Selling Focus Turns to Sterling as Yen Digests Losses

Market overviews

Yen remains the weakest one today, but there is some short covering as global benchmark treasury yields also retreat. Selling focus is turning Sterling instead. For now, Aussie and Dollar are the strongest one for the day, followed by Canadian. Euro is mixed, helped by recovery against Swiss Franc. Gold recovers quickly after initial dip and it’s struggling to get a clear direction. WTI oil is trying to defend 110 handle.

Technically, GBP/AUD is breaking through 1.7412 low to resume the down trend from 2.0840 (2020 high). Near term outlook will stay bearish as long as 1.7839 resistance holds. Next medium term target is 61.8% projection of 2.0840 to 1.7412 from 1.9218 at 1.7099. GBP/USD might also trying to catch up and break through 1.2999 near term support to resume larger down trend.

In Europe, at the time of writing, FTSE is up 0.43%. DAX is up 1.41%. CAC is up 1.34%. Germany 10-year yield is down -0.019. Earlier in Asia, Nikkei dropped -0.73%. Hong Kong HSI rose 1.31%. China Shanghai SSE rose 0.07%. Singapore Strait Times rose 0.54%. Japan 10-year JGB yield rose 0.0196 to 0.260.

US exports rose $1.9B in Feb, imports rose $0.9B

US exports of goods rose USD 1.9B to USD 157.2B in February. Imports of goods rose USD 0.9B to USD 263.7B. Trade deficit narrowed from USD -107.6B to USD -106.6B, still larger than expectation of USD -106.0B.

Wholesales inventories rose 2.1% mom to USD 814.7B. Retail inventories rose 1.1% mom to USD 665.6B.

BoE Bailey: Takes time to properly assessment join experience of COVID and Ukraine

BoE Governor Andrew Bailey said today, the forward guidance language was “very cautious” because of the high uncertainty. And it will take time to properly assessment how the “joint experience of COVID and Ukraine invasion causes world economy to emerge into new steady state.”

“Liquidity conditions have deteriorated in many commodity markets, margining costs have risen, which is of course a reflection of much higher volatility and risks in these markets,” he said. “We can’t take resilience, in particular in that part of the market, for granted. There’s a strong need to work together on this,” he said.

Bailey added that he’s starting to see evidence of an economic slowdown in business and consumer surveys. “We expect that this pressure on demand will weigh down on domestically generated inflation, other things equal at the moment,” he said.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3153; (P) 1.3189; (R1) 1.3219; More…

GBP/USD’s break of 1.3119 minor support argues that corrective rebound from 1.2999 has completed at 1.3297 already. Failure to hit 55 day EMA keeps near term outlook bearish. Intraday bias is back on the downside for 1.2999 low first. Break will resume larger down trend from 1.4248. Next near term target is 61.8% projection of 1.3641 to 1.2999 from 1.3297 at 1.2900, and then 100% projection at 1.2655. For now, risk will stay on the downside as long as 1.3297 resistance holds, in case of recovery.

In the bigger picture, current development suggests that the up trend from 1.1409 (2020 low) has completed at 1.4248. Decline from 1.4248 could still be a corrective move, or it could be the start of a long term down trend. In either case, deeper decline would be seen back to 61.8% retracement of 2.1161 to 1.1409 at 1.2493. In any case, break of 1.3748 resistance is needed to indicate medium term bottoming, or outlook will stay bearish.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
12:30 USD Goods Trade Balance (USD) Feb P -106.6B -106.0B -107.6B
12:30 USD Wholesale Inventories Feb P 2.10% 1.30% 0.80% 1.10%