New York Forex Report: Equity markets shrugged off Asian session weakness to rip higher over the European morning as risk sentiment improves . The moves are partly driven by oil, which has regained ground today having fallen yesterday on the underwhelming news that Russian & Saudi Arabia have agreed an output freeze but not reduction. The next stage of this deal is to establish how the other oil producers will respond, with particular focus on Iran who so far have refused to meet with Saudi Arabia and Russia. Looking ahead to the US session we have US Industrial & Manufacturing Production figures followed by the release of the January FOMC meeting minutes.
EUR/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: A recovery in equity markets over the European morning weighed on EUR/USD alongside lower than expected EZ Construction Output Dec. Traders look ahead now to key US data and the FOMC minutes.
Technical: While 1.1220/40 rejects intra-day upside reactions expect a test of pivotal support at 1.1050/30 as the next downside objective. A breach of 1.1260 opens 1.1350 offers.
Interbank Flows: Bids 1.1150 stops below. Offers 1.1250 stops above
Retail Sentiment: Bearish
Trading Take-away: Short
GBP/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: The latest UK earnings data showed wage growth to be in line with expectations, with a slight beat on ex-bonus. Unemployment rate ticked back up to 5.1% from 5% prior. Reaction to the news saw GBP bid though yesterday’s weak inflation data still weighs
Technical: While 1.4510/30 caps the upside expect a retest of bids towards 1.4350/30. A breach of 1.4550 opens a retest of February highs a 1.4660’s
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: Improved risk sentiment over the European morning as seen diminished safe-haven demand for JPY leading USD/JPY higher over the session.
Technical: While 113.20 supports downside rotations expect a grind higher to retest the broken neckline resistance at 115.80/116 where fresh selling interest should emerge
Interbank Flows: Bids 113.20 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: EUR/JPY remains rangebound near yesterday’s lows as both EUR and JPY suffer weakness over the European morning
Technical: While 129 caps upside reactions expect a retest of year to date lows 125.77 a breach of this support opens a move down to 124 as the next downside objective. A close over 129.74 would ease immediate downside pressure and open a rotation higher yo test 132.30
Interbank Flows: Bids 126 stops below. Offers 128.50 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 enjoyed a recovery higher over the early European session, driven by a rebound in risk sentiment as commodity and equity markets rally. FOMC minutes later today will be key short-term focus with China CPI later tonight alongside Australian Unemployment Rate.
Technical: While AUD continues to trade above the pivotal .7100 expect a retest of offers above .7200 en-route to .7310. Another failure at .7100 would suggest further weakness to retest year to date lows at .6820’s
Interbank Flows: Bids .6950 stops below. Offers .7250 stops above
Retail Sentiment: Bearish
Trading Take-away: Neutral
USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
Fundamental: A recovery in oil over early European trading today has boosted the Canadian dollar as investors choose to remain optimistic regarding the likelihood of other oil producers joining Saudi Arabia & Russia in an output freeze.
Technical: While USD/CAD trades sub 1.3830 downside pressure remains the driver with bears fully focused on a retest of 1.3630 bids ahead of 1.3530. A close over 1.3850 suggests a retest of 1.40 offers in broader range trade.
Interbank Flows: Bids 1.3650 stops below. Offers 1.40 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
