Morning Report: Yellen Fails To Break February Ranges

KEY DATA RELEASES TODAY (GMT) :

0930 GBP Prelim Business Investment q/q exp 2.0% v-0.7%
0930 GBP Second Estimate GDP q/q exp 0.5% v 0.5%
1330 USD Core CPI m/m exp 0.1% v 0.0%
1330 USD CPI m/m exp -0.6% v -0.4%
1330 USD Unemployment Claims exp 288K v 283K
1330 USD Core Durable Goods Orders m/m exp 0.6% v -0.8%

OVERNIGHT:

Tight G10 ranges pervade, but broad USD weakness which sees the DXY slipping down towards the weekly lows at 94.13. The current combination of a soft USD, low vol, and the Fed on hold (10yr unable to break back above 2%), should however be supportive of the wider risk environment with the Nikkei printing a fifteen year high overnight.

Once again the Nikkei strength this does little to inspire the USD/JPY as the tight range trade persists. Yellen’s more heated exchange with House Republicans on Wednesday offered little int eh way of guidance as to the rates as the debate was more orientated towards FED oversight, again this did little to inspire USD bulls and the USD/JPY remains entrenched in the recent 118.50/119.50 battleground.

With the lack of any meaningful guidance from FED Chair Yellen during yesterdays testimony the EUR/USD has continued its modest drift higher although constrained by the broader range still of 1.1250-1.1450 the markets focus will likely start to shift towards next weeks Non Farm payrolls data as a potential catalyst to break the deadlock.

GBPUSD continues to be the out performer printing a high overnight of 1..5554 GBP continues to garner support as the BOE are increasingly eyed as heir apparent to the FOMC’s normalisation throne, as BOE members continue to strike a more hawkish tone. THis mornings GDP data will be monitored as potential further support for the hawkish rhetoric.

Overnight saw Australian Capex (4Q) Down -2.2% qoq (and -3.6% over the year), in between consensus (-1.6%) and MS (-2.7%). The 5th Estimate for 2014-15 came in at AUD153bn, a little less than the AUD155bn expected. However, there was a material downside surprise on the 1st estimate for 2015-16, which came in at AUD110bn – implying double-digit declines overall. 1st estimate flagged a -9% cut in non-mining capex in FY16, which challenges the recovery view and supports the markets call that the RBA will need to cut rates to 1.75% through the year. In AUD/USD, there was, surprisingly, only a moderate sell off down to a low 0.7836. Immediate support comes in at yesterday’s low, 0.7825, with topside resistance still around the 0.79 figure mark

Looking ahead this morning headline will be UK GDP, while important data releases from the US today come in the form of CPI and durable goods.

PRICE ACTION OVERVIEW:

EUR: While 1.1270 supports focus on 1.17 upside corrective equality target, below 1.12 targets 1.10
GBP: Testing 1.55/5550 corrective target area, upside break targets 1.58 next
JPY: While 117.50 supports expect break of 120.50
CAD: While 1.2350 trendline supports 1.28 next upside objective ahead of key 1.30
AUD: 0.79 remains the key hurdle to further corrective upside objective of .8050

KEY TRADES:

ANALYSIS:

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

• While 1.1270 holds as support the EUR/USD is on track to test a daily corrective equality target at 1.17, caution towards 1.1450 the recent range highs which may continue to contain in the near term, below 1.12 suggest early resumption of downtrend
• Order Flow indicators; OBV continues to drift up from lows, Linear Regression and Psychology bullish
• Monitor price action at 1.16/17 or a break of 1.12 to reset short positions to target 1.10

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

• Test of 1.5550 offers being tested while this area caps on a closing basis there is potential for downtrend to resume, above 1.56 targets 1.58 next
• Order Flow indicators; OBV continues to drift up from lows, Linear Regression and Psychology bullish.
• Risk free longs in play, monitoring price action and Order Flow indicators in the 1.5550 area to reverse short

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

• 118 acts as base for now for resumption of uptrend 120.50 next upside objective, a break of 117.50 would raise concern for the bullish bias
• Order Flow indicators; OBV continues consolidation below recent highs, Linear Regression retesting midpoint from above, Psychology bullish but stalling
• Monitoring price action and Order Flow indicators to set longs to target 2014 highs

USD/CAD: Short Term (1-3 Days): Neutral - Medium Term (1-3 Weeks) Bullish

• Bullish consolidation continues while 1.2350 supports expect retest and break of 1.28 on route to key 1.30 resistance. Below 1.2350 targets trendline test towards 1.2150/2200
• Daily Order Flow indicators; OBV just off highs, Linear Regression and Psychology pulling back to test midpoints from above
• Monitoring price action and Order Flow indicators to reset longs to target 1.30

AUD/USD: Short Term (1-3 Days): Neutral - Medium Term (1-3 Weeks) Bearish

• .79 resistance being tested if regained on a closing basis .8050 the next corrective target, caution around trendline resistance at .80 which has capped correction on last two tests
• Order Flow indicators; OBV continues ticking up from recent lows, Linear Regression and Psychology bullish
• Longs in play will look to reverse at corrective targets to rejoin broader trend, please see key trades for details