KEY DATA RELEASES TODAY (GMT) :
0930 GBP Retail Sales m/m 0.4% v -0.3%
1100 GBP CBI Realized Sales 16 1
1230 USD Unemployment Claims 291K v 291K
1300 USD FOMC Member Lockhart Speaks
1730 GBP BOE Gov Carney Speaks
OVERNIGHT:
Risk sentiment has taken a hit the past 24 hours or so, as geopolitical risks in the Middle East have intensified, sending oil prices as high as 5pct this morning. The reaction in USD/JPY has been muted, albeit predominantly and understandably seeing pressure to the left. Fiscal year end related flows have also played a factor in the pair’s heavy tone. Nonetheless, as options desks have pointed out, gamma is quite offered in the near term, a testament of lack of fast money interest in the pair for now. For now the trade in the bullish Japan story is in Nikkei 225, and not in USD/JPY, as evidenced by the breakdown in correlation of the two as well as political hesitation to see the JPY weaker from here ahead of the TPP negotiations and regional elections next month.
Institutional flow reports are mixed for the EUR/USD but predominantly highlight corporate and real money selling in rallies. Nonetheless, the pair trades relatively bid, gradually being paid up towards the psychological pivot of 1.10 again. In this current riskoff environment, funding currencies such as the EUR has found some demand (most especially against the likes of AUD and EM), helping keep EUR supported as well. The market maintains a medium term bearish outlook in the pair, given the volatile nature of short term price action there is the potenital for a further squeeze as oder books continue to be cleansed.
The under performance of the GBP continues, market retains a bearish view in cable. The inflation data has only reinforced the recent doveish tone from various BOE members, and the pound has outperformed in the crosses, most especially against the EUR. 0.7400 is the resistance level to watch in the cross, while the support level to watch in GBP/USD is 1.4850/60 initially. Today we get UK retail sales, and the path of least resistance for the GBP is lower (i.e. a weaker than expected print).
PRICE ACTION OVERVIEW:
EUR: While 1.0760/40 supports target 1.1190/1.1210 equality corrective target
GBP: While 1.5030/50 contains upside target 1.4630
JPY: While 118 contains downside target 124.00
CAD: While 123.50/124 contains downside target 130
AUD: While .7940/6- contains upside target .72
KEY TRADES:
| FX Pair | Short Term | Position/Date | Entry Level | Target | Stop | Comments |
| EUR/USD | Neutral | Await new signal | ||||
| GBP/USD | Bearish | Await new signal | ||||
| USD/JPY | Neutral | Await new signal | ||||
| USD/CAD | Neutral | Await new signal | ||||
| AUD/USD | Neutral | Await new signal |
ANALYSIS:
EUR/USD Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bearish
- Eroding trendline resistance at 1.10 while this area hold potential for further consolidation and retest 1.0760/40 but while this supports there is potential for a broader corrective phase which has an equality target at 1.1180/1.12. Only below 1.06 suggests trend resumption
- Order Flow indicators; OBV consolidates off lows, Linear Regression pulling back to test midpoint form above, Psychology bullish
- Monitoring price action and Order Flow below 1.12 to reset short positions targeting 1.03
GBP/USD: Short Term (1-3 Days): Bearish - Medium Term (1-3 Weeks) Bearish
- While 1.5030/50 caps upside expect a break of 1.47 to confirm trend resumption, above 1.51 suggests a test of 1.52 in broader corrective pattern
- Order Flow indicators; OBV ticking up from lows, Linear Regression stalling above midpoint, Psychology bullish
- Monitoring price and Order Flow against 1.5030/50 targeting 1.46/45
USD/JPY: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bullish
- Below 118 concern bullish bias and would suggest a retest of 117
- Order Flow indicators; OBV ticking down, Linear Regression and Psychology bearish
- Monitoring price action and Order Flow indicators for longs targeting 124
USD/CAD: Short Term (1-3 Days): Bullish - Medium Term (1-3 Weeks) Bullish
- While 1.2350/1.24 supports a close above 1.28 will target key 1.30 only below 1.2350 concerns bullish bias
- Daily Order Flow indicators; OBV retreats from highs, Linear Regression bearish but ticking up and Psychology bearish
- Monitoring price action and Order Flow indicators to set longs targeting 1.30
AUD/USD: Short Term (1-3 Days): Neutral - Medium Term (1-3 Weeks) Bearish
- Rejected at .79 a break below .7760 suggests false break from bearish channel and early return to trend. A close above yesterdays highs targets .8050 in broader correction.
- Order Flow indicators; OBV consolidating at lows, Linear Regression bearish break, Psychology rotating at midpoint with bullish bias
- Monitoring price action and Order Flow indicators to set shorts targeting .72
