Market sentiment retreated yesterday. Data flow from the US disappointed by and large on both the housing and manufacturing front. Existing home sales slipped more than expected by 3.4% MOM in October while PMI manufacturing also slipped more than expected to 52.6 in November, suggesting while growth in the US economy is still forthcoming, it is not solid enough. Coincidentally, this ties in with Fed Tarullo’s comment that the US economy is “chugging along” and that overall growth picture remains mixed. The USD index slipped before US afternoon on the back of rebound in European majors and signs of weakness in US manufacturing, but advanced thereafter on firmer support from safe haven demand to close 0.24% higher at 99.80.
EUR/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: EUR/USD was down 0.1 percent to 1.0631 after touching a seven month low of 1.0591. Due to the divergence on policies between ECB and Fed, markets expect euro will continue to grind lower until it reaches parity with the USD.
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: GBP traded soft overnight as markets await BoE Governor Carney’s speech today and Friday’s UK Q3 GDP figures. Traders will be looking for cues about the UK monetary policy outlook as Governor Carney has left markets less confident about a BoE rate hike in the near future. US Q3 GDP is due today. If data appears upbeat, the sterling might possibly test its lowest point in two weeks. Markets will also focus on today’s UK inflationary report hearing for BoE’s views in regards to record levels of low inflation.
Technical: While 1.5230 contains upside reactions, expect a test of of bids at 1.50 as the next bearish objective. Only a close above 1.54 eases immediate bearish bias
Interbank Flows: Bids 1.51 stops below. Offers 1.53 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: Yesterday was a quiet day for JPY with domestic markets on holiday. USD/JPY went up to an intraday high of 123.25 and slipped back to 122.93 to start its Tuesday session. Traders await US Third Quarter GDP and US Personal Consumption Expenditure.
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: Local markets were closed for a public holiday yesterday and re-opened today. The pair continues to be weighed by the negative cross flows from the EUR.
Technical: While 131.50 caps upside reactions, expect retest of 130.50 lows and sustained break below 130 to confirm a retest of 2015 lows
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): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: Commodities plunged, in which copper and nickel prices dropped to their multi-year lows, on concerns over global demand and a stronger greenback. AUD/USD struggled to hold above 72 US cents, and is now trading around 71.9 levels.
Technical: While .7170/50 supports downside reactions, expect grind higher to retest Friday’s highs, a failure at .7150 suggests a retest of current base towards .7070.
Interbank Flows: Bids .7100 stops below. Offers .7250 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 rebounded and trimmed losses overnight with the recovery of oil prices amid Saudi Arabia saying that they will do “Whatever It Takes” to stabilise the oil market. USD/CAD reached its highest level in two months at 1.3435 during European session, as the USD strengthened broadly, but stalled ahead of its 11-year peak score at 1.3457.
Technical: Offers just above 1.3350 eroded year to date highs are the primary upside objective now; bulls have the ball while 1.33/1.3280 supports intraday downside. A close below 1.3220 would ease the near term bullish bias.
Interbank Flows: Bids 1.33 stops below. Offers 1.34 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines for now
