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ECB guiding the EUR lower

Four markets in focus today: EUR/USD, GBP/USD, EUR/AUD and Flight Centre.

EUR/USD

The market continues to take long EUR positions off the table and as stipulated in Friday’s afternoon report the market is keen to sell EUR/USD on rallies, with the pair closing below the July 2013 uptrend on the weekly chart. We also saw a sizeable bearish reversal at the trend high on the weekly chart and any moves to 1.3800 look like shorting opportunities. What’s more we also saw modest selling in the Spanish and Italian bond market, with spreads against bunds marginally wider.

GBP/USD

The main event this week is the BoE’s May inflation report on Wednesday, with Mark Carney ready to detail how the central bank see spare capacity and policy outlook. Given what we are seeing from operating margins, one could make an assumption that wages are slowly climbing again and it will be interesting as we also get wage growth data this week, with average earnings (ex. bonuses) expected to rise 1.5%.

1.5% is still well below the 4-5% annualised growth rates we saw before the GFC, but is still an improvement. It’s worth flagging that the market has got fairly hawkish on UK rate expectations, with short sterling futures pricing in a 50 basis point hike by March. To express any bullish sterling stance right now I would look to be long GBP against the EUR.

Flight Centre (FLT)

FLT looks fairly weak at present having closed at a thirty-day low and below the bottom of the multi-month range of $55.72 to $51.08. The stock has closed below the bottom of the lower Bollinger band, while the MACD is firmly below the signal line. Technically short positions are preferred in this name, despite the company being solid from a fundamental standpoint.

EUR/AUD

I was stopped out of my long EUR/AUD trade last week for a modest loss, and all eyes now fall on the April 10 low of 1.4654. 1.4991 (the 38.2% retracement of the March to April sell-off) ended up being key resistance and traders have used this level to work offers into. Stochastic momentum is lower and thus it seems the pair could be headed lower again. Fundamentally it makes sense to be short with the ECB the most active central bank in the G1O in terms of talking down their currency.

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