Asian Forex Overview (March 10 - 14)

As anticipated, the second half of last week's news-heavy schedule delivered significant volatility to the forex market. US President Donald Trump continued to move the markets in a rapid-fire fashion, particularly regarding trade tariffs and the complicated relationship with European allies and Ukraine. Equities sold off, erasing all the gains following Trump's election victory.

The EU, which kept its main financing rate unchanged, announced a significant increase in military spending, which moved the bond market, signaling a lack of appetite from creditors to finance such an endeavor. Finally, the US Non-Farm payroll on Friday indicated weaker-than-anticipated results, pushing the US dollar down alongside equities. Unemployment ticked higher, signaling that it has almost certainly bottomed out for this business cycle. The dollar declined over 3.4% in the first week of March.

Next week might look light, but it will bring an anticipated new round of inflation news, clarifying whether the fears of the second wave of inflation are justified. Historically, second waves of inflation reach about half of the first, implying a potential for inflation to eventually reach around 4.5%. This week's Y/Y expectations are set at 2.9%.

Also, the Bank of Canada will decide on the latest interest rate, with analysts expecting a 25 bps cut from 3% to 2.75%.

The expectations for this week are more of the same, focusing on JPY weakness and CHF strength.

Key News:

• Tuesday: USD – JOLTS Jobs
• Wednesday: USD – CPI, CAD – BOC Rate Decision
• Thursday: USD - PPI
• Friday:  GBP – GDP

  

Pairs In Focus

EUR/JPY

The Euro regained footing against the JPY in March after sweeping the September 2024 lows through February. However, last week, it failed at the first attempt of 161.200 resistance, which is the level it has to clear before it becomes viable to look for longs.

Clearing that level on the daily chart leaves doors open to challenging January highs around 164.  Retail sentiment is overwhelmingly bearish at 60%. If this sentiment keeps growing while the price moves higher, it enhances the probability of a retail squeeze, stacking the odds in the bull's favor.

3. CHF/JPY 

The Swiss franc has been ranging against the Japanese yen for the last five weeks, finding strong support at 166. The price has now bounced above 168, climbing and closing below the key level of 168.110 and framing the key level below at 166.740.

The plan for next week is to observe the opening price action and look for bullish signs. The potential to take out the stops at 169.800 opens the door for an attempt at 170.540. Sentiment is currently mainly long at 63%, which doesn't make it a great contrarian pick, but it is certainly worth following.

 

Notes:

• AUD CAD: Currently, there is a rare bullish spot for AUD, mainly owing to CAD’s fundamental weakness.
• AUD NZD: Turned bearish, closing below the key weekly level of 1.10380.
• AUD SGD:  Remains in a bearish trend with no apparent signs of a turnaround.
• AUD JPY:  Despite a short-term pullback, it remains in a bearish trend.
• AUD CHF: It made a lower low but found some support at July’s lows. It might enter a range.
• EUR AUD: In a strong uptrend, it took out July’s high and squeezed retail traders.
• GBP NZD: In a strong uptrend with no pullbacks at this moment.
• GBP SGD: Broke and closed above the key level of 1.71530. As long as it stays above, it can move higher and take multiple tops made between August and October 2024.
• GBP AUD: In a strong bullish trend and looking to take out highs from 2020.
• NZD JPY: Pulled back but failed to close below the key level 84.800. As long as this level holds, the short-term trend is bearish.
• SGD JPY: Bearish, but key support around 111 has held, making this pair a good candidate for a short-term pullback.