FX News Today
- The EU summit starts today and while Brexit is not the only topic on the agenda, it will likely dominate discussions, after PM May yesterday officially asked for an extension until June 30 and ruled out that she as Prime Minister would ask for a long extension.
- EU council president Tusk in his official response made it clear that a short extension will only be possible if the Withdrawal Agreement has been backed by MPs in London.
- Tusk did not rule out a long extension but as May has made it clear that she as PM won’t ask for one, that is currently not on the table.
- After an interesting meeting yesterday, the Fed was even more dovish than expected, suggesting that no rate hikes would take place in 2019, although leaving the window open for some hikes in 2020.
- Overall, the Fed commented that a patient, semi-neutral approach was the best at this point, after the cooling in growth and inflation. Justification was sought in slower growth, static payrolls, weaker household spending and a decline in overall inflation.
- In addition, the Fed also confirmed plans to taper in May, and then end in September, the balance sheet runoff.
- Trump, following the Fed, tweeted that tariffs on Chinese goods could be in place for a “substantial period”. Equities dropped, after increasing as a result of the Fed dovishness.
- Dow closed down 0.55% and under its 20 SMA. Asian shares are less impacted, but Japan is closed today.
Charts of the Day
Technician’s Corner
- EURUSD pushed higher than the 1.14 level on the Fed dovishness, with expected Resistance at 1.1433, and then at 1.15. Indicators are supportive of a consolidation/downtrend mode this morning.
- GBPUSD is slightly regaining its losses, still moving around the 1.32 area, on a sideways channel, still below end-February highs. MACD and Stochastics can perhaps be interpreted as sending positive signals.
- USDJPY dropped heavily on the Fed announcement, crossing the 110.72 Support and its 200HMA. The next Support level is at 110.34, even though the MACD and Stochastics do not appear to agree with the downwards trend.
- XAUUSD gained significantly and is trading at $1319, while some downwards momentum continues to exist according to the indicators. The Fed decision did have a strong effect, as suggested yesterday, and the question is whether Gold can now break through the $1321 Resistance level, or will retrace to the $1313 Support.
Main Macro Events Today
- European Council Meeting (EUR, GBP, Full Day) – One of the most important European Council Meetings for the year, given that Theresa May will likely aim to provide justification for a Brexit delay.
- Employment Data (AUD, GMT 00:30) – While the Unemployment Rate is expected to have remained at 5% in February, employment change is expected to have eased, increasing by 15K compared to 39K last month.
- SNB Interest Rate Decision (CHF, GMT 08:30) – The SNB is not expected to surprise markets as the Swiss rate is forecast to remain at -0.75%.
- Retail Sales ex Fuel (GBP, GMT 09:30) – UK Retail Sales are expected to have eased, growing by 0.2% on a m/m basis, compared to 1.2% in January.
- BoE Interest Rate Decision (GBP, GMT 12:00) – Shadowed by the ongoing political developments in Brexit, the BoE is not expected to proceed with any interest rate actions.
- CPI inflation (JPY, GMT 23:30) – National Core CPI for Japan is expected to have declined to 0.3% m/m in February, compared to 0.4% in January.
Support and Resistance
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Dr Nektarios Michail
Market Analyst
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