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Euro Staying in Rebound ahead of ECB, Dollar Awaits CPI

Yen and Swiss Franc are both under selling pressure following the strong rebound in global stock markets. While it’s too early to conclude that risk appetite has returned from the shadow of Russia invasion of Ukraine, at least, the initial shock seemed to be digested well already. Euro is staging a strong rebound as traders would temporarily turn their eyes to ECB meeting today. Meanwhile, Dollar will look into today’s CPI data for guidance.

Technically, with repeated support from 55 day EMA, it’s now getting much more likely that price actions from 116.34 are mere a near term consolidation pattern. Considering the structure, an upside breakout could be imminent and break of 116.34 will resume larger up trend towards long term resistance level at 118.65. That would be a focus for today.

In Asia, at the time of writing, Nikkei is up 3.96%. Hong Kong HSI is up 1.26%. China Shanghai SSE is up 1.91%. Singapore Strait Times is up 1.34%. Japan 10-year JGB yield is up 0.0150 at 0.182. Overnight, DOW rose 2.00%. S&P 500 rose 2.57%. NASDAQ rose 3.59%. 10-year yield rose 0.076 to 1.948.

Some previews on ECB, a look at EUR/CHF

A tremendous amount of uncertainty was added to ECB outlook from Russia’s invasion of Ukraine. There were expectations that ECB could announce an earlier end to its asset purchase program at today’s meeting, paving the way for a rate hike later this year. But now, it’s more likely for the central bank to keep options open for the moment.

Nevertheless, facing increasing risk of prolonged high inflation, hawks in the councils could push for at least a move to a “neutral” guidance. That could come in form of dropping the reference to a rate cut in the guidance. ECB might also remove the stipulation that rate hike would come “shortly” after end of net asset purchases.

The new economic projections would also be scrutinized while President Christine Lagarde would be asked for her views on risk of stagflation in Eurozone.

Here are some previews for today’s ECB meeting:

Euro is staging a strong rebound since yesterday, while gold and oil prices are in deep retreat. The situation came as markets are exiting the phase of initial shock of Russia invasion. But clearly, the clouds are still there. Today’s ECB announce might give Euro some temporary volatility, but the next move will still very much depend on the development in Ukraine.

Technically, for EUR/CHF, 0.9970 is theoretically a good place to bottom. It’s not unreasonable to say that the down trend from 1.1149 has ended as a five-wave move, just hitting, 100% projection of 1.0936 to 1.0298 from 1.0610 at 0.9972. Parity can also provide additional psychological support. Yet, firm break of 1.0298 support turned resistance is still needed to be the first sign of major bottoming. Otherwise, risk will remain heavily on the downside.

Japan PPI rose record 9.3% yoy in Feb, led by energy and commodities

Japan corporate goods price index rose 9.3% yoy in February, above expectation of 8.7% yoy. At 110.7, the index hit the highest level marked since 1985. That’s also the highest rise on record, as led by skyrocketing energy prices. Coal and petroleum prices jumped 34.2% yoy. Electricity, city gas and water prices also surged 27.5% yoy.

Commodity prices also surged with iron and steel up 24.5% yoy. Nonferrous metal rose 24.9% yoy. Lumber and wood products rose 58.0% yoy.

Import prices rose 34.0% yoy while export prices rose 12.7% yoy.

Elsewhere

Australia consumer inflation expectations rose to 4.9% in March. UK RICS house price balance rose to 79 in February, above expectation of 73. In addition to ECB meeting, US CPI will also be closely watched while jobless claims will also be featured.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.0944; (P) 1.1019; (R1) 1.1149; More

Intraday bias in EUR/USD remains neutral first despite the strong rebound from 1.0805, and outlook as unchanged. As long as 1.1120 support turned resistance holds, larger down trend from 1.1494 is still expected to continue. On the downside, firm break of 61.8% projection of 1.2265 to 1.1120 from 1.1494 at 1.0786 will pave they way to 100% projection at 1.0349 next. However, strong break of 1.1120 will confirm short term bottoming, at least, and bring stronger rebound back towards 1.1494 structural resistance instead.

In the bigger picture, the decline from 1.2348 (2021 high) is expected to continue as long as 1.1494 resistance holds. Firm break of 1.0635 (2020 low) will raise the chance of long term down trend resumption and target a retest on 1.0339 (2017 low) next. Nevertheless, break of 1.1494 will maintain medium term neutral outlook, and extend range trading first.

Economic Indicators Update

GMTCcyEventsActualForecastPreviousRevised
23:50JPYPPI Y/Y Feb9.30%8.70%8.60%8.90%
00:00AUDConsumer Inflation Expectations Mar4.90%4.60%
00:01GBPRICS Housing Price Balance Feb79%73%74%
12:45EURECB Interest Rate Decision0.00%0.00%
13:30EURECB Press Conference
13:30USDInitial Jobless Claims (Mar 4)205K215K
13:30USDCPI M/M Feb0.80%0.60%
13:30USDCPI Y/Y Feb7.90%7.50%
13:30USDCPI Core M/M Feb0.50%0.60%
13:30USDCPI Core Y/Y Feb6.40%6.00%
15:30USDNatural Gas Storage-139B
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