Forex News and Events

South Africa’s headline inflation eased in March (by Arnaud Masset)

According to the latest CPI report from South Africa, inflation decelerated during the month of March. After hitting 7%y/y in February - the highest level in seven years - headline CPI eased to 6.3%y/y in March, beating median forecast of 6.4%. This improvement in the consumer price index came as a breath of fresh air for the SARB, especially given the fact that the last decision to hike the benchmark interest rate by 25bps to 7%, back in March, was a close calls as half of the MPC members expressed their concerned over the negative effects on the growth outlook. The SARB’s commitment to lower inflation towards the target band of between 3% and 6% seems to start paying off; however it would be a bit premature to anticipate that the battle against inflation has been won as food prices remain under significant upside pressure due to a severe drought. We anticipate the SARB to reiterate it hawkish view on the country’s monetary policy stance as renewed weakness in the rand cannot yet be ruled out. USD/ZAR moved slightly lower in reaction to the good news, edging slightly lower to 14.26. We remain cautious with regard to further rand appreciation as the last’s month rally is mainly due to the commodity prices rally and weakening dollar; there was little improvement in the domestic situation.

US existing home sales growth to rebound after 6-year low in February (by Yann Quelenn)

Though markets are mainly focused on verbal interventions from Fed members, right now any and all data is being closely analysed for clues concerning the future Fed rate path. Recent releases show that the fundamentals of the US economy seem to have improved, inflation has been growing since the beginning of the year, and unemployment remains stable around 5%. In contrast, retail sales disappointed with a last negative release at -0.3% in March. On top of that, there are growing concerns that the housing market is buried too deep in a bubble as a result of the loose monetary policy of the past decade.

Existing home sales will be closely analysed today and are expected to rise by 4% to 5.28 million according to estimates. We believe that in the current environment, where rates are so low, there is no benefit for sellers as expectations for higher rates are pushing sales to decrease. Also, it is more difficult than before to get a mortgage. However, financial markets are still expecting low interest rates and steady unemployment to provide the necessary traction to underpin the housing market. Currency-wise, this underlines our opinion that the greenback is overvalued. We believe that US difficulties are not fully priced in and as a result we remain long EURUSD until 1.2000.

EURUSD range-bound ahead of ECB (by Peter Rosenstreich)

Germany ZEW expectations index rose to 11.2 in April indicating that investors are significantly more optimistic over the outlook for the German economy. While the global economic backdrop deteriorates parts of the Euro-area remain resilient, yet downside risks are obvious. Fridays Markit Eurozone PMI reads should also support stabilization from steady declines. Finally February Eurozone balance of payments data indicates that European investors’ appetite for foreign debt has recovered. The selling of Euro has been critical in offsetting the exodus from the USD, slowing EURUSD bullish momentum. The data improvement should be welcomed news for Draghi and the ECB. Expectations for this week’s ECB monetary-policy meeting are limited. With March 10th solid policy announcement (increase in monthly purchases to €80 bn, a cut of the depo rate and main lending rate to -0.40% and 0% and new TLTROs) still fresh in traders’ minds, the market will be focused any mention of foreign exchange. The ECB avoids discussing Euro but steady appreciation could potentially derail Europe’s delicate growth environment. Failure to mention the Euro or provide measures to debase the single currency should trigger a mild Euro rally. Overall this meeting is too close to recently launched stimulus to make any claims or produce new policy strategies. However, with the strong euro, weak oil and consistently underperformance of inflation more easing is likely. We expected that the market will need to wait until Decembers meeting (coinciding with the central banks forecast changes) for any further stimulus (including unorthodox use of helicopter money). The lack of real dovish action/comments and growing dissension between the ECB and Bundesbank which will hamper Draghi’s options should give EURUSD the freedom to test 1.1465 range highs.

USD/CAD - Bearish Breakout


 
Today's Key Issues Country/GMT
Mar Convenience Store Sales YoY, last 1,60% JPY/07:00
Bloomberg April Switzerland Economic Survey CHF/07:30
ECB's Knot, EG's Dijsselbloem Speak at Conf. in Amsterdam EUR/07:45
Mar CPI YoY, exp 6,40%, last 7,00% ZAR/08:00
Mar CPI Core MoM, exp 1,30%, last 1,40% ZAR/08:00
Mar CPI Core YoY, exp 5,80%, last 5,70% ZAR/08:00
Mar CPI MoM, exp 0,80%, last 1,40% ZAR/08:00
Mar Claimant Count Rate, exp 2,10%, last 2,10% GBP/08:30
Mar Jobless Claims Change, exp -10.0k, last -18.0k GBP/08:30
Feb Average Weekly Earnings 3M/YoY, exp 2,30%, last 2,10% GBP/08:30
Feb Weekly Earnings ex Bonus 3M/YoY, exp 2,10%, last 2,20% GBP/08:30
Feb ILO Unemployment Rate 3Mths, exp 5,10%, last 5,10% GBP/08:30
Feb Employment Change 3M/3M, exp 60k, last 116k GBP/08:30
BOE's Hauser Speaks at Business Forum in London GBP/08:30
Apr Credit Suisse ZEW Survey Expectations, last 2,5 CHF/09:00
ECB President Draghi Speaks Opening Remarks in Frankfurt EUR/10:00
Apr 15 MBA Mortgage Applications, last 10,00% USD/11:00
Apr 20 Benchmark Repurchase Rate, exp 7,50%, last 7,50% TRY/11:00
Apr 20 Overnight Lending Rate, exp 10,00%, last 10,50% TRY/11:00
Apr 20 Overnight Borrowing Rate, exp 7,25%, last 7,25% TRY/11:00
Feb National Unemployment Rate, exp 10,10%, last 9,50% BRL/12:00
Apr IBGE Inflation IPCA-15 MoM, exp 0,46%, last 0,43% BRL/12:00
Apr IBGE Inflation IPCA-15 YoY, exp 9,30%, last 9,95% BRL/12:00
Feb Wholesale Trade Sales MoM, exp -0,40%, last 0,00% CAD/12:30
Apr 18 CPI Weekly YTD, last 2,20% RUB/13:00
Apr 18 CPI WoW, last 0,10% RUB/13:00
BOE's Ian McCafferty Speaks at the Bank of England GBP/13:00
Mar Current Account Balance, exp -$1230m, last -$1919m BRL/13:30
Mar Foreign Direct Investment, exp $6000m, last $5920m BRL/13:30
Mar Existing Home Sales, exp 5.28m, last 5.08m USD/14:00
Mar Existing Home Sales MoM, exp 3,90%, last -7,10% USD/14:00
Apr 15 DOE U.S. Crude Oil Inventories, exp 3000k, last 6634k USD/14:30
Apr 15 DOE Cushing OK Crude Inventory, exp 70k, last -1767k USD/14:30
Currency Flows Weekly BRL/15:30
Poloz and Wilkins speak at Senate Banking Committee CAD/20:15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Risk Today

Yann Quelenn

EUR/USD has failed to break 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 hourly resistance at 1.4514 (18/03/2016 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 1.4969 1.0093 113.8
1.1714 1.4668 0.9913 112.68
1.1465 1.4514 0.9788 109.9
1.1364 1.4392 0.9611 109
1.1144 1.4006 0.9476 107.63
1.1058 1.3836 0.9259 105.23
1.0822 1.3503 0.9072 100.82

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

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