USD/CHF: One-Day Reaction After The SNB Reduced Exemptions From Negative Rates

GROWTHACES.COM Forex Trading Strategies

Taken Positions

EUR/USD: long at 1.0740, target 1.1000, stop-loss 1.0615, risk factor *

GBP/USD: long at 1.4900, target 1.5270, stop-loss 1.4900, risk factor *

USD/JPY: short at 119.35, target 117.20, stop-loss 120.20, risk factor **

USD/CAD: short at 1.2280, target 1.2000, stop-loss 1.2380, risk factor **

AUD/USD: long at 0.7730, target 0.7950, stop-loss 0.7620, risk factor **

NZD/USD: long at 0.7630, target 0.7850, stop-loss 0.7520, risk factor **

EUR/GBP: long at 0.7170, target 0.7350, stop-loss 0.7110, risk factor ***

EUR/JPY: long at 128.00, target 130.00, stop-loss 128.00, risk factor *

AUD/JPY: long at 91.80, target 94.00, stop-loss 91.80, risk factor ***

Pending Orders

USD/CHF: sell at 0.9690, if filled – target 0.9500, stop-loss 0.9770, risk factor ***

GBP/JPY: buy at 179.00, if filled – target 182.20, stop-loss 178.00, risk factor **

CHF/JPY: buy at 123.50, if filled – target 126.85, stop-loss 122.50, risk factor ***

 

EUR/USD: Market Hesitates, We Stay Long

(long at 1.0740)

• Eurozone PMI Composite pulled back to 53.5 from March’s 11-month high of 54.0, according to flash PMI survey data for April. The slowdown reflected weaker rates of expansion in France and Germany, which offset an acceleration of growth in the rest of the region to the fastest since August 2007.
• A fall in PMI is in line with the drops seen in both the German ZEW investor sentiment index and the flash measure of Eurozone consumer confidence in the same month.
• The manufacturing and service sectors continued to expand, but both saw rates of expansion cool compared to their ten- and eight-month respective highs seen in March. Eurozone manufacturing PMI amounted to 51.9 vs. 52.2 in March and services PMI fell to 53.7 from 54.2 in March.
• PMI showed that average selling prices for goods and services continued to fall, but the rate of decline was the weakest since June of last year, in part reflecting the pass-through of higher input costs.
• Although the PMI has pulled back from March’s recent high, the index remains above the average seen in the first quarter and suggests the Eurozone economy growing at quarterly rate of 0.4% at the start of the second quarter.
• Investors are still focused on Greece. The European Central Bank’s chief economist Peter Praet said : “Greek banks are assessed to be solvent.” He added that the situation was stressful. Greek Prime Minister Alexis Tsipras will meet German Chancellor Angela Merkel on the sidelines of an EU summit in Brussels today. On Tuesday, European Commission President Jean-Claude Juncker urged Greece to step up efforts to strike an agreement with its international creditors, warning that talks were not advanced enough to find a quick solution. The head of the Eurogroup, Jeroen Dijsselbloem, said he expected Athens and its creditors to forge a new agreement in the coming weeks. But Greek Finance Minister Yanis Varoufakis said that there was convergence and expressed optimism that a pact would be reached although this may not happen in the 24 April meeting of Eurozone finance ministers. These comments suggest that the agreement is unlikely tomorrow.
• Our EUR/USD long is still in play. Latest pullback cleared the support at 10-dma but good news for the EUR-bulls are that the support level at 1.0660 (low on April 21) was not reached. Technical situation does not give any strong hint for further move. Long legged doji on April 21 suggests indecision in the market.

Significant technical analysis’ levels:

Resistance: 1.0801 (high Apr 22), 1.0824 (high Apr 20), 1.0848 (high Apr 17)

Support: 1.0660 (low Apr 21), 1.0624 (low Apr 16), 1.0571 (low Apr 15)

 

GBP/USD: Disappointing Retail Sales Data Hit The GBP

(long at 1.4900)

• The GBP backed away from a five-week high against the USD today after data showed British retail sales fell in March. Data showed retail sales fell 0.5% mom and were up 4.2% yoy in March vs. median forecast for a rise of 0.4% mom and 5.4% yoy.
• The weaker data were the result of strong fall in automotive fuel sales (by 6.2% yoy). Sales growth excluding fuel accelerated to 5.0% yoy in March from 4.8% yoy in February.
• The GBP/USD fell to a day’s low at 1.4961 after the release of sales data from 1.4990 beforehand but backed above 1.5000 soon. The GBP/USD rose to a five-week high of 1.5080 after Bank of England minutes on Wednesday showed the central bank saw a chance that inflation could rebound faster than expected.
• We stay GBP/USD long with the target of 1.5270. We took profit on our long GBP/JPY position yesterday (117.20-180.20) and are looking to get long again on this pair at 179.00

