London Forex Report: Risk Sentiment Stalls

London Forex Report: Risk Sentiment Stalls

London Forex Report: Risk sentiment ebbed further with losses across major markets; the Dow and S&P 500 slipped 0.1% and 0.2% respectively, while oil resumed a softer tone as Brent and WTI fell 1.4% and 3.4% respectively. On the macro front, only the UK churned out improved data; balance of factory orders remained negative in April, but closed the deficit to -11 from -14, beating estimates of further decline to -17. Housing and manufacturing sectors in the US showed signs of further softness, while both leading and coincident indicators of Japan retreated, signaling weaker conditions going forward. USD snapped a three day gain and weakened as European majors recovered while US data dimmed. The USD Index trended steadily lower through European and US mornings before recovering from intraday lows to close at 94.84, down 0.29% for the day.

EUR/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Fundamental: EUR edged up to 1.1277 against USD yesterday even though the April German IFO Business Climate was worse than the market expectations. US home sales data declined 1.5% month over month, causing the USD pull back in the early US session. Traders are likely to on hold before the FED meeting due this Thursday. EUR/USD is expected to range ahead of the risk event.

Technical: Anticipated retest of bids at 1.1220 attracted buyers on the initial test while 1.13 acts as resistance bears target 1.1140 as the next downside objective . Only over 1.14 negates near term bearishness
Retail Sentiment: Bearish
Trading Take-away: Long

GBP/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Fundamental: GBP rocketed to a ten week high against USD on Monday, as bets on Brexit issue cooled down after US president Barack Obama stated his support for Britain to stay in the European Union. GBP/USD surged to an intraday high of 1.4519, its strongest since 15 February. Markets expect Sterling will remain choppy before the referendum in June.

Technical: While 1.43 supports bulls target a broader symmetry swing objective at 1.4670. Failure at 1.43 opens a near term base test at 1.4240 next.
Retail Sentiment: Bearish
Trading Take-away: Long

USD/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Fundamental: JPY drifted off multi-week lows against the USD as traders adjusted positions in anticipation of the FOMC and BoJ. The USD closed at 111.19 against JPY, off a three-week high of 111.90. Markets expect BoJ will cut its price forecasts and debate whether a strong JPY and weak global demand have hurt inflation expectations enough to deliver fresh stimulus at its 27 – 28 April policy meeting.

Technical: While 110 now acts as supports expect a test of 112 offers, breach of 110 support suggests false upside break and opens a move to retest year to date lows
Retail Sentiment: Neutral
Trading Take-away: Neutral

EUR/JPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish

Fundamental: Final print of leading indicator confirmed the Japanese economy is poised to slow further in the next three to six months, heightening speculation the BOJ may do more to spur growth in the ailing economy. The leading index fell more than initially estimated to 96.8 in February (Jan: 101.2) while the coincident index is equally downbeat, falling 1.6 points to 110.7 in February.

Technical: Bears now target weekly symmetry objective at 120.60, resistance is sited at 125.50. Only a close over 126.80 eases immediate downside pressure.
Retail Sentiment: Bullish
Trading Take-away: Sidelines

AUD/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish

Fundamental: AUD consolidated yesterday after rallied to multi-month highs last week. The reason behind the lift was upbeat sentiment about oil, which was poised for its biggest weekly increase so far this year. A rousing recovery in iron ore, Australia’s single biggest export earner, which hit 10-month highs amid a jump in steel prices in China also aided the Aussie.

Technical: While .7680 supports the advance bulls target .7880 as the next upside objective, failure at .7650 opens a move back to test .7470.
Retail Sentiment: Bearish
Trading Take-away: Sidelines

USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish

Fundamental: CAD edged lower against the USD as oil prices fell and traders’ attention turned to the rate decision by the US Federal Reserve. Better than expected retail sales figures helped the loonie to retain strong momentum of gains since last week. Traders tend to avoid holding positions ahead of the Fed decision, leaving the currency to fluctuate with oil prices.

Technical: While prior support at 1.2740/60 acts as resistance expect a test of bids at 1.2560 as the next downside objective
Retail Sentiment: Bullish
Trading Take-away: Short