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Forex Weekly Wrap up – Technical analysis & Market News


Apr.04.2014

Were you expecting anything from Mario Draghi yesterday? Sorry to hear that because both the announcement and the subsequent press conference were non-events. Using very similar wording from previous meetings, Mr Draghi said that the governing council wanted more data to assess whether low inflation was at risk of turning deflationary, as the ECB feel at the moment that this is likely to correct itself over the medium to long term (despite not showing any signs of doing so in the last few months).

His words did have the desired effect on the strength of the Euro though. We saw a gradual decline in its strength, but probably every country other than Germany would argue that it is still incredibly overvalued at anything north of 1.35 to the Dollar and they'd like the outside world to be able to get a lot more for their money when trading with Europe.

Before the announcement we saw some services PMI numbers, which were relatively disappointing for the UK. Services followed he trend of manufacturing and construction and posted below expectations which frustratingly weighed on the Pound, negating much of the benefit of the euro weakness that came in a little later on.

It was the Italians who fared worst in the PMI announcements. Services data there showed a surprise contraction in activity, which is a complete reversal from the surprise record month they had last month. Italy only scraped out of recession in Q4 last year and its fragile recovery thereafter will be closely watched by many, particularly their countryman at the ECB, Mario Draghi.

In the US session investors weren't taking too much notice of the ECB and instead were sitting tight ahead of today's non-farm payrolls. Equity markets are up against it slightly, having continued their charge to record highs in recent days, during a backdrop of mediocre data and uncertainty over when the Fed wi l actually start the rate hike cycle. This could leave them in a fragile position if these numbers disappoint and if they post well, is it going to be enough to offset fears that all is not as it seems. The Wall Street Journal are reporting this morning that investors are bracing for some poor Q1 bank earnings as the American consumer has dramatically slowed down the pace of mortgage borrowing and banks have found a distinct lack of alternative opportunities to take up the slack in revenues as a result.

On the American diplomatic stage, Washington's key man in Asia has gently warned China not to get any of its own Crimean ideas. The US fears that seeing Russia's speedy and successful annexation of Crimea might lead to china flexing its military muscles to achieve similar outcomes with its own territorial disputes.

China, along with the rest of Asia have been fairly quiet overnight, as they're reluctant to take fresh positions ahead of today's payrolls. The market is expecting a reading of 200,000 , which is just about the break even rate of job creation to keep unemployment stable. Ahead of the NFP we get European Retail PMI numbers and German construction PMI data, which could well give us some early movement on Euro crosses.

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Forex Weekly Technical Levels

EUR/USD: bullish bias above 1.345.

Pivot: 1.345

Our preference: Long positions above 1.345 with targets @ 1.405 & 1.4245 in extension.

Alternative scenario: Below 1.345 look for further downside with 1.33 & 1.299 as targets.

Comment: The pair is shaping a falling wedge (continuation pattern), not yet validated.

Supports and resistances:
1.454
1.4245
1.405
1.3793 Last
1.345
1.33
1.299

USD/JPY: bullish bias above 100.3

Pivot: 100.3

Our preference: Long positions above 100.3 with targets @ 105.45 & 107.5 in extension.

Alternative scenario: Below 100.3 look for further downside with 97.7 & 96 as targets.

Comment: The pair has rebounded above its support and should post further advance.

Supports and resistances:
110.4
107.5
105.45
103.685 Last
100.3
97.7
96

 GBP/USD: bullish bias above 1.62.

Pivot: 1.62

Our preference: Long positions above 1.62 with targets @ 1.704 & 1.74 in extension.

Alternative scenario: Below 1.62 look for further downside with 1.587 & 1.56 as targets.

Comment: The pair remains within a ST bullish channel.

Supports and resistances:
1.79
1.74
1.704
1.6649 Last
1.62
1.587
1.56

USD/CHF: under pressure.

Pivot: 0.8965

Our preference: Short positions below 0.8965 with targets @ 0.858 & 0.8275 in extension.

Alternative scenario: Above 0.8965 look for further upside with 0.915 & 0.938 as targets.

Comment: The pair is rebounding but stands below its resistance.

Supports and resistances:
0.938
0.915
0.8965
0.8844 Last
0.858
0.8275
0.8005

USD/CAD: the upside prevails.

Pivot: 1.07

Our preference: Long positions above 1.07 with targets @ 1.125 & 1.146 in extension.

Alternative scenario: Below 1.07 look for further downside with 1.044 & 1.0175 as targets.

Comment: The pair is facing a pull back but remains on the upside.

Supports and resistances:
1.175
1.146
1.125
1.1011 Last
1.07
1.044
1.0175

AUD/USD: rebound.

Pivot: 0.89

Our preference: Long positions above 0.89 with targets @ 0.954 & 0.976 in extension.

Alternative scenario: Below 0.89 look for further downside with 0.857 & 0.83 as targets.

Comment: The pair has broken above its resistance and should post further advance as the RSI is supported by a rising trend line.

Supports and resistances:
0.997
0.976
0.954
0.9252 Last
0.89
0.857
0.83

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