Significant technical analysis’ levels:

Resistance: 1.5080 (high Apr 22), 1.5147 (high Mar 18), 1.5255 (high Mar 6)

Support: 1.4915 (low Apr 22), 1.4857 (low Apr 21), 1.4813 (low Apr 16)

 

USD/CHF: One-Day Reaction After The SNB Reduced Exemptions From Negative Rates

(sell at 0.9690)

• The Swiss National Bank said it was considerably reducing the number of institutions exempt from negative rates on their cash deposits held at the central bank.
• Negative interest will now also apply to the so-called sight deposit accounts held at the SNB by enterprises associated with the Confederation, the Federal Pension Fund, and the SNB’s pension fund, the central bank said in a statement. The bank said it would continue to monitor the remaining sight deposit accounts, such as those held by compensation funds for old age, disability, and loss of earned income, that are not subject to negative rates.
• The SNB has clearly underlined its commitment to keep CHF pressured by tightening its sight deposit rules and warning the market that it may go for deeper negative rates. Accounts under negative rates will be looking elsewhere to put their cash, and the main destination will be probably the USD.
• The USD/CHF rose above 0.9700 after the decision from nearly 0.9500 before the SNB statement and the EUR/CHF jumped above 1.0400 from 1.0250. The rises were short-lived and are not continued today. The CHF is strengthening 0.5% against the USD and 0.4% against the EUR today. We see that the demand for the CHF is still strong and investors are not afraid of the possibility of deeper negative rates in Switzerland.
• Swiss exports pushed higher in March despite the CHF’s sharp rise against the EUR, as surging shipments to the United States, Middle East and Asia more than compensated for a drop-off in sales to the single currency bloc. The Federal Customs Office said exports from Switzerland rose by a real 4.2% yoy in March. Overall Switzerland ran a merchandise trade surplus of CHF 2.53 billion in March vs. CHF 2.00 in March 2014. Sales to the Eurozone were down 3.7% on a nominal basis, while exports to the United States and Middle East surged by 23.6% and 29.2%, respectively. Exports to China were up 12.4%.
• In our opinion the USD/CHF is likely to go down in the coming days. We are looking to get short at 0.9690.

Significant technical analysis’ levels:

Resistance: 0.9718 (high Apr 23), 0.9769 (high Apr 15), 0.9793 (high Apr 14)

Support: 0.9655 (10-dma), 0.9500 (psychological level), 0.9482 (low Apr 3)

 

NZD/USD: We Used Falls On Central Bank Comments To Get Long

(long at 0.7630)

• Reserve Bank of New Zealand Assistant Governor John McDermott said the bank was currently not considering raising its official cash rate and it would ensure that monetary policy was stimulatory to help lift inflation back to the bank’s 1-3% target range. He suggested that monetary policy should remain stimulatory for a prolonged period. His remarks bolstered the view that the central bank will keep rates on hold into next year, prompting a sell-off in the NZD.
• John McDermott said: “Before considering any tightening in monetary policy we would need to be confident that increased capacity utilisation and labour market tightness was generating, or about to generate, a substantial increase in inflation.” He added that evidence of weakening demand, wages and inflationary pressure would prompt the central bank to consider lowering rates.
• He said that near-zero inflation was mostly due to low tradables inflation, caused by the slow global economic recovery, the high exchange rate and recent sharp falls in oil prices. In his opinion the impact of some of those factors would be temporary, and as oil prices stopped falling, they would cease to be hold down inflation by the start of next year. Stimulating output growth above potential would help lift non-tradables inflation, returning headline inflation gradually to the target midpoint. He described the high NZD exchange rate as unwelcome at a time when key export prices, such as dairy, were falling.
• Chinese PMI fell to 49.2 in April, below the 50-point level that separates growth in activity from a contraction on a monthly basis. This means that manufacturing activity contracted at its fastest pace in a year. A slowdown in China have additionally undermined the NZD.
• The NZD is the very popular choice for carry trade because of high interest rates among core markets. The AUD/NZD was falling towards parity and the Reserve Bank of New Zealand tried to ensure that New Zealand does not lose out competitively with Australia.
• We went long on the NZD/USD at 0.7630 , in line with our trading strategy.

Significant technical analysis’ levels:

Resistance: 0.7740 (high Apr 17), 0.7782 (high Jan 20), 0.7857 (high Jan 16)

Support: 0.7635 (low Apr 21), 0.7601 (10-dma), 0.7581 (low Apr 16)