London Forex Report: In the US, the surprisingly strong rebound in durable goods orders by its quickest in ten months raised optimism the manufacturing sector is on the mend. Initial jobless claims, while rising 10K to 272K for the week ended 20-Feb, remained at levels suggesting steady growth in the labour market. USD slipped despite better-performing US data as the USD Index reversed a strong jump to close 0.17% lower at 97.28 sliding on the back of a strong rally in CAD and a rebound in risk appetite. Massive sell off in China equities led EM indices lower but the renewed rout didn’t spill over to the Europe and the US, which was lifted higher by rebounding oil prices.
EUR/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: EUR appeared to find a floor just above 1.1000 against the USD, following a two-week slide from a three and a half month high of 1.1377. In Europe, inflation remained almost non-existent in January with consumer prices growing a mere 0.3 percent year-on-year and well below the European Central Bank’s (ECB) target.The latest figures paved the market’s view that the ECB will have to add more stimulus soon.
Technical: While prior pivotal support at 1.1050/70 acts as intra day resistance bears target prior range support at 1.08. Only a close over 1.1150 eases immediate downside pressure.
Interbank Flows: Bids 1.0950 stops below. Offers 1.1150 stops above.
Retail Sentiment: Bearish
Trading Take-away: Long
GBP/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: The UK economy grew by a solid 0.5% QoQ in Q4 2015, in line with market forecast. Without major announcements regarding the Brexit issue overnight, the data release has allowed GBP/USD to stabilize and take a breather above 1.39 levels. Market today will focus on BoE Governor Carney’s speech as investors will be looking for hints regarding the central bank’s future movements.
Technical: While 1.4040/60 acts as resistance expect a continued grind lower for a test of the next major monthly downside objective at 1.37. Only a close over 1.4250 eases immediate downside pressure.
Interbank Flows: Bids 1.39 stops below. Offers 1.4040 stops above.
Retail Sentiment: Bullish
Trading Take-away: Short
USD/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: Bank of Japan governor Kuroda said on Thursday that the central bank’s adoption of negative interest rates has been exerting its intended effects and technically possible to push interest rates further into negative territory. JPY weakened during the early Asia session today due to the flat CPI data. After the data, the USD/JPY changed hands at 112.70 levels, up 0.05 percent
Technical: 111 bids.buffer the decline in USD/JPY setting up a potential double bottom base for a more meaningful corrective phase, confirmation of a broader correction will come with a close over 113.30. Failure at 111 opens psychological 110 as the next downside objective.
Interbank Flows: Bids 111 offers below. Offers 113.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
EUR/JPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Fundamental: Consumer prices in the euro area grew at a quicker pace of 0.3% YoY in Jan (Dec: +0.2% YoY) due to slower declines in energy prices. While headline CPI was slightly higher, inflation still remained generally subdued. Low inflationary pressure will leave rooms for the ECB to expand its stimulus program when they meet next month. Similarly in Japan, low price pressure prevailed. Price growth was flat in Jan after climbing 0.2% YoY in Dec, suggesting that BoJ may consider cutting interest rates further into negative territory.
Technical: While 124.80/125 offers intraday resistance expect a continued grind lower to print fresh lows and test bids at the psychological 120 en route to a weekly downside objective at 118/117, only a close over 126.60 eases bearish bias
Interbank Flows: Bids 122 stops below. Offers 125 stops above.
Retail Sentiment: Bearish
Trading Take-away: Neutral
AUD/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: AUD edged slightly higher to open this morning at 0.7242 after oil prices rebounded following an announcement of a meeting between major oil producers on a proposed oil output freeze. On the domestic front, Private Capital Expenditure rose 0.8% against a negative growth of 3.1% expected. Despite being pressured under 0.72 handle during the last Asian session and hitting intra day lows of 0.7154, AUD managed to recover and push back to current levels at 0.7220s
Technical: Expected retest of offers above .7240 attracts near term profit taking. While .7150 supports intraday expect a test of range resistance at .7300. Only a failure at.7050 pivotal support threatens bullish bias
Interbank Flows: Bids .7150 stops below. Offers .7300 stops above.
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: CAD hit its strongest level against USD in more than two months, as investors unwound bets on a rising USD as oil prices rebounded. Oil fell early as record US crude inventories added to worries about oversupply in a slowing global economy, but later reversed after Venezuela confirmed an oil producers meeting in mid-March that would include Saudi Arabia, Russia and Qatar.
Technical: While USD/CAD trades sub 1.3660 downside pressure remains the driver with bears focusing on a AB=CD ultimate downside objective at 1.2966, the next support level to watch is is 1.3450 the breakout point of the upside acceleration.
Interbank Flows: Bids 1.3450 stops below. Offers 1.3650 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
