April 4th Morning Brief - Central Banks In Focus - FX Leaders News

April 4th Morning Brief – Central Banks In Focus

Posted Tuesday, April 4, 2017 by
Arslan Butt • 4 min read

Morning traders, it’s such a pleasant morning here and I'm enjoying every bit of it. Yesterday, although the market was not very volatile, we managed to gain some green pips. The WTI Crude Oil and Nikkei signals closed in profit. We entered into crude oil twice and our second signal stayed in profit for a long time. Later, due to change in the fundamentals, it ate our stop loss. Overall, we remained in profit and that’s what that matters!

Today the central banks RBA (Reserve Bank of Australia) and ECB’s (European Central Bank) President Mario Draghi is expected to make a speech which is attracting attention and may cause volatility in the market.

 

Expectations from RBA (Reserve Bank of Australia)

The Reserve Bank of Australia is likely to release their cash rate along with a policy statement in a few of hours. The previous rate was 1.50%, and taking the improved Gold prices into account, I am expecting a neutral stance from them. Therefore, we can’t ignore the RBA Rate Statement. Investors should monitor it for further clues about the next policy action. This meeting may provoke volatility in the market if the RBA’s stance varies from market expectations.

 

ECB’s President Mario Draghi Speech

Mario Draghi, the President of ECB, will speak at the launching of the new €50 banknote in Frankfurt. They have intensified the security features which will allow for better protection against forgers. In my opinion, his speech is unlikely to impact the market since the ECB is just replacing an old note with a new one.

Though Mario Draghi is not supposed to talk about the monetary policy actions, any remarks from him will be enough to shake the market. So, let's wait for the event to pass before we enter the market to avoid unnecessary risks.

 

Major Economic Events Today:

AUD    

  • Cash Rate (5:30)
  • RBA Rate Statement (5:30)
  • RBA Gov Lowe Speaks (10:15)

EUR    

  • Spanish Unemployment Change (8:00)
  • ECB President Draghi Speaks (15:30)   

GBP    

  • Construction PMI (9:30)   

CAD    

  • Trade Balance (13:30)

USD    

  • Trade Balance (13:30)
  • Factory Orders m/m (15:00)   

NZD    

  • GDT Price Index (Tentative)

 

EUR/USD – The Pair With A Major Trade Setup

As discussed in our weekly forecast report, the EUR/USD is trading mostly unchanged, around $1.0660. The tug of war between bulls and bears is still not over which is keeping traders in isolation.

This supported pair is first and foremost because the Eurozone unemployment rate failed to surprise the market as it fit within expectations. The figure dwindled to 9.5% for the month of February. This is undoubtedly better than the previous month's figure of 9.6%. Besides this change we have not seen any major fundamental shifts from the United States. That's why the pair has not moved a lot.

Let's jump to the technical side where I'll discuss the second reason for a supported EUR/USD.

EURUSD - 4 Hours ChartEURUSD – 4 Hours Chart

 

Technical Outlook – Intraday

If we look at the 4 – hour chart, the EUR/USD has stuck in the brief range of $1.0650 – $1.0699. In addition to this the pair has completed a 61.8% Fibonacci retracement at $1.06510. The RSI was oversold, but the pair failed to pullback higher. Now it seems that the market is making room for further selling as the technical tools, such as the RSI, are normalized, and are not in an oversold territory anymore.

Trading Signal: Traders are recommended to take up a sell position only below $1.0640 with a stop loss at 1.6800 and a take profit at $1.0600.

 

AUD/USD – The Pair in the Spotlight

Yesterday, the pair sank lower for a 3rd consecutive day due to slight strength in the U.S dollar index. However, the AUD/USD is likely to continue its bearish rally as we are expecting the release of Cash Rate decisions in the Asian sessions.

The bearish momentum strengthened after the release of Australian retail sales figures. According to the Australian Bureau of Statistics, the retail sales released at -0.1% in the month of February. The figure was worse than the previous one (0.4%), and even the expected figure of 0.3%.

This is why investors lowered their bets on the Aussie and moved their investments towards other opportunities in the market.

AUDUSD - 30 Min ChartAUDUSD – 30 Min Chart

Technical Outlook – Intraday

The candlestick pattern "three black crows" is holding my attention. This pattern demonstrates that sellers are dominant and we may see a continuation of the bearish trend. Besides that, the pair is holding below 50 periods EMA resistance of $0.7610, and the RSI (below 50) is also signaling a sell bias.  Lastly, we can see a descending triangle pattern in the 4 – hour chart which is about to break. We can expect the pair to test the next support level of $0.7565.

Trading Signal: Traders are recommended to take up a sell position below $0.759 with a stop loss above $0.7620 and a take profit at 0.7565.

 

Ending Remarks:

Fellows, keep a close eye on the RBA and ECB, although we aren't expecting any major changes. Nevertheless, the remarks still have the potential to move the market. Further, we need to move our stops at breakeven once our positions show us significant profits. This is how we can deal with sudden changes in the fundamentals.

Happy Trading!

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About the author

Arslan Butt is our Index & Commodity Analyst
Arslan Butt is our Lead Commodities and Indices Analyst. Arslan is a professional market analyst and day trader. He holds an MBA in Behavioral Finance and is working towards his Ph.D. Before joining FX Leaders Arslan served as a senior analyst in a major brokerage firm. Arslan is also an experienced instructor and public speaker.
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