target of $1.3300 and a stop at $1.4160. Economists believe the most effective measure the ECB can undertake is to introduce the negative deposit rate: “As the EUR has been benefitting from a positive capital flow situation, cutting the deposit rate negative appears to be the most efficient way going forward. Indeed, Weidmann said too that negative rates would be more appropriate to curb the EUR”, they explain.

Credit Suisse recommends selling EUR/USD on rallies from the rising 55-day MA ($1.3712). Strategists went short on the pair from $1.3795 targeting $1.3665. “We favor a break below $1.3704 for a test of $1.3664/43 – the 61.8% retracement of the February/March rally, late February low and trend line support”, analysts add.

 

[FBS]

April 1: Asian session

Asian shares swung between gains and losses as investors weighed reports on China’s manufacturing that pointed to weakness in the world’s second-biggest economy. China March manufacturing PMI came a bit above the forecast at 50.3 (forecast: 50.1, previous: 50.2). However, the final manufacturing PMI from HSBC disappointed, falling the last week's estimate of 48.1 to 48.0 (February: 48.5).

USD/JPY is trading a bit on the upside in the 103.20/35 area, below yesterday’s high at 103.43. Yen remained lower after Bank of Japan’s data showed the Tankan index for sentiment among large manufacturers in the nation rose to 17 in Q1 from 16 in the previous period, while analysts surveyed by Bloomberg News expected an advance to 19. According to Mizuho, “Tankan was weak”.

AUD/USD retested the $0.9300 mark early in the session, but later slipped back into the $0.9260 area. RBA meeting was a pretty neutral event. The regulator repeated the Aussie dollar is high by historical standards, but said it sees a period of interest rate stability ahead. NZD/USD stayed in a small range around the $0.8670 mark.

EUR/USD edged up to $1.3778 after forming a spinning top candle yesterday. GBP/USD edged up to $1.6670, but is below yesterday’s high at $1.6684. US held losses versus most major peers as investors wondered weigh whether American economic data this week will be strong enough to lift central bank’s concerns that the economy still needs stimulus.


Key option levels (Apr. 1)

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (14:00 GMT).

Here are the key options expiring today:

EUR/USD: $1.3650, $1.3700, $1.3750, $1.3765, $1.3790, $1.3800, $1.3830, $1.3890;

GBP/USD: $1.6500, $1.6630;

USD/JPY: 102.10 (large), 102.30 (large), 102.50 (large), 103.25, 103.30, 103.75 (large);

AUD/USD: none;

USD/CAD: 1.0900 (large), 1.1030, 1.1200;

EUR/JPY: 143.00;

AUD/JPY: 94.00.


Trade on US data releases

The Fed’s Chairwoman Janet Yellen said yesterday US economy will need stimulus “for some time.” Analysts at BNP Paribas think, however, that Yellen’s dovish comments was an attempt to reverse some of the impression created by her “6 months” reference (time between the end of QE and the start of rate hikes) at the March FOMC press conference. The specialists note, however, that the market’s reaction was muted. In their view, this seems unlikely to reverse and prospects for USD will remain good unless data begins to materially deteriorate again.

Economists surveyed by Bloomberg predict a report today will show quicker manufacturing growth, while a private survey tomorrow may indicate an improving jobs market. Figures tomorrow from the ADP Research Institute may show companies in the US added 195K jobs in March after boosting positions by 139K the previous month.

Citigroup Inc.’s Economic Surprise Index for the US, which shows whether data beat or fell short of economists’ forecasts, dropped to a one-week low of minus 32.60 yesterday.

BNPP is long on USD/JPY ahead of the release of the ISM Manufacturing PMI (14:00 GMT).


Trade signals from Danske Bank (Apr. 1)

EUR/USD: Sell at $1.3780 with a target of $1.3705 and a stop at $1.3815

USD/JPY: Long at 102.12 with a target of 103.77 and a stop at 103.01

GBP/USD: Buy at $1.6645 with a target of $1.6745 and a stop at $1.6595

USD/CHF: Long at 0.8840 with a target of 0.8899 and a stop at 0.8809

AUD/USD: Look to buy

USD/CAD: Long at 1.1025 with a target of 1.1170 and a stop at 1.0995

 

[FBS]

JP Morgan: short on EUR/USD

JP Morgan technical strategists hold a short position on EUR/USD since mid-March with a stop at $1.3950, an initial target at $1.3130, and a secondary target at $1.2900.

In a short term analysts see a chance to test the $1.3820 resistance area (61.8% Fibo from the 2011-2012 decline). Clear break above here would weaken the bearish view. Decline below $1.3610 would fully confirm the bearish dominance over the pair.

Chart. H4 EUR/USD

 

[FBS]

April 9: Asian session

Asian shares rose on Wednesday after Wall Street reversed a 3-day losing streak, but Japanese stocks dropped sharply after yen surged on fading hopes of near-term stimulus from the Bank of Japan. MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.9%. Nikkei fell by 1.9%. USD/JPY edged up to 102.00 after it tested 100.54 yesterday.

Commodity currencies extend the upside on Wednesday. AUD/USD touched $0.9390 in Asia (the highest level since Nov. 2013). Westpac consumer sentiment moved higher for the first time in 5 months (+0.3% in April vs. -0.7% in March). Meanwhile, home loans data confirmed a continued housing rebound. Note that Australia will release a bunch of employment data tomorrow – forecasts are pretty negative. NZD/USD tested the levels above the $0.8700 mark (highest since August 2011). Gold rose to $1314, but holds slightly below the yesterday’s peak.

EUR/USD is trading in the $1.3790 area after it rose as high as to $1.3811 yesterday. GBP/USD is trading in the $1.6750 area after it gained more than 130 pips yesterday.

 

[FBS]

USD/JPY is under pressure
By Mark Jensen

USD/JPY remains in a smooth upwards channel. Yesterday the pair slid to its lower border in the 101.50 area as the Bank of the Japan left policy unchanged. Judging from the regulator’s rhetoric, its policy will remain unchanged for a while. This is increasing pressure on USD/JPY to sink lower, to the 200-day MA and February low at 100.75. The pair still hasn’t reached the lower daily Bollinger band. Daily MACD’s approaching 0.

Today there was a bullish hammer at H4 and the greenback recovered to the bottom of the daily Cloud in the 102 area. Even if the channel stays, we may see more action in the 102.50 (200-period MA)/101.50 area. As dollar is still at the oversold levels at this timeframe we will sell on the increase towards 102.50 targeting once again the channel’s bottom.

Chart. Daily USD/JPY

Chart. H4 USD/JPY

 

[FBS]

AUD/USD: waiting for labor data
Kira Iukhtenko, analyst

The Australian dollar pushed to its highest level in 5 months on Wednesday on a fresh block of strong economic data. AUD/USD extended the bullish recovery, posting highs near $0.9390 in Asian trade.

The number of Australia home loan approvals rose at a highest rate since September in February (+2.3%). Record low interest rates continue supporting mortgage lending in the country. What’s more, the Australian April consumer confidence rose slightly, though remains below the key 100-point level.

Aussie’s upside remains contained by the $0.9400 mark ahead of the important employment data release on Thursday. Unemployment rate is forecasted to increase by 0.1% to 6.1% in March, while the economy is expected to add only 7.3K new jobs (February: + 47.3K). JP Morgan economists expect only a 5K employment increase for the past month.

Technically, the pair is moving in line with an inverse head-and-shoulders formation (neckline at $0.9080). Aussie has recently broken above the 55-week MA and 61.8% Fibo from the Oct.-Jan. downtrend. Our medium target lies at $0.9500 (78.6% Fibo, bottom of the weekly bearish Ichimoku).

Note that the pair is overbought; there is a MACD divergence on the H4 chart. Tomorrow’s labor market data will be a good reason for the pair to correct lower. Strong support lies around $0.9200/20.

Chart. H4 AUD/USD

 

[FBS]

USD/CAD reached important support

USD/CAD slid to 1.0912 yesterday approaching the 100-day MA and the bottom of the daily Ichimoku Cloud at 1.0900. Canadian dollar gained on Tuesday as the Bank of Japan maintained monetary stimulus and the loss of separatist party at the Quebec election. CAD strengthened since Friday when Canadian employment posted the biggest jump in 7 months, while the unemployment rate in Canada fell from 7 to 6.9%.

Yesterday, however, Canada released a bunch of weaker-than-expected housing data. USD/CAD recovered today to 1.0942. There’s bullish divergence at H4 MACD.

Analysts at SEB Bank say that to ease the bearish pressure USD/CAD needs to move above 1.0957 and 1.1002, but also over 1.1078/95 is prerequisite to make believe that the correction lower intraday has passed its lowest point.

Chart. Daily USD/CAD

 

[FBS]

JP Morgan: short on EUR/USD

JP Morgan technical strategists hold a short position on EUR/USD since mid-March with a stop at $1.3950, an initial target at $1.3130, and a secondary target at $1.2900.

In a short term analysts see a chance to test the $1.3820 resistance area (61.8% Fibo from the 2011-2012 decline). Clear break above here would weaken the bearish view. Decline below $1.3610 would fully confirm the bearish dominance over the pair.

Chart. H4 EUR/USD

 

[FBS]

April 10: Asian session

US dollar hit a 5-month low versus a basket of currencies after the Fed’s last meeting minutes undercut prospects for an increase in interest rates. EUR/USD slid to $1.3845 after reaching $1.3870 earlier today. GBP/USD returned to the opening level at $1.3890 after reaching $1.6820 earlier today.

USD/JPY is consolidating in the 102.15/101.60 area. Today the greenback fell versus yen. Demand for yen as a safe haven increased after China reported an unexpected drop in imports and exports by 11.3% and 6.6% respectively from the previous year.

Commodity currencies faced sellers in Asia. AUD/USD first rose to $0.9440 on better-than-expected labor market data. Unemployment rate fell to 5.8% (forecast: 6.1%), while the economy added 18K jobs (forecast: 7.3K, prior: 48.2K). However, news from China increased market concerns, pulling the Aussie down into the $0.9415 area. NZD/USD followed the AUD, first hitting $0.8745 and then retracing to $0.8715. NZ manufacturing expanded last month to the highest level since July (58.4 vs. prior 56.5). Gold extended the upside to $1317.

FOMC minutes: bearish for USD

The US dollar fell against most major currencies on Wednesday after the FOMC minutes from the March 19 meeting showed no signs of higher interest rates ahead. As a result, the USD index weakened to the pre-meeting levels.

After the meeting last month, Fed Chairwoman Janet Yellen said the central bank would consider raising interest rates 6-month after the end of QE. However, not all the Fed’s members share her optimistic views. Minutes showed Committee members discussed keeping interest rates low for a longer period of time even after employment and inflation reaches targeted levels. Fed’s inflation target lies at 2%, in February 2014 it came at 1.1%.

Deutsche Bank: "With the mention of inflation risks and no confirmation of the 6-month story from Yellen's comments, this tends to lean on the dovish side. And the dovish side is slightly negative for the dollar. Still, the Fed minutes' impact on the dollar is likely to be limited, because the US currency has already weakened considerably since Friday's jobs report.

Bank of England: policy unchanged

As expected, the Bank of England has left policy unchanged with the benchmark rate at 0.5% and the size of the asset purchase program at 375B.

There is no statement in today’s meeting, prompting investors to follow the more ample risk-on trends ahead of the US data later today.

