More mixed US data. CPI accelerated more than expected to 0.2% YOY in October as core CPI held firm at 1.9%, shoring up expectations inflation is edging closer to the Fed target. On the contrary, industrial production extended its decline for a 2nd straight month as faster gains in manufacturing output failed to offset contractions in mining and utilities production. An index of housing market also pulled back from a decade high but nevertheless did little to sway prospects of continuous recovery in the US housing market.
USD Index climbed to a seven-month high yesterday, as better-than-expected US CPI reinforced the expectations that Fed will hike rate in December. All eyes will now turn to the minutes of the FOMC’s October 17-18th meeting, though they may be somewhat discounted as stale, particularly given October’s standout nonfarm payrolls figure.
EUR/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: EUR has continued its downward trend, opened at 1.0687 and closed at 1.0641. German ZEW survey was announced as 10.4, beat the market expectations 6.0. Some market participants believe that the outlook for German economy is brightening due to currently high consumption in Germany.
Technical: While 1.07 caps intraday upside corrections, bears target a test of 1.0560 next ahead of an assault on year to date lows. Only a close above 1.08 eases immediate downside pressure.
Interbank Flows: Bids 1.06 stops below. Offers 1.08 Stops above.
Retail Sentiment: Bullish
Trading Take-away: Short 1.0830 targeting 1.0560
GBP/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: Despite UK headline inflation rate remained negative at -0.1% YoY in October, core inflation unexpectedly climbed 1.1%, offering some hope that inflation will recover through 2016 and, thus, supporting the sterling overnight. As markets again expect the monetary policy divergence between Fed and BoE to narrow, GBP edged higher and stood firm above 1.52 levels after touching intra-day high of 1.5238
Technical: While 1.5250 contains upside reactions, expect a test of of bids at 1.50 as the next bearish objective. Only a close above 1.53 eases immediate bearish bias
Interbank Flows: Bids 1.50 stops below. Offers 1.5250 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines for now
USD/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: USD rose 0.2% against JPY to 123.43. The discrepancy between the Fed and BoJ is a key factor to drive the yen weaker. Traders will have their eyes on the Kuroda Press Conference.
Technical: While 122.50/30 supports downside reactions, market structure remains bullish to test 2015 highs next
Interbank Flows: Bids 122 stops below. Offers 124 stops above
Retail Sentiment: Bearish
Trading Take-away: Long 122.50 stops to entry target 125.50
EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: JPY eased as asset markets continued to climb. All eyes will now turn to the BoJ’s policy decision on Thursday, where the central bank is expected to keep its policy stance unchanged despite Q3 GDP released this week that shows the economy is back in recession for the second time since PM Abe came to power.
Technical: Equality corrective objective at 131.20 achieved, only a close above 133.50 eases immediate bearish pressure, while 132.50 caps upside reactions expect retest of 130.50 lows
Interbank Flows: Bids 130.50 stops below. Offers 132.50 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines for now
AUD/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: Despite a stable inflation rate reading from the US bolstering market expectations of a possible Fed rate hike in December, the Australian dollar traded stronger overnight after the release of rather optimistic meeting minutes from the RBA. AUD touched intra-day high of 0.7140 before slowly retreating back to 0.7110 levels. Under the absence of domestic data, FOMC meeting minutes due tonight will be the main driver for the currency pair.
Technical: While .7170 caps corrective upside reactions, expect a retest and breach of .7010 as bearish momentum builds for a retest of year to date lows. A close above .7200 eases bearish pressure
Interbank Flows: Bids .7000 stops below. Offers .7170 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines for now
USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
Fundamental: CAD firmed against a broadly stronger USD on Tuesday, recovered from a six-week low hit on Monday. Crude oil rallied on Monday on heightened geopolitical tensions following the Paris attacks but traded lower on Tuesday as attentions returned to global oversupply. The US Federal Reserve scheduled to release the minutes of its October monetary policy meeting, which should be focused by investor.
Technical: Offers just above 1.3350 stall the upside ratchet, bulls have the ball while 1.3220 supports intraday downside. However, a close below 1.3220 would ease the near term bullish bias.
Interbank Flows: Bids 1.3250 stops below. Offers 1.3350 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines for now
