London Forex Report: All eyes are on Yellen's testimony today for further cues on monetary policy direction. Data released yesterday was mostly disappointing, affirming downside bias on global growth this year. US wholesale inventories plunged for 3 straight months as business outlook dimmed.
In tandem, a report from NFIB showed that small business sentiment tumbled to a two year low in Jan. Crude oil tumbled 7.8% to USD 30.32 per barrel on Tuesday, the lowest in two weeks amid supply glut concerns. S&P 500 index and Dow Jones also closed lower, tracking lower crude oil prices.
EUR/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: German industrial production and exports were weaker than expected yesterday, increasing expectations for more ECB support in March. However, EUR continued to strengthen as EUR/USD shorts were unwound, but bulls are cognizant of potential threats of jawboning as we test the upper end of the broader trading range.
Technical: While 1.1250/30 remains intact as support expect rotation through last weeks highs en route to test 1.14 symmetry objective. Below 1.1050 eases immediate upside pressure.
Interbank Flows: Bids 1.12 stops below. Offers 1.1350 stops above
Retail Sentiment: Bearish
Trading Take-away: Long
GBP/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: The UK trade deficit was smaller than expected, but still significant. BoE Deputy Governor Cunliffe warned that the BoE could increase rates if credit growth continued to accelerate. However, the GBP underperformed. Negotiations between UK and EU (re UK membership in EU) are still ongoing and EU Summit on 18-19 Feb is the earliest date a deal might be reached, and 23 June 2016 may well then be the earliest date the EU referendum could take place.
Technical: Testing base support of last weeks advance, failure at 1.4350 suggests false upside break and resets bearish trend to attack and break 1.40 as the primary downside objective. Over 1.45 re- establishes bullish bias and targets retest of last weeks highs.
Interbank Flows: Bids 1.4350 stops below. Offers 1.45 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: USD/JPY held onto its Asian move overnight. USD/JPY continues its slide below the 115-levels this morning though this was still below the 114.21-levels (low not seen since Nov 2014). With little sign of ‘official support’, markets are likely to push this further if equities continue to decline.
Technical: USD/JPY trading at major neckline support again overnight. While 116.70 caps intraday upside reactions expects a grind lower to test 113.90 as the next downside objective.
Interbank Flows: Bids 114 offers below. Offers 116 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
EUR/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: Still reflecting weak foreign demand for Japan’s machine tools, order book fell 17.2% YoY in Jan albeit at a softer pace than the 25.7% decline in Dec. Even the dip in the 10Y JGB below 0% has failed to deter inflows from both overseas and domestic investors.
Technical: While 130.30 continues to cap upside reactions expect tests of 127.70 bids next, failure through this level opens 126 as the next downside objective. Only a close over 130 eases immediate downside pressure.
Interbank Flows: Bids 128 stops below. Offers 130.50 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: Consumer confidence in Australia rose to a 3-month high of 101.3 in Feb (Jan: 97.3). Assessment on family finances and current conditions improved the most. Housing data was equally upbeat with new home sales surging 6.0% MoM in Dec (Nov: -2.6%), snapping three straight monthly declines.
Technical: AUD tests and hold bids ahead of.6950 a failure of support here opens a retest of year to date lows. Only a close over .7150 eases immediate downside pressure
Interbank Flows: Bids .6950 stops below. Offers .7150 stops above.
Retail Sentiment: Bullish
Trading Take-away: Neutral
USD/CAD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: No tier one data for this week. USD/CAD will likely take its lead from the USD side of the equation today/tomorrow with Yellen’s testimony in front of the US congress. CAD traders will likely also have one eye on the commodity complex, as crude continues to probe bids at the year-to-date lows.
Technical: Anticipated 1.40 retest from below under way, while this area contains the upside reaction potential for bearish bias to resume, however while 1.38 supports there remains potential fro 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: Bearish
Trading Take-away: Neutral
