German ZEW bounces back in April

Forex News and Events

Germany suffers and accuses the ECB (by Yann Quelenn)

Tensions are rising between Germany and the ECB over the European institution’s current monetary policy. Germany believes that QEs and low interest-rates are destroying its economy and that what may be good for most of Europe is not, in the end, good for them, as they bear the brunt of the cost.

Financial markets are closely scrutinising German economic indicators and will be paying close attention to the ZEW, due to be released later today. This will provide insightful economic sentiment for April including current situation and expectation figures. ZEW Current situation data is expected to print in line with March's previous figure. One year ago, the indicator was above 70. Economists are growing increasingly pessimistic.

However, while the overall European situation is worsening, the ZEW expectations rebounded last month but remain, as well, in a clear negative trend. In general, sentiment remains negative and the European outlook is clearly uncertain, especially due to Brexit and Grexit.

The single currency should continue to push lower against the Swiss franc. On the other hand, we remain bullish EURUSD as the renewed dovish stance of the Fed should continue to add upside pressures to the pair.

Still eye downside in USDJPY (by Peter Rosenstreich)

In a WSJ interview BoJ Governors Kuroda stated that he sees yen appreciation as a direct threat to inflations goals. Today’s comments on FX pricing were the central bank chief’s most explicit since the JPY began strengthening. Kuroda went on to provide some generic jawboning suggesting the BoJ stood ready to act, but markets reaction was muted. In our view, for Kuroda straight talking provides some insight into the panicky feeling at the BoJ. Corporate and household confidence in Abenomics is declining, which will undermine the BoJ efforts. With growing expectations of deflation, Japan is once again falling into a deflationary trap. Negative interest rates have proved less effective than originally believed (indicated by the flaws in economic theory in predicting behavioral response). Households and corporates have become worried over the sustainability of fragile inflation, which has triggered a reduction in borrowing, which in turn has strapped banks with additional reserves (hurting banks profitability). In addition, there is increased evidence that households, which were spooked by the BoJ negative rate policy reversal, are hoarding cash to avoid negative interest rate penalties. Overall, deeper negative rates are unlikely. Direct FX intervention remains a threat (sub 105 levels). Yet the BoJ must tread lightly as unsuccessful action will only erode the BoJ credibility, which is critical in policy setting. Dovish Fed and positive risk sentiment have forced the cutting of USD long positions indicating that liquidity issues with JPY repatriation will be an issue. We remain bearish on USDJPY and target range bottom at 107.63.

USD/JPY - Range-Bound Pattern

Today's Key Issues	Country/GMT
Bloomberg April United Kingdom Economic Survey	GBP/07:30
Feb ECB Current Account SA, last 25.4b	EUR/08:00
Feb Current Account NSA, last 6.3b	EUR/08:00
ECB Bank Lending Survey	EUR/08:00
Apr 15 FIPE CPI - Weekly, exp 0,89%, last 0,94%	BRL/08:00
Feb Current Account Balance, last -1068m	EUR/08:30
Bank of Portugal Governor, Finance Minister Speak on Banif	EUR/08:30
Apr ZEW Survey Current Situation, exp 50,8, last 50,7	EUR/09:00
Apr ZEW Survey Expectations, exp 8, last 4,3	EUR/09:00
Apr ZEW Survey Expectations, last 10,6	EUR/09:00
Bank of Italy Governor Visco Speaks Before Senate Committee	EUR/12:30
Mar Housing Starts, exp 1166k, last 1178k	USD/12:30
Mar Housing Starts MoM, exp -1,10%, last 5,20%	USD/12:30
Mar Building Permits, exp 1200k, last 1167k, rev 1177k	USD/12:30
Mar Building Permits MoM, exp 2,00%, last -3,10%, rev -2,20%	USD/12:30
Mar PPI MoM, exp 1,50%, last -1,50%	RUB/13:00
Mar PPI YoY, exp 0,00%, last 3,50%	RUB/13:00
Mar Unemployment Rate, exp 5,90%, last 5,80%	RUB/13:00
Mar Real Disposable Income, exp -5,90%, last -6,90%	RUB/13:00
Mar Real Wages YoY, exp -2,30%, last -2,60%	RUB/13:00
Mar Retail Sales Real MoM, exp 7,00%, last -2,50%	RUB/13:00
Mar Retail Sales Real YoY, exp -5,10%, last -5,90%	RUB/13:00
RBA Governor Stevens Speech in New York	AUD/13:30
BOE Governor Mark Carney Speaks in Parliament in London	GBP/14:35
Poloz and Wilkins Testify at House of Commons Committee	CAD/15:00
Mar PPI YoY, last -3,40%	KRW/21:00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Risk Today

Yann Quelenn

EUR/USD is approaching 1.1400. The pair is moving within an uptrend channel. Hourly support can be found at 1.1144 (24/03/2016 low) and resistance at 1.1465 (12/04/2016 high). Stronger support is located a 1.1058 (16/03/2016 low). Expected to show further increase. In the longer term, the technical structure favours a bearish bias as long as resistance at 1.1746 ( holds. Key resistance is located at 1.1640 (11/11/2005 low). The current technical appreciation implies a gradual increase.

GBP/USD is riding downtrend channel near the hourly support at 1.4006 (04/06/2016 low). Hourly resistance is given at 1.4320 (04/04/2016 high). Expected to show further bounce back. 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 is trading between hourly support at 107.68 (07/04/2016 low) and hourly resistance at 109.90 (07/04/2016 high). The medium-term momentum is clearly bearish. Selling pressures are still on. Expected to show further weakening. 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 is edging lower inside the downtrend channel without massive volatility. Hourly support can be found at 0.9499 (12/04/2016 low). Hourly resistance is located by upper bound of the downtrend channel and by 0.9788 (25/03/2016 high). Expected to show further decline as short-term buying pressures do not seem strong. 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	113.8
1.1714	1.4591	0.9913	112.68
1.1465	1.4348	0.9788	109.9
1.133	1.4314	0.9629	109.08
1.1144	1.4006	0.9476	107.63
1.1058	1.3836	0.9259	105.23
1.0822	1.3503	0.9072	100.82