Morning Report: Abe To Tax or Not To Tax?

Key Data Releases Today

0930GMT – GBP Average Weekly Earnings exp 0.8% v 0.7%
0930GMT – GBP Claimant Count Rate exp 2.7% v 2.8%
0930GMT – GBP Employment Change exp 125k v 46k
0930GMT – GBP Unemployment Rate exp 5.9% v 6.0%
0930GMT – GBP Jobless Claims Change exp -20K v -18.6k
0930GMT – GBP Weekly Earnings ex Bonus exp 1.1% v 0.9%
1000GMT – EUR Eurozone Industrial Production exp -0.2% v -1.9%
1030GMT – GBP Bank of England Inflation Report
1400GMT – EUR ECB President Draghi Speaks in Rome
1500GMT – USD Wholesale Inventories exp 0.2% v 0.7%


Overview:

Choppy Asian session USDJPY trading between 115-116 with Nikkei advising Abe has told party leaders to prepare for snap election on either Dec 14 or 21. Press report Japanese parliament will be dissolved this month and lots of commentary as to whether Sales Tax increase next year will be postponed. Looks like the market awaits Q3 GDP release on Sunday evening for clues, expected at 0.5% quarter over quarter (range 0.2 – 0.8). Chief Cabinet Secretary Suga denied any delay to Sales Tax.

EURCHF yet to test large reported bids 1.2020-00 with SNB Jordan claiming SNB will not quit cap in foreseeable future.

Highlight this morning is UK data Employment Report and the BoE’s quarterly Inflation Report. Market expects BoE to slightly lower its growth and inflation forecasts. The communication will likely emphasize the absence of wage and inflationary pressures, as well as headwinds facing the UK economy.

EUR continues to test range lows.
CAD pull back continues to test support.
GBP position squaring ahead of key risk event.
JPY trades at highs on Abe Sales Tax postponement possibility.
AUD testing range from below.

Key Trades:

EURUSD: Bearish to Neutral – Revised (monitoring range retest from below)
USDCAD: Bullish – Revised (trailing stops on spec longs triggered)
GBPUSD: Bearish to Neutral – Revised (trailing stops on spec shorts triggered)
USDJPY: Bullish – No Change (trailing stops triggered)
AUDUSD: Bearish to Neutral – Revised (monitoring confirmation of range break)

Analysis:

EURUSD: Bearish to Neutral – Revised

  • Rejection candle at range retest from below, price continues to test range from below
  • Order Flow indicators recovering from very bearish levels, Linear Regression and Psychology test mid points
  • Monitoring potential follow through on rejection of range support now as potential resistance

EURO

USDCAD: Bullish – Revised

  • USD profit taking, price retreats from fresh 2014 highs, still testing support
  • Daily Order Flow indicators have crossed mid point to the downiside
  • Monitoring trendline support and Order Flow indicators to signal bullish trend resumption
  • No follow through on test of support zone

loonie

GBPUSD: Bearish to Neutral – Revised

  • Contracting range break lower reversed sharply, now testing resistance
  • Order Flow indicators test mid points, monitoring potential rejection of mid points for trend continuation
  • No follow through on first test and rejection of previous range lows

CABLE

USDJPY: Bullish – No Change

  • Profit taking at new 2014 highs
  • Order Flow indicators testing midpoints
  • Monitoring support zones for potential trend resumption

yen

AUDUSD: Bearish to Neutral – Revised

  • Snap back into range monitoring price action for confirmation
  • Order Flow indicators testing midpoints
  • Bearish rejection candle neutralised
  • No follow through on inital bearish rejection of range lows

aussie

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