Waiting On Abe…

KEY DATA RELEASES TODAY:

0930GMT  GBP PPI Input m/m exp -1.4% v -0.6%
0930GMT  GBP RPI y/y exp 2.3% v 2.3%
0930GMT  GBP CPI y/y exp 1.2% v 1.2%
1000GMT  EUR ZEW Economic Sentiment exp 4.3 v 4.1
1000GMT  EUR German ZEW Economic Sentiment exp 0.9 v -3.6
1330GMT  USD PPI m/m exp -0.1% v -0.1%
1330GMT  USD Core PPI m/m exp 0.2% v 0.0%

OVERNIGHT:

Quiet Asian session the market perhaps having one eye on risk events later in the week. The majors are all marginally bid against the USD, albeit within recent ranges. USD/JPY still seems to be the leading indicator for the broader G10 moves, so with Abe due to give a press conference later this morning this should garner most participants’immediate attention. The market is expecting a final decision on the second round sales tax and a decision on the snap election. Given the weak GDP print, is it unlikely that anyone would question why the sales tax had to be pushed back, and Abe will likely use this press conference to deliver a very strong message that he is going to get Japan on track-with non-conditional sales tax hike in 2017.

Elsewhere, we had the minutes from the November RBA meeting, which failed to yield anything particularly interesting. On the FX front the RBA continue to claim that the value of AUD remains elevated, while they also expressed concerns that the BOJ stimulus might spur demand for AUD, leaving it at an even higher level than economic fundamentals would imply. On the economy side, they continue to hold the view that growth is expected to remain below trend until late 2016, so not expecting any rate hikes in the near-future. AUD/USD remains range bound, awaiting a broader market catalyst to incite a significant break to the downside. The major support level remains at the 2014 low of 0.8540, which also coincides with the 50% Fibonacci level of the 2008-2011 range.

Looking ahead, we have CPI data from the UK, market expecting inflation to remain at 1.2%Y in October having declined three-tenths in September. Market also expects unchanged RPI inflation at 2.3%Y

OVERNIGHT PRICE ACTION:

• EUR: Rejected back into range from first trendline test
• GBP: Trading at descending trendline support
• JPY: Testing ascending trendline resistance
• CAD: Pulling back to test trendline support
• AUD: Rejection on first test of trendline resistance

KEY TRADES:

ANALYSIS:

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

• Price is ticking up to test initial trendline resistance, range contracting
• Order Flow indicators; OBV bearish but ticking up form low levels, Linear Regression and Psychology bullish
• Price rejected on initial trendline test, will set counter trend longs on trendline break

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

• Sharp rejection from range lows testing lower end of descending channel
• Order Flow indicators; OBV bearish, Linear Regression and Psychology reject mid points suggesting trend continuation
• Shorts in play, see key Trades

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

• Price continues to be pressured to the upside testing ascending trendline resistance 
• Order Flow indicators; OBV bullish, Linear Regression and Psychology retesting mid points 
• Monitoring trendline resistance break to set new longs

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

• Price continues to contract in high range
• Daily Order Flow indicators; OBV bullish, Linear Regression and Psychology break midpoints to the downside
• Monitoring support to set new longs

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

• Rejected on initial trendline test
• Order Flow indicators; OBV tick up from bearish levels, Linear Regression and Psychology break higher
• Rejection candle at trendline test, set One-Cancels-Other orders to play the breakout from yesterdays high and low (buy break of high, sell break of low)