Yesterday’s data flow was a mixed bag, with focus on China in the absence of first tier data from the US. China CPI softened more than expected to 1.3% YOY while PPI sustained a 5.9% YOY decline in October. Core CPI ex-food and energy also eased off to 1.5% YOY, reaffirming downward price pressure, not only in China but globally. In line with this, import prices extended its fall in the US, dragged by lower prices of petroleum and other products. US dollar index remained supported near seven month highs at 99.29 spurred by heightened expectations for a December Fed rate lift off.
EUR/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: EUR weakened 0.26% to 1.0724 against a strong USD after bouncing back from sub-1.07 level. EUR remained pressured by prospects of further policy easing, the single currency staged a later reversal in US trading on profit taking.
Technical: While 1.0830/50 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 1.09 eases immediate downside pressure.
Interbank Flows: Bids 1.07 stops below. Offers 1.0830 Stops above.
Retail Sentiment: Bullish
Trading Take-away: Sell against 1.0830/50 resistance targeting 1.0560
GBP/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: GBP traded near six-month lows as traders turn their attentions to the upcoming UK labour market figures. The average weekly earnings and unemployment figures would be the main focus for sterling as the BOE would consider raising rates for the first time since the financial crisis if the figures look good.
Technical: While 1.52 contains upside reactions expect a test of of bids at 1.50 as the next bearish objective. Only a close above 1.52 eases immediate bearish bias
Interbank Flows: Bids 1.50 stops below. Offers 1.52 stops above
Retail Sentiment: Bullish
Trading Take-away: Sold 1.5150 targeting a 1.50 test, stops above 1.52
USD/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: USD/JPY is in a phase of consolidation above 123 handle while the greenback remains firm after the Nonfarm Payrolls gave the green-light for a rate hike in December. The US-Japan 2-Year yield spread remains elevated close to its recent multi-year high on the basis of Fed-BoJ’s policy divergence.
Technical: Upside objective of the primary equality objective at 123.50 essentially achieved, while 122.50 supports downside reactions, market structure remains bullish to test 2015 highs next
Interbank Flows: Bids 122.50 stops below. Offers 124 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines for now
EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: Lower ProShares Ultra 7-10 Year Treasury (N:UST) yields after a solid 10 year auction saw a modest move to the downside but with equities erasing earlier losses, support was quickly found. Pair remains weighed by negative EUR cross flows. Draghi due on the wires later and could see an uptick in volatility.
Technical: Bears now target equality corrective objective at 131.20, only a close above 133.50 eases immediate bearish pressure.
Interbank Flows: Bids 131.00 stops below. Offers 133.50 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: AUD was off one-month lows but remained weak to expectations that the Federal Reserve will raise US interest rates soon. Domestic figures from Australia showed business conditions remained strong in October even as firms became a little less confident on the outlook. The marked slowdown in China, a key export market for Australia, also weighed on the AUD/USD.
Technical: While .7100 caps corrective upside reactions expect a retest and breach of Friday’s lows as bearish momentum builds for a retest of year to date lows.
Interbank Flows: Bids .7000 stops below. Offers .7100 stops above
Retail Sentiment: Bullish
Trading Take-away: Squared shorts into .7030 target, sidelines for now
USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
Fundamental: CAD was little changed against the USD, caught between a modest pick-up in oil prices and a stronger USD. US crude settled up 34 cents at $44.21 a barrel after a report from the International Energy Agency said a sharp drop in oil investment.
Technical: Offers just above 1.33 stall the upside ratchet, bulls have the ball while 1.3260 supports intraday downside. However a close below 1.3260 today would suggest a false upside break and a bull trap sustained weakness below 1.3220 confirms.
Interbank Flows: Bids 1.3250 stops below. Offers 1.3350 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines for now
