Forex: Overview - Week of April 15 to 19

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04/17/2019 | 04:22 pm
Risk appetite is clearly dominating the markets these days, offering the Euro a remarkable rally at the expense of the main safe-haven stocks, led by the Dollar, Yen and Swiss Franc.

After the British Parliament rejected the divorce agreement negotiated in Brussels by Theresa May three times, the Prime Minister and her European partners definitively rejected the no deal scenario by postponing Brexit again until October 31. While this new deadline prolongs uncertainty in the region, the postponement is flexible and the United Kingdom will be able to leave the European Union before that date if its members are able to agree on a project acceptable to the opposing party.

A hypothesis that still seems very far away, while ECB President Mario Draghi presented himself worried at a press conference, referring to "weak" indicators and "risks" likely to worsen the economy of the Nineteen.

Among them are the repeated threats of Donald Trump, who promises new customs duties on 11 billion European imports if the EU does not suspend its subsidies to Airbus. A way to support aircraft manufacturer Boeing, currently in turmoil.

But the White House resident also continues to stigmatize the Federal Reserve's behavior, regularly urging it to lower its policy rate while ignoring the institution's independence.

However, the Fed has already taken its foot off the pedal, abandoning its monetary tightening cycle this year, as confirmed by the publication of the latest report of the US central bank. Charles Evans, one of its main managers, even estimated that the interest rate on money could now stagnate until autumn 2020.

But the US economy is gradually raising its head. Consumer prices rose by +0.4% between February and March, while producer prices rose by +0.6% over the same period, two figures higher than economists' expectations. In addition, weekly jobless claims have not been so low since 1969 and JP Morgan, the leading US bank in terms of assets, has just announced record quarterly profits. In New York, stock market indices are approaching their highest historical levels.

Finally, Chinese exports grew by +14.2% in March after a decline of -20.7% the previous month, indicating a certain resilience of global growth.

Over the next few trading sessions, traders will be monitoring British inflation on Wednesday as well as private activity in the Euro zone and US retail sales on Thursday. The week will end with Good Friday, a holiday in many countries.

Graphically, the Euro is taking advantage of the good mood of the markets to return to the contact of 1.1334 where its forward march is already becoming more pushy. The context offers us a new opportunity to sell on rebound.

The single currency also appreciated against the Swiss franc, with the EUR/CHF pair using its annual lows to test a resistance of CHF 1.1349. As against the Dollar, it could help contain the attacks of the European currency in the short term.

Finally, the USD/JPY and EUR/JPY pairs also benefit from the current environment by returning to above JPY 111.90 and JPY 126.50, without however seeming able to establish themselves permanently beyond these key levels. Here too, we are favoring short positions in the coming days.

Mathieu Burbau 2019
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