ECB to reveal QE plan

The dollar is trading with a bid bias against the majors with the euro breaking the 1.1099 level and trading to 1.1025, its lowest level since 2003. The technical picture points to a break of 1.10 as being a significant step for further declines in the single currency.

The monetary policy divergence remains the key theme for FX markets as Canada left its policy unchanged yesterday. The RBA deputy Governor was quoted as saying that the board noted further easing may be appropriate, citing that the recent cut was made due to the lack of improvement and not a continued decline in the economy. He went on to add that the Australian dollar was still overvalued compared to the state of the economy, but he acknowledged it was getting closer to a fair value. The Australian retail sales and trade deficit data came in generally in-line with the consensus forecast.

China has lowered its growth and inflation targets for this year as the market had expected. The yearly growth target has been lowered to around 7% from the previous estimate of ‘around’ 7.5%, with inflation targeted to be 3.0%, down from 3.5% last year.

The central bank meetings will dominate in FX space today ahead of the US jobs report tomorrow.

• BoE: No policy change is expected; however, BoE has made it clear that they will look through temporary disinflationary pressures, expecting to hike later in the year.
• ECB: We should get more technical details on the exact mechanics of QE. While this will be of interest to other markets, impact on FX should be minimal. Of more interest will be updated staff projections, including 2017 CPI forecasts. ECB president Mario Draghi will reflect that ECB has now taken meaningful steps and that they are now entering time of assessment. This should not disappoint the market.

EUR/USD
Supports 1.1025-1.1000-1.0765 | Resistance 1.1155-1.1245-1.1400

USD/JPY
Supports  119.50-118.65-118.20 | Resistance 120.50-120.85-121.85

GBP/USD
Supports 1.5225-1.5200-1.5145  | Resistance 1.5345-1.5460-1.5500