London Forex Report: Risk sentiments got a lift from a rebound in oil prices in hopes of production cut that could help reduce supply glut. Major stocks and US treasuries also advanced amid expectations the Fed will maintain a very gradual pace of rate normalization in the wake of current market turmoil and below target inflation expectations. US dataflow has been mixed and soft. PMI services expanded at a slower pace while Richmond Fed manufacturing also registered slower growth, signaling softer momentum going into 1Q16. On a more positive note, consumer confidence and house prices improved more than expected, supported by improving job market outlook. USD fell as bids retreated going into FOMC meeting on top of rebound in risk appetite that stemmed demand amid soft US data. The USD Index slipped lower through US trade and overturned all gains from European session to close unchanged at 99.36.
EUR/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: EUR surged to an intraday high at 1.0873 at late Asian session due to the bad performance of Asian stock markets. However, the pair retreated afterward due to the recovery of oil prices and the rally of US stocks. The euro is expected to stay in the range before any fresh momentum provided by the FOMC’s meeting.
Technical: Trading mid to upper range, a sustained breach of 1.08 bids opens 1.07 range lows. A breach of 1.0990 trend resistance opens a broader 1.1240 symmetry corrective objective.
Interbank Flows: Bids 1.08 stops below. Offers 1.0950 Stops above.
Retail Sentiment: Bullish
Trading Take-away: Play the range, buy dips to 1.07 sell rallies to 1.10
GBP/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: US stocks rebounded over 1 percent overnight, driven by a surge in oil prices and strong corporate results. Supported by a recovery in risk sentiment, the cable rebounded strongly to touch intraday highs at 1.4366 after hovering at 1.42 levels. BoE Governor Carney reiterated his comments suggesting the conditions for rate hike were not yet in place and expressed concerns over Brexit. Attentions will turn to FOMC rate decision and UK Q4 GDP figures due tomorrow.
Technical: A breach of 1.42 opens a retest of last week's 7-year lows. Over 1.44 eases immediate downside pressure and sets up a broader correction.
Interbank Flows: Bids 1.42 below. Offers 1.44 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines
USD/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: USD/JPY dropped to an intraday low at 117.63 and then rebounded back above 118.00 yesterday. The USD gained 0.1 percent against the yen to 118.40 as the risk sentiment has been improved by the recovery of oil prices. The risk outlook has been picked up by the better-than-expected US Consumer Confidence.
Technical: While 117.90 caps downside attempts expect a retest of 119 offers. Only above 119.30 eases immediate downside pressure. A breach of 117.40 resets the bearish tone.
Interbank Flows: Bids 117.50 stops below. Offers 119 stops above
Retail Sentiment: Bearish
Trading Take-away: Stay long from 117.70 for 119.20 stops to entry
EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: Market choppiness continues, as EUR/JPY seesaws inside the broad 129-127 range, and it looks like we will need to wait for the FOMC and BOJ policy decisions in the next couple of days to establish a new theme. For choice, prefer the pair to find support in dips especially as we anticipate the FOMC to maintain a relatively moderate tone and players to be wary of a potential move from the BOJ on Friday.
Technical: Anticipated grind higher to test 129, over 129.50 eases immediate bearish tone bulls target 131 next while 127.50 supports
Interbank Flows: Bids 127.50 stops below. Offers 129.50 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines
AUD/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: The AUD rebounded sharply yesterday. The AUD/USD lifted in the morning session after figures showed 4th quarter domestic inflation rose at a slightly higher-than-expected pace. The Aussie touched high at 0.7040 after the CPI figures, putting some distance between the 7-year low of 0.6824 hit earlier in the month.
Technical: While .6930/50 caps intraday downside expect a test .7050. Only a breach of .7150 eases immediate downside pressure.
Interbank Flows: Bids .6900 stops below. Offers .7050 stops above
Retail Sentiment: Neutral
Trading Take-away: Sidelines
USD/CAD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Fundamental: CAD rallied against USD, recorded its 4th strong gain in 5 sessions supported by a recovery in oil prices. The loonie hit its weakest level since 2003 last week, but started to gain since the decision by the Bank of Canada to hold off on cutting rates and as oil prices pushed back above $30 a barrel.
Technical: While 1.4310/30 caps upside reactions expect a broader corrective phase to test 1.40 support. Only above 1.44 eases immediate downside pressure and opens a retest of 2016 highs.
Interbank Flows: Bids 1.4050 stops below. Offers 1.4350 stops above
Retail Sentiment: Bullish
Trading Take-away: Sell pullbacks to 1.43 for 1.40
