USD Maintains Gains As Trade Deficit Shrinks

Intraday Technical Analysis 28 March

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The January trade deficit data for the United States showed a decline of 15% with the deficit shrinking from a revised $59.9 billion in December to $51.1. The deficit shrank on lower oil imports and surged in soybean exports. The data reversed the tariff driven surge from the months before. Imports fell 2.6%, while exports rose 0.9%.

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Euro Remains Subdued as Draghi Raises Concerns of Negative Rates

The ECB President, Mario Draghi, speaking at an event on Wednesday, said that the central bank was concerned about the prolonged effects of negative interest rates. The ECB has been keeping interest rates negative for nearly five years to spur lending. The shift from the ECB comes as it ended its QE program in December last year and will be launching a new round of cheap financing for European banks.

Can the EURUSD Reverse Off the Support?

The common currency continued to decline as price was seen trading just outside the support area of 1.1268 – 1.1251. While price action is currently signaling a possible retracement, a close above 1.1268 is required to confirm this. The Stochastics on the 4-hour chart is oversold indicating a potential bounce. However, prices are likely to remain subdued in the near term. A bearish follow through could see the EURUSD reaching for 1.1217 support.

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Market Sentiment Remains Somewhat Mixed

Investors continued to remain cautious despite the market’s moderate risk appetite. This was reflected in the safe haven yen which managed to rise modestly on the day. The yen posted modest gains of 0.15% on the day after previously easing back. The better than expected trade deficit figures from the U.S. helped to soothe investors’ nerves.

Is the USDJPY Reversing?

The USDJPY currency pair failed to capitalize on the gains from Tuesday and price action has been trending lower in the near term. With price above the support level of 109.84, we expect the minor correction to be limited. However, if the currency pair breaks the support, then we could expect a deeper correction to the downside. For the moment, we expect USDJPY to stall its pullback and resume the move to the upside.

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Gold Retreats From a 4-week High

The precious metal posted declines right after hitting a 4-week high. Gold prices fell for a second consecutive day as it lost 0.45% on the day on Wednesday. However, price action remains largely flat in the medium to longer term horizon. This aptly reflects the broader market outlook which remains cautious.

Will Gold Maintain the Range?

Gold prices extended declines from the resistance level of 1320.81 as expected. Price action is currently attempting to post a reversal, just a few pips above the support area of 1306. The near term retracement could potentially push gold prices to correct the recent declines. However, this could keep the precious metal maintaining a sideways range within the said levels. A break below 1306 is required for further declines that could see price attempting to test the next lower target of 1290.

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