New York Forex Report: Risk sentiment continued to improve over early European trading today as optimism grows for an OPEC deal on production cuts. Equity markets have benefited from the improved risk environment with S&P 500 trading back above last week’s highs. US markets are out today for Presidents Day holiday so flows are expected to be light. Key focus for the remainder of the day will be on ECB President Draghi who is due to speak, with traders keen to hear if the ECB chief addresses recent EUR strength.
EUR/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: A recovery in equity markets alongside a resurgent USD have weighed on EUR over early European trading today. Focus now turns to ECB President Draghi who speaks in Brussels.
Technical: While 1.12 remains intact as support expect rotation towards initial resistance at 1.13. A failure at 1.12 opens a retest of pivotal 1.1050
Interbank Flows: Bids 1.12 stops below. Offers 1.13 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines
GBP/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: A resurgent USD weighed on Sterling over the European morning as choppy flows in GBP/USD continue to skew trading conditions. Traders await UK CPI tomorrow for clear directional cues.
Technical: Failure at 1.4350 suggests false upside break and resets bearish trend to attack and break 1.40 as the primary downside objective. Over 1.46 re-establishes bullish bias and targets a retest of early February highs en route to 1.4860
Interbank Flows: Bids 1.4430/50 stops below. Offers 1.46 stops above.
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: A weaker than expected 4Q GDP print overnight, in line with growing expectations for further BOJ action, has seen JPY soften as we start the week, allowing USD to sustain a correction higher.
Technical: USD/JPY has confirmed break of major neckline support again from its extended consolidation pattern. While 114.30/50 caps intraday upside reactions expects a grind lower to test psychological 110 as the next major downside objective. Over 117 eases immediate downside pressure
Interbank Flows: Bids 110 offers below. Offers 114.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: EUR/JPY remains hemmed in by flows currently with both EUR and JPY weaker. Traders turn next to ECB President Draghi for any possible comments on recent currency moves.
Technical: While 129.10 caps upside reactions expect a retest of year to date lows, only over 130.50 eases immediate downside pressure.
Interbank Flows: Bids 125.50 stops below. Offers 128.50 stops above.
Retail Sentiment: Bullish
Trading Take-away: Short
AUD/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Fundamental: The recovery in risk-sentikent so far today as led AUD higher against the US dollar as equity ad commidty markets rebound. Data out of China overnight was mixed as Tade Balance figures improved but imports and exports both fell sharply.
Technical: A close over .7150 eases immediate downside pressure as bulls target a test of .7240 as the next upside objective. A failure at .7050 support would target a retest of .6950 support zone.
Interbank Flows: Bids .6950 stops below. Offers .72 stops above.
Retail Sentiment: Bearish
Trading Take-away: Neutral
USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: USD/CAD remains range bound near last week’s lows as CAD benefits from a correction higher in oil but meets resistance from a resurgent US dollar.
Technical: While 1.39 contains upside reactions potential for bearish bias to resume, however while 1.38 supports there remains potential for a broader corrective phase with 1.4160 the next upside pivot.
Interbank Flows: Bids 1.3750 stops below. Offers 1.40 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
