Rising Middle-Eastern tension coupled with mixed dataflow clouded market sentiments. Upward revision to the second estimate of US 3Q GDP growth to 2.1% QOQ coupled with a pick-up in house prices in 20 major cities in the US continued to cement the ground for a US rate lift-off in December. The upward revision was mainly due to quicker business spending while consumer spending grew slower at 3.0% vs the initially estimated 3.2%. Moving forward, softer consumer confidence, as evident in yesterday’s slide to a 90.4 reading in November, signals consumer spending could remain under pressure in 4Q, but markets are expecting some boost from year end seasonal spending to support overall growth. USD softer as traders take profits on long positions before the Thanksgiving holiday. USD Index slid to 99.61 from an eight-month peak of 100.00 set on Monday
EUR/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: EUR climbed as far as 1.0676 (as of writing) against dollar before losing steam, and it was recovered to 1.0646 to start its Wednesday session. Euro was also supported by better-than-expected German IFO Business climate.
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 1.0750 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 a weaker USD across the board, the cable fell 0.3% overnight after BoE’s chief economist, Any Haldane, said there were downside risks to inflation and growth, while Governor Mark Carney reiterated a low interest rate environment is likely to persist. With BoE officials turning dovish and intensifying Turkey-Russia geopolitical risks, 10-year gilt yields fell to their lowest level this month, further dragging on the performance of GBP/USD.
Technical: While 1.5160 contains upside reactions, expect a test of of bids at 1.50 as the next bearish objective. Only a close above 1.5250 eases immediate bearish bias
Interbank Flows: Bids 1.5050 stops below. Offers 1.5250 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines for now
USD/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: As USD weakened, USD/JPY dropped to one and a half week low of 122.29 and since edged back to 122.57 in the Asian session. The October BoJ minutes provided no fresh leads as widely expected. However, the minutes warned that Japan economy is likely to grow at a slower pace in financial year 2017.
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: Pair is holding steady this morning after slipping lower yesterday, weighed once again by negative EUR cross flows, exacerbated by the flight to safety flows following rising tensions between Turkey and Russia.
Technical: While 131.50 caps upside reactions, expect a sustained break below 130 to confirm a retest of 2015 lows. Only a close above 132.50 eases immediate bearish pressure.
Interbank Flows: Bids 130.50 stops below. Offers 132.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines for now
AUD/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: AUD traded stronger overnight on comments from RBA Governor Stevens, signaling a halt in interest rate cuts during December. In his speech, he suggested that the market should “chill out” and reassess the data after Christmas. Despite that, iron ore prices dropped to their lowest level in six years whilst upbeat US Q3 GDP saw a healthy growth of the largest economy, the Aussie showed great resistance and is now trading at 72.65 level.
Technical: While .7170/50 remains the bid zone, expect grind higher to test .7350 area next; only a close below .7150 concerns near term bullish bias.
Interbank Flows: Bids .7150 stops below. Offers .7300 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines for now
USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
Fundamental: CAD extended the pullback from eight-week highs hit in the previous day and dropped below the 1.3300 handle overnight. The loonie received a boost from the rally of oil prices amid heightened geopolitical fears arising from Russia and Turkey.
Technical: Bulls have the ball, while 1.33/1.3280 supports intraday downside. A close below 1.3220 would ease the near term bullish bias and suggest a broader correction is underway.
Interbank Flows: Bids 1.33 stops below. Offers 1.34 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines for now
