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Forex Majors technical analysis – March

March 08, 2018

A more “hawkins” Powell than expected gave a nice boost to the US dollar with the 2-year interest rates back to 2.25%.

The interesting aspect is that this movement on the short-term rates did not coincide with a similar movement of the long-term rates. In fact, the yield curve expressed by the 10-2 spread has flattened a lot since mid-February falling from 78 basis points to the current 60. This element expresses the perplexities of the market about a monetary policy that could become too penalizing for the future economic growth. The reaction of the greenback was however temporary because the usual tweet of Trump has ruined the party with the announcement tariffs on U.S. imports of  steel and aluminium that are likely to trigger a trade war with difficult consequences to estimate.

EurUsd

eurusd0803.jpg

The movement seen last Thursday below 1.22 was a classic bear trap that was quite disappointing on the possibility of formalizing a double top with consequences that would have been bearish up to 1.19 / 1.20 for EurUsd.

Nothing to do with the protectionism of Trump that now risks triggering a new wave of sales on the Dollar. First a bearish engulfing pattern then a second upward push have pushed EurUsd away from the support zones, thus feeding the expectations for a return in the upper part of the range positioned around 1.25. Also in case of new bearish pressures, keep in mind the upward trend line that rises from April and currently in transit at 1.21. It will be difficult to see EurUsd below those levels.

UsdJpy

 

usdjpy0803.jpg

The weakness of Usd combined with the strength of Jpy triggered by the "hawkins" statements by Kuroda about the possibility that in 2019 the Boj could begin to remove the monetary stimulus, has definitely confirmed the bearish break of the bullish trend line that joined the low of UsdJpy in the last two years, a movement that already started in January with the fall below 110 and is now confirmed with the break of 106.50 (61.8% Fibonacci retracement of the whole rise). At this point, area 100/101 should represent the ideal support zone for the current bearish movement.

AudUsd

 

audusd0803.jpg

The weakness of the Australian Dollar was heavily hit by Trump proposal to activate tariffs on steel and aluminium. Predictably, this may immediately cause a decline in demands of which, a producer of raw materials such as Australia, would obviously be a victim.

The downward trend of the Aussie should continue up to 0.76 where we can place the trend line that joins the three primary lows since the beginning of 2016. At that point we will understand if the market intends to relaunch the quotations of AudUsd.

GbpUsd

 

gbpusd0803.jpg

The Cable continues in its slow falling phase towards 1.36 where the top of September 2017 is positioned. The bearish sequence was divided into two waves composed of three sub-segments that would seem to qualify the current movement as corrective. In theory, therefore, at 1.36 the fall should be exhausted, but the involvement of the lower wall of the uptrend channel in transit at 1.35 before the restart cannot be excluded.


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