Financial market research and analysis

The key event of the day is the ECB meeting, followed by Mario Draghi’s speech. The market expects the ECB to cut the deposit rate by additional 10 basis points and to potentially expand the QE purchases by 10 billion euros. EURUSD is expected to trade sideways until we have more clarity from the ECB. We stand ready for two sided volatility. The key mid-term resistance at 1.1044/51 (200-dma / Fib 38.2% retrace on Dec-Feb rise) is expected to shelter offers before the meeting. Option barriers trail down the 1.10 strike. Vanilla calls are supportive only above 1.1085. If the EURUSD stays below the 1.1044/51 area, the EURUSD will stay in the bearish trend with the possibility of pullback to 1.0826 (Mar 2nd low) and to 1.0800/10 (February lows). Breaking below this level should pave the way all the way down to the 1.0725 (minor 74.6% before 1.0524 (Dec low). Surpassing the 1.1044/51 resistance, we could consider a further advance to 1.1100 mark before 1.1175 (minor 23.6% retrace on Dec-Feb rise) and 1.1376 (Feb 11th high).

USDJPY extended gains from 112.22 (March 9th low) to 113.80 (March 10th High). Trend and momentum indicators are marginally positive, suggesting a potentially steady advance toward the critical 115.08 resistance (major 38.2% retrace, 115.08, on Jan 29 – Feb 11 slide). Decent vanilla puts could well deteriorate the bullish picture for a slide below 113.00 today. Short-term support is seen at 112.00/111.90 area. A break below could fully expose the February dip of 110.99 (Feb dip).

GBPUSD consolidates gains above 1.4154, major 38.2% on February-March decline, which is currently lending support to the positive trend started on February 1st. Having triumphed against the 1.42 offers against the US dollar, the pound is now ready to grasp the 1.43 mark, which had been damaged after David Cameron fixed the Brexit referendum date two weeks ago. A slide below 1.4154 level could signal a further pullback to 1.4032/1.4000 (minor 23.6% / psychological support).

AUDUSD traded shortly above the 75 cents level; the sharp rise in AUDNZD helped the AUDUSD higher in Sydney after the RBNZ cut its OCR rate by 25bp unexpectedly. The fastening inflation in China curbed the appetite in Aussie given that a faster inflation could well narrow the PBoC’s manoeuvre margin. Nevertheless, from a pure technical perspective, the positive trend is gaining traction, suggesting a potential break above 0.75. The RSI (70%) is edging the overbought territories, which could trigger a short-term downside correction. Support is eyed at 0.7430 (minor 23.6% retrace on Mar 1 – 9 rise) before 0.7370 (major 38.2%). Above this level, the technical bias is to remain positive.

Gold traded rangebound between $1245/1255 before the ECB meeting. The MACD is in the red zone warning that a further downside correction is well possible. Support is eyed$1225 (minor 23.6% on Dec-Mar rise) if cleared could give way for a further slide 1200 mark. Resistance is eyed at $1280 (March 3rd high) before $1300 mark.

WTI is fighting against the bears just below the $40. The resistance remains intact at $38.50 (Mar 9th high). The 100-day moving average ($36.86) is expected to lend support before the $35.50 (minor 23.6% retrace on Feb-Mar rise) and $33.75 (major 38.2%).