ADP report in focus, Swiss KOF stable

Forex News and Events

Starting day for US jobs data (by Yann Quelenn)

During Janet Yellen’s speech at the Economic Club of New York she confirmed what we have been saying for almost a year - the Fed is clearly not in a rush to raise rates. The Fed chair expressed her cautiousness about the strengthening of the US economy. Yellen also added that any rate hike will be gradual. She also admitted that growth is likely to be weaker than expected. Obviously, weaker global demand is not synonymous with a recovery. Concerning the US, we feel that expectations are just too high, especially as inflation remains too low and reaching the central bank’s target of 2% seems, at least at present, a difficult goal to reach.

US labour market data is due to be released later today. The ADP employment change is expected to print a bit lower than expected, however, at this point recent job data is already quite good and has not provided the expected inflation increase. We do not think that today’s release will have any major impact on the dollar. However, financial markets will be expecting way more from Fed members’ speeches than any data release as it seems that the interpretation of data is much more important than the data itself.

Switzerland still recovering (by Peter Rosenstreich)

The March KoF Economic Barometer is basically unchanged from February. The data came in at 102.5 from 102.6 contrary to the expected 102.0. Above its long term average, the indicators signal continued positive development for the Swiss economy. The strong impulse came from private consumption, while construction and financial sectors saw only marginal changes. As expected, the strong CHF continues to take its toll, as manufacturing (weakness in textile industry) and export sectors were negative. Moreover, negative signals from the employment side suggest that further layoffs should be expected. Overall, the Swiss economic recovery continues unabated. The ECB easing program was unable to significantly drive sustained Euro weakness and therefore kept CHF from becoming paralysingly strong, much to the relief of the SNB. Fed Chair Yellen's dovishly uncharacteristic acknowledgement of the limitation of conventional monetary policy tools has triggered USD selling (US 10-year yields sharply lower following Yellen’s comments), but reactive selling has tapered off. In the mid to long term we continue to expect the Swiss franc to weaken against the greenback as global risk appetite remains solid. However, the effect on EURCHF should be limited (marginal bullishness) as expectations for next week’s ECB bond purchase to further constrict European yields will tighten EURCHF yield spreads and balance out fundamentals. EURCHF is consolidating in the near term but the upside looks interesting, resistance is located at 1.0950 declining trendline and horizontal price high.

The Risk Today

Yann Quelenn

EUR/USD has increased and is now lying above 1.1300 on Yellen's comments. Hourly resistance lies at 1.1376 (11/02/2016 high) while hourly support is given at 1.1169 (29/03/2016 low). Stronger support is located a 1.1058 (16/03/2016 low). Expected to show further monitoring of resistance at 1.1376. In the longer term, the technical structure favours a bearish bias as long as resistance at 1.1746 ( 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 deterioration implies a gradual decline towards the support at 1.0504 (21/03/2003 low).

GBP/USD is back to bullish despite the medium-term technical structure is clearly bearish. Hourly resistance is given at 1.4591 (05/02/2016 high) while hourly support can be found at 1.4033 (03/03/2016 low). A break of stronger resistance at 1.4668 (04/02/2016) is needed to show a reverse in the medium-term momentum. 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's medium term momentum is clearly negative. On the short-term, the pair has broken short-term uptrend channel. Hourly resistance is given at 113.80 (29/03/2016 high) while stronger resistance is given at 114.91 (16/02/2016 high). Hourly support is given at 110.67 (17/03/2016 low). Expected to remain mixed. 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 decreased yesterday confirming difficulties to go higher. Hourly support at 0.9651 (11/02/2016 low) has been broken. Hourly resistance is located at 0.9787 (25/03/2016 high). Stronger resistance can be found at 0.9913 (16/03/2016 high). Expected to show further weakness. 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: