USD Index climbed to a seven-month high yesterday, as better-than-expected US CPI reinforced the expectations that Fed will hike rate in December. All eyes will now turn to the minutes of the FOMC’s October 17-18th meeting, though they may be somewhat discounted as stale, particularly given October’s stand-out non farm payrolls figure and the recent improvement in CPI. Comments from Fed chair Yellen recently that a December lift-off remains a “live possibility” have also encouraged USD bulls heading into the event, though USD is softer on the session due to position adjustment. Equities remain off yesterday’s highs also.
EUR/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: EUR retreated from session highs over the European morning as traders adjust positions ahead of the FOMC minutes release later today.
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 1.08 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: Despite UK headline inflation rate remaining negative at -0.1% YoY in October, core inflation unexpectedly climbed 1.1% offering some hope that inflation will recover through 2016 and, thus, supporting the sterling overnight. As markets again expect the monetary policy divergence between Fed and BoE to narrow, GBP edged higher over the European morning but retreated heading into the US cross-over on Dollar flows. BOE’s Broadbent cautioned markets not too focus entirely on the BOE’s inflation forecasts and instead the broader factors driving growth, suggesting that the very flat UK yield curves are vulnerable to sharp sudden moves.
Technical: While 1.5250 contains upside reactions expect a test of of bids at 1.50 as the next bearish objective. Only a close above 1.53 eases immediate bearish bias
Interbank Flows: Bids 1.50 stops below. Offers 1.5250 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines for now
USD/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: USD rose 0.2% against JPY to 123.43. The discrepancy between the Fed and BoJ is a key factor to drive the yen weaker. Traders will have their eyes on the Kuroda Press Conference early tomorrow morning with the recent weak GDP print likely to be discussed.
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: Over the European morning, JPY eased as asset markets continued to climb. All eyes will now turn to the BoJ’s policy decision on Thursday, where the central bank is expected to keep its policy stance unchanged despite Q3 GDP released this week that shows the economy is back in recession for the second time since PM Abe came to power.
Technical: Equality corrective objective at 131.20 achieved, only a close above 133.50 eases immediate bearish pressure, while 132.50 caps upside reactions expect retest of 130.50 lows
Interbank Flows: Bids 130.50 stops below. Offers 132.50 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/USD remains resilient heading into the US cross-over with a slightly softer US Dollar and slight rebound in copper supporting price. Key focus will be FOMC minutes release.
Technical: While .7170 caps corrective upside reactions expect a retest and breach of .7010 as bearish momentum builds for a retest of year to date lows. A close above .7200 eases bearish pressure
Interbank Flows: Bids .7000 stops below. Offers .7170 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: Oil was firmer initially over the European morning though has since pulled back from session highs, stemming weakness in USD/CAD so far today.
Technical: Offers just above 1.3350 stall the upside ratchet, bulls have the ball while 1.3220 supports intraday downside. However a close below 1.3220 would ease the near term bullish bias.
Interbank Flows: Bids 1.3250 stops below. Offers 1.3350 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines for now
