New York Forex Report: Following the big moves we saw yesterday across the GBP and JPY pairs, driven by an aggressive sell-off in oil and equities, markets have been calmer across early European trading so far today. Concerns for the European financial sector, alongside a renewed drop in oil, led global equities lower yesterday and whilst for now the selling has been stemmed, concerns hang heavy over the state of the global economy leading to a surge in safe-haven demand for the Japanese Yen. A quiet data calendar for the US session today leaves no clear directional drivers though USD remains weak today.
EUR/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: EUR grinded higher over the European morning as European equities and the US dollar remain weak. German Trade Balance and Industrial Production data both printed below expectations.
Technical: While 1.1050/30 remains intact as support expect rotation through last weeks highs en route to test 1.14 symmetry objective. Below 1.0950 suggests false upside break and opens retest of range lows.
Interbank Flows: Bids 1.11 stops below. Offers 1.1250 stops above
Retail Sentiment: Bearish
Trading Take-away: Long
GBP/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Fundamental: A choppy session for GBP which strengthened on improved Trade Balance data which showed a narrowing of the deficit, though the move was tempered as commodity and equity markets came under pressure again heading into the NY session.
Technical: Testing base support of last weeks advance failure at 1.4350 suggests false upside break and resets bearish trend to attack and break 1.40 as the primary downside objective. Over 1.45 re- establishes bullish bias and targets retest of last weeks highs
Interbank Flows: Bids 1.4350 stops below. Offers 1.45 stops above.
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: JPY has broken important technical levels, and, bar a BoJ ‘intervention’, markets will be wary of further downside, which keeps pressure on the USD/JPY bounces are very limited, as broader market trades poorly, and sentiment hit as attention refocuses on signs of stress across certain products. The inability to hold key support despite IOER move, Kuroda comments on further easing stance, was a sign in itself and clearly reflects instability and unforeseen concerns
Technical: USD/JPY breaches major neckline support overnight. While 116.70 caps intraday upside reactions expects a grind lower to test 113.90 as the next downside objective.
Interbank Flows: Bids 114 offers below. Offers 116 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: Choppy flows in EUR/JPY as JPY pulls back slightly from yesterday's highs on talk that BOJ might be forced to intervene if strength continues.
Technical: While 130 continues to cap upside reactions expect tests of 127.70 bids next, failure through this level opens 126 as the next downside objective. Only a close over 130 eases immediate downside pressure.
Interbank Flows: Bids 128 stops below. Offers 130 stops above.
Retail Sentiment: Bullish
Trading Take-away: Short
AUD/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: AUD comes under renewed pressure today as commodity and equity markets see fresh selling with Copper down sharply on the session. NAB business survey today in Australia demonstrates softening in commercial conditions as renewed concerns of global growth / China and financial market volatility begin to be borne out in the data.
Technical: AUD is testing pivotal .7000 support a failure here resets the bearish bias and targets a test of .6950 en route to a retest of year to date lows. Only a close over .7150 eases immediate downside pressure
Interbank Flows: Bids .70 stops below. Offers .7150 stops above.
Retail Sentiment: Bullish
Trading Take-away: Neutral
USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
Fundamental: Fresh oil weakness today has the Canadian dollar under pressure again with USD/CAD grinding higher despite USD weakness also.
Technical: While 1.3630/50 survives as support potential for broader correction to the recent decline to 1.40 offers from below. A failure at 1.3630 opens1.3430 test on the downside.
Interbank Flows: Bids 1.3630 stops below. Offers 1.39 stops above.
Retail Sentiment: Neutral
Trading Take-away: Neutral
