- The minutes from the March European Central Bank meeting are due out on Thursday at 12:30 GMT.
- At the March meeting, the Governing Council announced its intention to start a third TLRO program.
Join me on Mondays at 7:30 EDT/11:30 GMT for the FX Week Ahead webinar, where we discuss top event risk over the coming days and strategies for trading FX markets around the events listed below.
04/04 THURSDAY | 11:30 GMT | EUR March European Central Bank Meeting Minutes
The March ECB meeting minutes on Thursday will draw interest this week considering the Governing Council’s decision to announce its third TLTRO program starting this September and push back its forward guidance to indicate that rates would stay on hold through at least the end of 2019. Likewise, we’ll get some insight into how much more the central bank is willing to do at a time when fiscal policymakers are hamstrung by seemingly endless domestic woes.
Stability in energy prices have seemingly done little to filter through into inflation expectations (Brent Oil prices up by +5.1% over the past four-weeks), a strong indication that growth concerns are driving the turn lower. ECB President Mario Draghi’s preferred measure of inflation, the 5-year, 5-year inflation swap forwards, closed last week at 1.351%, sharply lower from where it was one month earlier at 1.499% (-14.8-bps).
An objective look at European economic data shows that conditions have stabilized, relatively speaking, over the past few weeks. In recent days we’ve seen the March German IFO surveys and February German Retail Sales beat expectations, while Eurozone economic, industrial, and services confidence all dropped in March. As a result, heading into this week, the Citi Economic Surprise Index for the Eurozone has moved up to -61 from -61.6 one week earlier; for comparison, three months earlier, the index was at -73.3.
EURJPY Price Chart: Daily Timeframe (December 2018 to April 2019)
Our earlier update noted that EURJPY was “finding itself enmeshed in daily 8-, 13-, and 21-EMA envelope. Both daily MACD and Slow Stochastics remain in bearish territory just below their respective signal/median lines, though it’s possible that these are false signals.” Indeed, prices have continued to trend higher through the first half of the week. Accordingly, traders may continue to find it beneficial to await greater clarity: a move above the daily 21-EMA at 125.17; or below the March low at 123.65.
IG Client Sentiment Index – EURJPY (April 3, 2019)
Retail trader data shows 57.4% of traders are net-long with the ratio of traders long to short at 1.35 to 1. In fact, traders have remained net-long since Mar 22 when EURJPY traded near 126.035; price has moved 0.7% lower since then. The number of traders net-long is 13.4% lower than yesterday and 8.5% lower from last week, while the number of traders net-short is 14.3% lower than yesterday and 4.8% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EURJPY prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EURJPY-bearish contrarian trading bias.
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--- Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher, email him at firstname.lastname@example.org