FOMC minutes in focus, solid data from Germany

Forex News and Events

FX markets await FOMC minutes (by Arnaud Masset)

The US dollar has been trading on the back foot since the last FOMC meeting as the Federal Reserves turned out more dovish than anticipated by the market. As a result the greenback went under heavy selling pressure with the dollar index, which measure the value of the US dollar against a basket of foreign currencies, falling 2.50% down to 95.60. Two weeks later, Janet Yellen slams another nail in the coffin of the USD as she delivered another batch of cautious comments about the US economy during a speech before the Economic Club of New York, sending the US dollar to a fresh 5-month low. The minutes of the March 15-16 meeting are due later today and are expected, unsurprisingly, to be dovish. We do not believe the minutes could send the greenback lower as Yellen already emphasised the Fed’s worries about the global economy by being extremely cautious; however the minutes will most likely maintain the pressure on the USD sentiment. The market has been pricing out any rate hike in the first half of the year with US treasury yields tumbling continuously. For now, EUR/USD is stabilising between 1.1335 and 1.1438 as traders await the minutes. FX markets should remain quiet today but be ready for some action in late US session.

Germany: Industrial Production consolidates (by Yann Quelenn)

After the strongest jump in more than six years in February at +3.3% m/m, Germany Industrial Production growth did not collapse despite markets expecting a very weak read. The data printed this morning at -0.5% m/m for March. Domestic demand is definitely helping the German economy as the overall weaker demand adds downside pressures to exports. The country is fighting to recover and is one of the few, if not the only one, to have a sustainable debt. Servicing its debt is not as heavy as is the case with other European countries and only represents 71.70% of the GDP.

However, despite its other fundamentals being on the right path, inflation is not picking up - currently stalling below 0%. And it seems that Wolfgang Schauble is holding the European Central Bank responsible for this situation. The German finance minister believes that only other European countries benefit from the current monetary policy. From our standpoint, we believe that the single currency is still at stake and along with debts and sovereignty issues, Germany has the sentiment that its the one footing the bill for other countries. While recession in Europe is far from being over, a brief look at debt and revenues would be enough to convince anyone that Germany’s competitiveness is limited by its neighbours. Just as a reminder: Is anyone in Switzerland disappointed about not being in the Eurozone…? No.

 

EUR/GBP - Ready To Set Two Year-Highs.

Today's Key Issues	Country/GMT
ECB's Nouy Speaks at European Banking Event in Frankfurt	EUR/07:15
Mar Markit Germany Construction PMI, last 59,6	EUR/07:30
RBA's Kent Speech in Hobart	AUD/07:40
Mar New Car Registrations YoY, last 8,40%	GBP/08:00
SNB Board Holds Press Conference on New 50-Franc Bill	CHF/08:00
ESV Budget Forecasts	SEK/08:00
Mar Markit Germany Retail PMI, last 52,5	EUR/08:10
Mar Markit Eurozone Retail PMI, last 50,1	EUR/08:10
Mar Markit France Retail PMI, last 48,1	EUR/08:10
Mar Markit Italy Retail PMI, last 49,4	EUR/08:10
Apr 1 MBA Mortgage Applications, last -1,00%	USD/11:00
Apr 4 CPI Weekly YTD, last 2,10%	RUB/13:00
Apr 4 CPI WoW, last 0,10%	RUB/13:00
Mar Ivey Purchasing Managers Index SA, exp 54,8, last 53,4	CAD/14:00
Mar Vehicle Production Anfavea, last 131313	BRL/14:20
Mar Vehicle Sales Anfavea, last 146809	BRL/14:20
Mar Vehicle Exports Anfavea, last 36484	BRL/14:20
Apr 1 DOE U.S. Crude Oil Inventories, exp 2850k, last 2299k	USD/14:30
Apr 1 DOE Cushing OK Crude Inventory, exp 0k, last -272k	USD/14:30
Currency Flows Weekly	BRL/15:30
Fed President Mester Discusses Economic Outlook in Cleveland	USD/16:20
U.S. Fed Releases Minutes from March 15-16 FOMC Meeting	USD/18:00
Feb Leading Index, last 98,12	CNY/22:00
Mar Commodity Price Index MoM, last -1,48%	BRL/22:00
Mar Commodity Price Index YoY, last 23,72%	BRL/22:00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Risk Today

Yann Quelenn

EUR/USD is testing below 1.1400. Hourly resistance can be found at 1.1438 (01/04/2016 high) while hourly support is given at 1.1144 (24/03/2016 low). Stronger support is located a 1.1058 (16/03/2016 low). Expected to show further test of 1.1400. 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's short-term momentum is growing. Hourly resistance is given at 1.4591 (05/02/2016 high) while hourly support can be found at 1.4171 (01/04/2016 low). A break of stronger resistance at 1.4668 (04/02/2016) is nonetheless needed to show a reverse in the medium-term momentum. Expected to show further approach to hourly support at 1.4033 (03/03/2016 low) 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 negative. The pair has exited ranged in which it was installed over the last two months. On the short-term, selling pressures keep increasing. Hourly support can be found at 109.96 (05/03/2016 low). Hourly resistance is given at 113.80 (29/03/2016 high) while stronger resistance is given at 114.91 (16/02/2016 high). Expected to further weaken. 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 weakened over the last month which confirms increasing selling pressures. Yet, the pair is currently trading mixed. Hourly support can be found at 0.9547 (05/04/2016 low) while hourly resistance is located at 0.9788 (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:

EURUSD	GBPUSD	USDCHF	USDJPY
1.257	1.4668	1.0093	114.91
1.1714	1.4591	0.9913	113.8
1.1495	1.4459	0.9788	112.68
1.1349	1.4101	0.961	110.42
1.1144	1.4033	0.9476	107.61
1.1058	1.3836	0.9259	105.23
1.0822	1.3503	0.9072	100.82