GBP/USD is trading in the $1.6795/70 area.

T. Norkina: trade signals (Apr. 10)
Tatiana Norkina, FBS analyst

EUR/USD: buy – 1.3820; stop — 1.3790; target1 — 1.3875; target2 — 1.3900.

USD/JPY: buy – 101.40; stop — 101.20; target1 — 102.10; target2 — 102.45.

Trade signals from Danske Bank (Apr.10)

EUR/USD: Buy at $1.3840 with a target of $1.3948 and a stop at $1.3777

USD/JPY: Short at 102.05 with a target of 101.15 and a stop at 102.30

GBP/USD: Revised buy at 1.6765 with a target of 1.6917 and a stop at 1.6715

USD/CHF: Short at 0.8790 with a target of 0.8715 and a stop at 0.8847

AUD/USD: Long at 0.9219 with a target of 0.9544 and a stop at 0.9369

USD/CAD: Look to sell

 

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EUR/USD: bearish gap

By Mark Jensen

EUR/USD made a significant 40-pip gap and declined from the levels in the $1.3900 area to $1.3815. The ECB officials have tried to weaken the single currency: Mario Draghi said that further appreciation of euro would trigger more monetary stimulus. This probably means that the policymakers are uncomfortable with higher euro. At the same time US dollar strengthened as the situation in Ukraine has escalated and investors didn’t really price that in.

Analysts at RBC, however, warn that being short EUR is a “very short-term play”, because the conditions in the euro area’s periphery are improving and there’s modest recovery in the euro area’s economy. Danske Bank agrees that ECB’s talk without action won’t lead to the persistent depreciation of euro, because it’s supported by the monetary inflow to the euro area. The crisis in Ukraine will only intensify capital flight to the euro zone. TD Securities say that downside potential for EUR/USD is limited unless we get a clear break below $1.3695.

On the US dollar’s pair we have many important data releases this week starting with retail sales on Monday (12:30 GMT). In addition, the Fed’s Chairwoman Yellen will speak on Tuesday and Wednesday. The FOMC meeting minutes last week was more dovish than expected which shows the members of the Fed are still rather uncertain whether American economic recovery has gathered enough pace for a harder monetary policy.

Support for EUR/USD lies at $1.3820, $1.3780 and $1.3745. Resistance is at $1.3860, $1.3905 and $1.3940.

Chart. Daily EUR/USD

 

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Trade signals from Danske Bank (Apr. 15)

*Danske Bank applies trailing stop orders (moved together with the price)

EUR/USD: Short at 1.3856 with a target of 1.3780 and a stop at 1.3850

USD/JPY: Long at 101.75 with a target of 102.72 and a stop at 101.59

GBP/USD: Long at 1.6700 with a target of 1.6879 and a stop at 1.6615

USD/CHF: Short at 0.8790 with a target of 0.8698 and a stop at 0.8808

AUD/USD: Buy at 0.9350 with a target of 0.9523and a stop at 0.9290

USD/CAD: Sell at 1.1015 with a target of 1.0842 and a stop at 1.1080

 

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Key option levels (Apr. 15)

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (14:00 GMT).

Here are the key options expiring today:

EUR/USD: $1.3750 (large), $1.3800, $1.3855 (large), $1.3900, $1.3960;

GBP/USD: $1.6500, $1.6665, $1.6675, $1.6950;

USD/JPY: 100.50, 100.95, 101, 102.00, 102.25, 102.40, 102.75, 103.50, 103.75;

USD/CAD: 1.0945, 1.0955, 1.0970, 1.0975, 1.1015 (large), 1.1025, 1.1115 (large);

USD/CHF: 0.8800, 0.9000, 0.9050;

AUD/USD: $.9210, $0.9250, $0.9400;

AUD/JPY: 95.00, 96.00;

EUR/JPY: 141.60, 142.00, 142.10, 142.75, 143.50;

GBP/JPY: 168.50 (large).