U.S. Non-Farm Payrolls Will Be A Test For Bullish USD

GROWTHACES.COM Forex Trading Strategies

Trading Positions

EUR/USD trading strategy: long at 1.0990, target 1.1200, stop-loss 1.0890

GBP/USD trading strategy: long at 1.5220, target 1.5450, stop-loss 1.5120

AUD/USD trading strategy: long at 0.7815, target 0.8020, stop-loss 0.7725

EUR/JPY trading strategy: long at 131.80, target 134.00, stop-loss 130.80

GBP/JPY trading strategy: long at 182.20, target 184.50, stop-loss 181.10

Pending Orders

EUR/CHF trading strategy: buy at 1.0670, if filled - target 1.0990, stop-loss 1.0570, risk factor *

NZD/USD trading strategy: buy at 0.7430, if filled - target 0.7650, stop-loss 0.7330, risk factor **

EUR/USD: U.S. Non-Farm Payrolls Will Be A Test For Bullish USD

(long for 1.1200)

• The European Central Bank said it will start printing money to buy bonds on Monday and showed QE programme details yesterday.

• One of the most important features of the QE is its flexibility, that will be applied taking into account the relative value of bonds and the liquidity of the different maturity segments. There is no duration target for the programme. There will be no primary market purchases. The ECB has clarified that the minimum maturity will be 2Y at the time of purchases. We still do not know how the ECB will split purchases among different types of assets - fixed coupons, floaters. We assume that the flexibility rule will apply here. The share of purchases in national central banks’ domestic markets is determined by the ECB's capital key. Under the plan, the Euro zone's national central banks will focus exclusively on buying on their domestic bond market - a move aimed at assuaging the concerns of Germany worried that pooling risks could leave them to pay for any losses. Within domestic markets there will be some flexibility for the national central banks to choose between purchases of central government securities and securities of certain agencies established in the respective jurisdiction. The ECB confirmed the 25% limit on each bond to avoid reaching a blocking majority in case of a debt restructuring.

• The ECB lowered inflation forecasts and raised GDP growth forecasts. The new projection assumes that inflation in the Euro area will be 0% in 2015 (0.7% previously estimated), 1.3% in 2015 (1.5% preciously) and 1.8% in 2017. GDP growth is expected to be 1.5% this year (vs. 1% previously estimate) and 1.9% next year (vs. 1.5% previously estimated).

• Mario Draghi said the ECB had raised the amount of Emergency Lending Assistance that the Greek central bank could provide to its banks.

• Although the QE programme is nothing new for investors, the EUR/USD broke below the 1.1000 after the ECB’s press conference. We used the low level to get long at 1.0990. We have stressed numerous times that a lot is already in the price of the USD and further rises in U.S. rates may not benefit the currency to the same extent as before. Given the oversold picture in the EUR/USD, trading well below its monthly average, the potential for further USD appreciation seems to be limited.

• The USD resumed its rise against the EUR in early European deals on Friday. The next strong support level is 1.0917 (daily low on September 5, 2003). Investors are waiting for U.S. non-farm payrolls. The market expects the reading of 240k, but our forecast is slightly lower - 230k. Recent strong appreciation of the USD raises the bar for the data to push the EUR/USD significantly lower. A figure in line with the market consensus may be not enough for USD-bullish traders.

Significant technical analysis' levels:

Resistance: 1.1115 (high Mar 5), 1.1185 (high Mar 4), 1.1218 (high Mar 3)

Support: 1.0917 (low Sep 5, 2003), 1.0809 (low Sep 4, 2003), 1.0072 (76.4% of 0.8228-1.6040)

EUR/CHF: Swiss Deflation Deepened In February

(buy at 1.0670)

• Swiss consumer prices fell 0.8% yoy in February vs. a decline of 0.5% yoy in January. The main source of this fall is deflationary pressure generated by stronger CHF. On January 15, the Swiss National Bank stunned markets by dropping its cap of 1.20 for the CHF against the EUR.

• Switzerland's foreign exchange reserves hit a new high in February. The Swiss National Bank said it held CHF 509.250 billion in foreign currency at the end of February, compared with a revised CHF 498.463 billion francs held the previous month. A strong rise in reserves raised the suspicion that the central bank was still intervening. However, we should note that the rise was largely due to a CHF depreciation in February, which made the bank's foreign currency holdings more valuable.

• The CHF was the biggest loser of the major currencies vs. the USD on Thursday. Deeply negative Swiss rate are the main source of CHF depreciation and th CHF is likely to weaken on carry trading and improving risk appetite after ECB’s QE. Given rising deflationary pressure we cannot exclude the Swiss central bank cutting rates deeper into negative area. However, this action is not the baseline scenario currently.

Significant technical analysis' levels:

Resistance: 1.076 (high Mar 3), 1.08 (high Feb 25), 1.0811 (high Feb 20)

Support: 1.0630 (low Mar 4), 1.0610 (low Feb 27), 1.0554 (low Feb 16)