New York Forex Report: Continued strength in oil markets, reportedly due to trades exiting their short positions ahead of next week’s Brent expiry, is keeing risk-sentiment supported into the US crossover on Friday with equities remaining firm. Far from a quiet end to the week, traders will be keeping an eye on a raft of key US data with 4Q GDP and PCE data the main focus. GDP is expected to remain unchanged at 2.2% whilst PCE data, which is used by the Fed as a key inflation gauge, is expected to tick up. PCE strength, following a rise in core inflation, should further support USD strength heading into the March FOMC.
EUR/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: Firm equity markets and stronger USD kept EUR/USD pressure over the European morning whilst an unexpected improvement in French 4Q GDP stemmed the decline. All eyes now on German CPI at 1300GMT.
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 though USD strength is keeping upside capped.
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: Bearish
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. Firm equities over the European morning have continued to keep JPY demand soft.
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: EUR & JPY weakness keeping EUR/JPY contained near yesterday’s session high. 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.
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: Despite better risk sentimeant, AUD/USD is under pressure heading into the NY open today, likely on profit taking into the .7250 level coupled with USD strength.
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: The technical rally in Crude, led by position squaring ahead of next week’s Brent expiry, has the Canadian Dollar firmly supported into the weekend. Eyes now on key US data.
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
