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Yen gains after BoJ inaction, GBP falls

EURUSD is slowly retracing the post-Draghi gains. The key short-term support at 1.1067 (major 38.2% retracement on post-Draghi rally) is under pressure. If the EURUSD manages to find a base at this level, we could expect a further bullish trend to develop toward the 1.1376 (Feb 11th high), especially if the US dollar shows signs of weakness following the FOMC decision scheduled on Wednesday. A slide below 1.1067 should signal a short-term bearish reversal and encourage a downside correction toward the 1.1000 mark before the 1.0915 (100-dma) and then to 1.0826 (Mar 2nd low). From a medium term point of view, a break below this level could pave the way to 1.0800/10 (February lows) then all the way down to the 1.0725 (minor 74.6% before 1.0524 (Dec low). 

The yen is the only gainer against the US dollar in the G10 complex following the BoJ’s announcement of status quo. USDJPY slumped below the 113 mark in the session and more weakness toward the 112.20/111.90 area could be underway if the pair fails to recover above the 113.34, Ichimoku’s conversion line. Clearing the 112.00 mark, the USDJPY could well resume a further slide down to the 110.99 (February dip).
On the upside, resistance is eyed at 114.00/114.44 area (optionality / March 10th high) before the critical 115.08(major 38.2% retrace on Jan 29 – Feb 11 decline).

The pound (-0.93%) is the biggest loser against the US dollar in London. Potential divergence between the Fed and BoE policy outlooks gives good reason for the GBPUSD to slide, while the agony in oil and commodity markets is certainly another factor. Some also believe that the latest Telegraph survey, claiming that Brexit ‘out’ supporters are more motivated to win, is taking its toll this morning. The break below the major 38.2% retrace on Feb 29 – Mar 11 rise, 1.4207 suggests that the pair is now in the bearish consolidation zone for a potential setback down to the 1.40 mark. Intermediate supports are eyed at 1.4136 and 1.4066 (Fib 50% and 61.8% retrace respectively).

The RBA minutes took the shine off the Aussie. The RBA said in its March 1st meeting that ‘low inflation to provide scope for more easing if needed’ and ‘low rates-AUD fall helping economy re-balance’. The AUDUSD stepped back below the 75 cents level.
In the US, the two day FOMC meeting starts today. Any unexpected signs of hawkishness from the Fed could drag the AUDUSD down to 0.7430 (200hma) before the critical 0.7409 (major 38.2% retrace on Mar 1 – 14 rise). Below 0.7409, the AUDUSD will step in the bearish consolidation zone and we could consider a deeper correction down to 0.7352 (50% major on Mar 1 – 14 rise) before the 200-dma (0.7246). On the upside, resistance is eyed at 0.7594 (Mar 14th peak) before a potential extension to 0.7655 (Fib 61.8% retrace on May-Jan decline) is brought back on the table.

Gold fell to 1225, just below the minor 23.6% on December-March rally. The broad based strengthening in the US dollar before the FOMC meeting could continue weighing in the yellow metal, and if $1225/1220 is cleared, we could well expect a further sell-off down to $1200 mark. On the upside $1245/1250 is expected to shelter offers, before a potential breakout for a re-test of the critical $1285/1300 resistance zone.

Oil market continues its slide after Iran said to prepare to increase production to 4 million barrel per day yesterday. WTI cheapened to $36.10, breaking the 200-hma ($36.88) for the first time in three weeks. The 50-day moving average ($36.60) is no more on the way. The possibility of a further slide down to $35 and even $34 (major 38.2% retrace on Feb-Mar recovery) is now on the table. Below this zone, the WTI will step in the bearish consolidation zone and a deeper correction could then develop down to $32.50 (Fib 50%) before $31.00 (Fib 61.80% retrace) and $30 mark.