It has been the turn of the Euro to lead the way on Thursday following the ECB’s decision to go into full on dovish mode by substantially downgrading the 2019/20 economic growth outlook, while also announcing that a new round of TLTRO is set to commence, quarterly from September 2019 through March 2021, aimed at preserving favourable bank lending conditions. The Euro collapsed, reaching a low of 1.1175 late in the US session, having taken out the November low of 1.1215. We are now sitting on strong support (61.8% of 1.0339/1.2550) which should underpin the Euro for a while but the charts suggest that it will give way for a possible run towards the June 2017 low at 1.1115, below which 1.1000 and then 1.0860 will attract (76.4% of 1.0339/1.2550).
The move in the Euro has set off a general risk-aversion tone, with the US$ being the big winner. I think this is set to continue and prefer to be long US$ against all the majors, with the exception of the Yen, which will also find safe haven demand. Some caution is warranted though, given that today will see the release of the US Jobs/NFP/Average Hourly Earnings data for February.
Note that the DXY (97.60) reached a high of 97.71 today, forming a double top with the 14 Dec 2018 high, but not seen previously since 20 June 2017 when the high was 97.87. This will be very strong resistance, also being 61.8% of 103.82/88.25, but a topside break would suggest a trip towards 98.00 and possibly towards 100.15 (76.4% of 103.82/88.25). The momentum indicators look increasingly positive for the dollar, so trading from the long side is still preferred.
Stocks also look increasingly heavy but will take their lead from the US jobs data. As before, I prefer to remain short and to add to the position in selling rallies.
On the crosses, given today’s US jobs data, some traders may wish to avoid US$ exposure, in which case selling EurJpy, Chf Jpy, GbpJpy, AudJpy, NzdJpy etc all seem to be in play.
EurGbp also looks heavy on all fronts but ahead of next week’s Brexit vote is possibly best left alone.
Note that UsdCnh seems to be building a base although the weeklies are yet to turn higher
Commodities are likely to come under pressure if the US$ continues to strengthen so selling the metal and oil may be a plan although the charts are currently mixed/indecisive.
Economic data highlights will include:
Fri: NZ Q4 Manufacturing Sales, Japan Eco Watchers Survey, Current Account, Trade Balance, China Trade Balance, UK Consumer Inflation Expectation, NIESR GDP Estimate, US Jobs/NFP/Average Hourly Earnings data, Wholesale Inventories.
By March 8, 2019
*Trade of the day: March 8, 2019; 10:30 AM(AET)
*This is a personal opinion only, based on the look of the table below, and carries no guarantee of success.
All trades are good till 5.00pm NY time. All “in the money trades” should have the SL raised to break-even, or managed manually. All “out of the money trades” should keep original SL in place.
Sell EurUsd @1.215. SL @ 1.1265, TP @ 1.1115
Sell EurJpy @125.30. SL @ 125.90, TP @ 124.00
Sell AudUsd @ 0.7050. SL @ 0.7080, TP @ 0.6980
Sell Gold @ 1295. SL @ 1305, TP @ 1280
Sell US30 @ 25650 SL @ 25950, TP @ 25000
Sell ASX200 @ 6270 SL @ 6290, TP @ 6200