According to CME Group’s advanced figures for EUR futures markets, investors trimmed their open interest positions for the second session in a row on Tuesday, this time by just 794 contracts vs. Monday’s final 600,892 contracts. In the same line, volume dropped for the third session in a row by almost 54.6K contracts.

EUR/USD a test of 1.2165/55 remains on the cards

EUR/USD keeps the choppy trade so far this week, all against the backdrop of declining open interest and volume. That said, the likeliness of another visit to the 1.2165/55 band is not ruled out although the downside potential seems to have lost some tailwinds.

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Greg Gibbs, Analyst at Amplifying Global FX Capital, points out that the AUD has been one of the weaker currencies in recent sessions. 

Key Quotes

“We had thought that the AUD might come under pressure after the tariff news come out in early-March.  We thought as a major exporter of steel-making commodities to Asia, it had as much to lose from steel tariffs as any country.  Further, we thought that since US protectionist policy was chiefly aimed at China, AUD might be seen as a proxy for increased economic risk for China and the global economy.”

“Perhaps belatedly, after initially rising in early-March, the AUD is now responding to the risks from tariffs to growth in China and global growth.  Chinese iron ore futures prices have fallen significantly since the tariff news.”

“China property market a risk for AUD

A number of economic reports in China have started the year on a strong note.  However, a good part of the recent economic strength in China appears to have been supported by strong export growth.  As such, increased USA protectionism directed at China represents a significant risk for economic confidence in China.
Recent data suggest that the Chinese property market is weakening, a key user of steel.  This may also be spilling over to weaker steel-making commodity prices and the AUD.
The RBA was upbeat on its outlook for global and trading partner growth in their policy minutes released on Tuesday.  But they made some comments that suggest there are risks towards slower growth in China.”

“Watch out for strong Australian employment report

Recent Australian economic data point to above-trend growth with booming business confidence and strong employment indicators.  A strong employment report should be expected on Thursday this week.  This might tend to support the AUD.
The AUD might also draw some strength from signs that the government might be able to gain enough support from Senators on the cross-bench to pass its proposed corporate tax cuts.”

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Analysts at Rabobank expect the Bank of Russia to lower the key rate by 25bps to 7.25% at its second monetary policy meeting this year scheduled on March 23.

Key Quotes

“With inflation at a record low and unlikely to accelerate sharply in the coming months, Russian policy makers led by Governor Nabiullina have room for manoeuvre to trim borrowing costs.”

“Given that the ruble has softened so far this month on the back of escalating diplomatic tension between the UK and Russia, it seems unlikely that the CBR will opt for a 50bps cut as it would leave the Russian currency more exposed and vulnerable to less condusive global environment dominated by concerns about global trade wars.”


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In view of FX Strategists at UOB Group, there is still room for the pair to re-visit the 105.25 level in the next weeks.

Key Quotes

24-hour view: “Expectation for USD to trade sideways yesterday was wrong as it rose to hit a high of 106.60. The up-move appears to be running ahead of itself but a ‘test’ of the strong 106.80 resistance is not ruled out. At this stage, a sustained move above this level seems unlikely (next resistance is at 107.30). On the downside, yesterday’s low near 105.90 is expected to be strong enough to hold any intraday pullback (minor support is at 106.20)”.

Next 1-3 weeks: “In the update on Monday (19 Mar, spot at 105.90), we were of the view that despite the lack of downward momentum, the weakened undertone suggests that a retest of the month-to-date low near 105.25 seems likely. The relatively strong recovery yesterday was not exactly expected and the odds for a move towards 105.25 have diminished. However, only a move back above 106.80 would indicate that the current mild downward pressure has eased. That said, a break of 106.80 is not going to change the current neutral outlook but would suggest that USD has moved into sideway consolidation range”.

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