London Forex Report: Optimism surrounding the Fed continuous rate normalization path stemming from better than expected US GDP and consumer prints lifted market sentiments. Second estimate showed the US economy moderated less than initially estimated, by 1.0% QOQ in 4Q15, due to an upward revision to inventories. Personal spending and income data beat estimates to increase at a quicker pace while the quicker gain in core PCE spurred bets inflation is crawling closer to the Fed’s target, hence allowing the central bank to continue raising rates this year. This marked a stark contrast to increased pessimism in the eurozone where confidence levels all dwindled across the consumer and business sectors as concerns over Brexit and migration crisis escalate. USD strengthened amid better than expected US GDP and consumer data. This led the USD Index higher to 98.15 at close, its highest in two and a half weeks.
EUR/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: The USD rose broadly after mostly upbeat US economic data renewed some prospects that the Federal Reserve could raise interest rates this year. The chairman of euro zone finance ministers Jeroen Dijsselbloem said that the monetary policy has not yet reached its limits, but any further action by central banks to boost the economy would have to be carefully designed to be effective.
Technical: While prior support at 1.10 acts as intra day resistance bears target prior range support at 1.08. Only a close over 1.1080 eases immediate downside pressure
Interbank Flows: Bids 1.09 stops below. Offers 1.1050 stops above.
Retail Sentiment: Bullish
Trading Take-away: Short
GBP/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: GBP fell back towards printing fresh seven year lows against the USD driven by persistent worries about a possible British exit from the European Union. The currency registered its biggest weekly loss since 2009. The drop was so dramatic that it provoked a rare comment on economic matters from Foreign Secretary Philip Hammond, a pro-European, who said it offered a “foretaste” of the impact leaving the EU.
Technical: While 1.4040/60 acts as resistance expect a continued grind lower for a test of the next major monthly downside objective at 1.37. Only a close over 1.4250 eases immediate downside pressure.
Interbank Flows: Bids 1.3850 stops below. Offers 1.4040 stops above.
Retail Sentiment: Bullish
Trading Take-away: Short
USD/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: The USD hit day high against the JPY after Japan said G20 could mention need to avoid FX devaluation. The USD climbed to 113.99, breaking the Japanese currency’s streak of gains but the JPY was still on track for its best month in more than seven years.
Technical: Friday’s close over 113.30 sets up the potential for a broader corrective phase against the daily double bottom pattern from last week. Bulls will be looking for 112.20/40 to support on the pullback for a further leg of corrective gains, to retest the broken neckline support at 115/116
Interbank Flows: Bids 112.50 offers below. Offers 114 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines
EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: The JPY was front and center in G20 discussions, with attention given to the market response to negative rates, and potential further policy action. Industrial production is expected to rebound, but data has been weak.
Technical: While 124.80/125 offers intraday resistance expect a continued grind lower to print fresh lows and test bids at the psychological 120 en route to a weekly downside objective at 118/117, only a close over 126.60 eases bearish bias.
Interbank Flows: Bids 122 stops below. Offers 125 stops above.
Retail Sentiment: Bullish
Trading Take-away: Short
AUD/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: The Australian dollar held near this year’s highest levels following upbeat figures and improving risk sentiment but gave up all its gain after upbeat US economic figures. Traders next focus will be the monthly policy meeting of the Reserve Bank of Australia (RBA) on 1 March.
Technical: Expected retest of offers above .7240 attracts near term profit taking. While .7150 supports intraday expect a test of range resistance at .7300. Only a failure at.7050 pivotal support threatens bullish bias.
Interbank Flows: Bids .7150 stops below. Offers .7300 stops above.
Retail Sentiment: Bullish
Trading Take-away: Sidelines
USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: CAD touched a two and a half month high against the USD as an uptrend in crude oil prices helped lock in the rise for the week. Crude slipped slightly last Friday as investors took profits, while upbeat economic figures out of the United States also provided a boost to Canada, which does much of its trade with its southern neighbour.
Technical: While USD/CAD trades sub 1.3660 downside pressure remains the driver with bears focusing on a AB=CD ultimate downside objective at 1.2966, the next support level to watch is is 1.3450 the breakout point of the upside acceleration.
Interbank Flows: Bids 1.3450 stops below. Offers 1.3650 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
