Yuan erases losses for the year

Forex News and Events

USDCNY hits 3-month low (by Peter Rosenstreich)

Risk appetite is higher across the board as the ECB announced a massive surprise package to ease monetary policy. Yet redirecting the focus from rate cuts to quantitative and credit easing allowed EUR to rise (and deliberately prevent too much USD strengthening) and European short-end rates to pop. Even the accompanying press conference comments that suggested supplementary easing in the near future was unlikely, failed to dampen investor’s new found optimism. That said, ECB updated staff macroeconomic forecasts indicates a significant deterioration in the inflation outlook signals that more measures will likely be needed. Asian equities indices were green across the board following Wall Street’s strong close. In China, despite disappointing February trade data, the PBoC lowered its USDCNY fix to 6.495 (down 222pips) the lowest level since 30th December. The strong CNY fix had a ripple effect across Asian EM and commodity currencies, which strengthened against the USD. Over the weekend we will get a slew of Chinese domestic data, which considering the weak external backdrop, has become critical in supporting growth. China activity indicators to be released include retails sales, industrial production and FAI growth. Given the new loans and fast-tracked infrastructure project we anticipate a solid FAI number yet industrial production could suffer on soft international environment and decelerating domestic demand. We anticipate CNY to remain stable with a skew towards further appreciation (in steady two way price action) as the PBoC moves away from currency targeting and interest rate cuts to revive growth.

Canada: higher oil prices to spur the economy (by Yann Quelenn)

Over the past year, Canada has been suffering due to collapsing oil prices as most of its revenues depend on the black commodity. Also investments in the oil industry have decreased. We expect overall business investment to remain weak in the near future. However, for now it looks as if Canada has caught a breather. The WTI has been increased more than 31% in a month. The current increase, even though pretty sharp, may not be sufficient to trigger a decrease in the Canadian unemployment rate due to be released this afternoon. There is a necessary time lag before current market prices are actual absorbed into the actual economy. This is why the consensus is for data to print unchanged at 7.2%. For the time being, in terms of currency, the Canadian dollar is appreciating because of a positive side effect of the rebound in commodities. The loonie is nonetheless still trading at a low level. Our view is positive on the CAD as upside pressures should continue.

Crude Oil - Resistance At 38.99 Holds.

The Risk Today

Yann Quelenn

EUR/USD has moved sharply higher after Draghi's comments yesterday. Yet, the pair is now consolidating. Hourly resistance lies at 1.1218 (10/03/2016 high). Hourly support can be located a 1.0822 (10/03/2016 low). Expected to show further consolidation. In the longer term, the technical structure favours a bearish bias as long as resistance holds. Key resistance is located region at 1.1453 (range high) and 1.1640 (11/11/2005 low) is likely to cap any price appreciation. The current technical deteriorations favours a gradual decline towards the support at 1.0504 (21/03/2003 low).

GBP/USD's short-term bullish is finally not coming to an end. Hourly resistance at 1.4284 (07/03/2016 high) has been broken. Major resistance is given at 1.4409 (19/02/2016 high) while hourly support can be found at 1.4108 (04/03/2016 low). The technical structure suggests further consolidation. The long-term technical pattern is negative and favours a further decline towards key support at 1.3503 (23/01/2009 low), as long as prices remain below the resistance at 1.5340/64 (04/11/2015 low see also the 200 day moving average). However, the general oversold conditions and the recent pick-up in buying interest pave the way for a rebound.

USD/JPY remains in a range between strong resistance at 114.91 (16/02/2016 high) and support at 110.99 (11/02/2016 low). Hourly support lies at 112.61 (10/03/2016 low). The technical structure suggests a growing short-term momentum. We favour a long-term bearish bias. Support at 105.23 (15/10/2014 low) is on target. A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems now less likely. Another key support can be found at 105.23 (15/10/2014 low).

USD/CHF has sharply declined yesterday. An hourly support lies at 0.9810 (10/03/2016 low), Indeed, key support at 0.9847 (16/02/2016 low) has been broken. Hourly resistance is located at 1.0093 (10/03/2016 high). Expected to show further consolidation. In the long-term, the pair is setting highs since mid-2015. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours a long term bullish bias.

Resistance and Support: