Markets are back to full strength on Wednesday as Japan returns from its Culture day holiday. The USD rose to a 12-week high as the NY-ISM proved especially strong. EUR dipped on the USD strength and escalating Volkswagen (DE:VOWG_p) emissions scandal. JPY eased as global equities firmed. GBP was little moved as analysts continued to ponder the difference between Monday’s strong UK manufacturing PMI and the subsequent contrasting release by the CBI. The USD Index began its recovery ahead of European session and rallied higher in US trading to close 0.24% higher at 97.15.
EUR/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: ECB chairman Draghi said a range of instruments is available to be undertaken if needed since Euro zone inflation is still far below target level. The euro soundly sold-off against most major currencies as the expectation for further easing was being put on the table again. EUR suffered about 110 pips loss yesterday and it is now trading below 1.0950 as of writing.
Technical: Failure at 1.0950 sets up a retest of last weeks lows en route to 1.0860. Only a close above 1.10 eases immediate bearish pressure
Interbank Flows: Bids 1.09 stops below. Offers 1.1o Stops above.
Retail Sentiment: Bullish
Trading Take-away: Long against 1.0950 targeting 1.1130, exit longs below last week’s low
GBP/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: UK Construction PMI data came in at 58.8, slightly below 58.9 expected yet still way above the 50 threshold. Recent positive data suggested that the UK economy might be gathering steam, supporting BoE’s optimistic view of the economy. Attention today turns toward the Services PMI data before shifting focus to BoE rate decision meeting and the accompanying reports due this Thursday
Technical: The upside rotation back through 1.5330 resets bullish expectations for a test of the 1.56 symmetry objective. Another failure at 1.53 targets stops sub 1.52 next.
Interbank Flows: Bids 1.53 stops below. Offers 1.55 stops above
Retail Sentiment: Neutral to bearish
Trading Take-away: Long from 1.5330 targeting 1.56
USD/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: Despite the absence of domestic data, JPY broke through 121 psychological barrier yesterday and is extending its uptrend rally. USD/JPY is now trading at around 121.20. Japan October monetary base new record high Y344.42 trln end-October, +32.7% y/y.
Technical: Bulls target a sustained break of 121.30 to target range highs at 121.85 next an intraday failure at 120.00 would suggest return to range.
Interbank Flows: Bids 119.50/30 stops below. Offers 121.50 stops above
Retail Sentiment: Neutral to bearish
Trading Take-away: Longs from 120.50 targeting upside range break
EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: Japan Post IPO very successful, shares surge on debut, with Japanese automakers breaking new car sales records in the US during October. The risk on sentiment in asset markets has weighed on the EUR with cross flows keeping the this pair under pressure
Technical: Bears now target equality corrective objective at 131.20, only a close above 133.50 eases immediate bearish pressure.
Interbank Flows: Bids 131.00 stops below. Offers 133.50 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines for now
AUD/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: AUD broke through 72 US cents after RBA kept interest rates on hold at 2% before slowly giving up some of its gains on profit-taking. In the meeting statement, RBA gave hints that they would cut rates if the economic outlook for inflation remained low. Australia’s retail sales and trade balance figures both appeared in line with expectations, which are expected to keep AUD supported in the near term.
Technical: Buyers emerge at retest of pivotal .7030/50 next, a close above .7230 eases bearish pressure a refocuses bulls to test offers towards .7350. While .7230 caps the upside expect rotation lower targeting year to date lows next
Interbank Flows: Bids .7150 stops below. Offers .7230 stops above
Retail Sentiment: Neutral
Trading Take-away: Shorts against .7230 targeting .7030
USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
Fundamental: CAD rose sharply across the board overnight, boosted by the advance of crude oil prices. The barrel started to rally after a report showed that OPEC members were attempting to establish a price floor while the commodity soared above $48 per barrel in the US .
Technical:1.3260 provides decent resistance as anticipated as this area contains upside potential for another leg of corrective downside. A close above 1.3280 eases bearish pressure and resets focus on the 2015 highs and stops above. While 1.3130 caps intraday upside reactions focus remains on the downside.
Interbank Flows: Bids 1.3030 stops below. Offers 1.32 stops above
Retail Sentiment: Bearish
Trading Take-away: If short from failed retest of 1.3260, move positions to risk free
