The greenback strengthened USD and regained strength overnight as we saw better than expected consumer confidence which came in at 125.6 (16-year high). At the same time Fed Fischer’s words which hinted at the likelihood of two more rate hikes gave reason for the greenback to be bought. UST 10yr went up to 2.42%. The reflation trade seems to have been revived with the strong consumer confidence. In addition to that talks of Trump meeting National Economic Council head Gary Cohn to discuss tax reforms helped the greenback further.
EURUSD Slipped Amidst USD Strength
The plan is still to sell rallies. The pair weakened as USD strengthened. ECB Makuch stated that ECB should continue with current policy stance which means that they are going to continue to remain accommodative. This will be the trajectory that they will follow until inflation is sustainable. On the daily charts we can see that the bullish momentum is showing some early signs of weakening while stochastics shows signs of turning from overbought conditions. We remain biased to sell rallies, looking for a move lower towards 1.0670.
GBPUSD, Trigger of Article 50
Today we have the trigger of Article 50. Brexit have given us its fair share of drama and at the moment we see signs of waning in the GBP as it started heading south this morning. Last two days fall was quite a big one and the pair could continue to do the same toady. We shall expect to face uncertainties related with post-Brexi and must be ready to accept the mood shifting downwards when the reality of Brexit hits the UK. The GBP may look undervalued now and it may continue to be so as the UK needs to negotiate and forge new relationships with Euro-area (which is having their own elections in France and Germany) and other countries. This may be long-drawn process and we shouldn’t expect growth to be all good going ahead. If we see negative data starting to come out, it will definitely cause the market to see the GBP as a risky currency to hold and might weaken the GBP further. At the moment the GBP is trading below the 1.24 level during late Asian session.
USDJPY Continues is Sideways Movement
USDJPY continues to consolidate and at the moment is back above the 111-level. USD strength following strong US consumer confidence figures have given this pair some room to retrace up. Nikkei futures are pointing higher this morning and could give the USDJPY some support to move northwards. The bears are not really out of the woods yet as there is still pressure due to global risk aversionstemming from the UK’s Brexit trigger expected today.
Do take note also of the repatriation of funds ahead of the fiscal year-end on 31 Mar which could impact the USDJPY to the downside. We can see on the charts that the 110.00 are providing support for this pair. If that level breaks, this pair may find its way all the way down to the 108.80 levels which is also the 50% fibo retracement of 2016 low to high.
We expect a short-term rebound in this pair.
Gold retraces from highs following USD Strength
Resistance is seen at the current moment at the 1260 zone. Stregthening USD gave a reason for the gold bears to come in and pushed price lower. We have first support at the 1240 zone and the next support at 1226. Just above 1260 is a downtrend line that has been stopping Gold’s ascent since July 2016.
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