Morning Report: AUD 5yr Lows As RBA Cuts Rates

KEY DATA RELEASES TODAY (GMT) :

0930 GBP Construction PMI exp 56.9 v 57.6
1500 USD Factory Orders m/m exp -1.8% v -0.7%

OVERNIGHT:

EUR has really taken a back seat we continue to remain in an extremely tight range with initial resistance level continuing to come in at 1.1385 with momentum expected to build to the downside on any move through 1.1270/20 key support level. News from the Greek Finance minister that they would ask for a menu of debt swaps has kept the EUR underpinned on positive risk sentiment which continues to be offset against ECB QE sentiment leaving intraday restrictive ranges and may require Fridays non farm data as a catalyst for a range break. GBPUSD continues to trade in broader range with a downside bias although no real momentum at present, the PMIs this week will be the main driver for the pair 1.5000 and 1.4952 are the initial supports to watch.

USDJPY consolidates on the 117 handle, but price action still feels offered in rallies. USD-JPY yield differentials narrowing spread signals a further move lower in USDJPY (if the correlation still holds). This weeks COT daat also highlighted the lowest reading in net JPY shorts since July of last year.

Elsewhere, AUDUSD dropped 150pips to a 5-year low after the RBA moved beyond expectations in policy accommodation, cutting interest rates by 25bps to a new record low of 2.25%. The accompanying statement was doveish, noting that “output growth will probably remain a little below trend for somewhat longer, and the rate of unemployment peak a little higher, than earlier expected.” And, “the economy is likely to be operating with a degree of spare capacity for some time yet.” The RBA also cited weaker than expected growth in Europe andJapan, lower oil prices pushing down inflation, below-trend domestic growth in rationalizing its easing.

Looking ahead, UK construction PMI and Eurozone PPI, while the afternoon session brings US factory orders

PRICE ACTION OVERVIEW:

EUR: 1.1220 support area base for test of 1.1460’s, break targets lows
GBP: 1.5000 support must be removed to open test of year to date lows
JPY:  119 – 117 range lows pressured but holding on a closing basis for now
CAD: 1.30 structural and psych resistance ahead, grind higher supported at 1.2500 near term
AUD: Trend channel support  at .7650 being tested

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDNeutralAwait new signal
GBPUSDNeutralShort Jan 30 1.5125OPEN1.5125Intraday Signal
USDJPYNeutral Await new signal
USDCADBullishAwait new signal
AUDUSDBearishShort Jan 29.7878 OPEN.7878Intraday Signal

ANALYSIS:

EURUSD Short Term (1-3 Days): Neutral  – Medium Term (1-3 WeeksBearish

  • Range trade continues, 1.1220 support area with 1.1350 near term resistance, break of 1.1220 support opens retest of year to date lows above 1.1350 targets descending trendline and horizontal resistance at 1.1450
  • Order Flow indicators; OBV drifting up from recent lows, Linear Regression and Psychology rotating at midpoints.
  • Monitor price action at 1.1460 retest from below to set short positions to target 1.10 or on a break of 1.1220

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GBPUSD: Short Term (1-3 Days): Neutral – Medium Term (1-3 WeeksBearish

  • Support at 1.5050 eroded but bids hold 1.50 on a closing basis, while 1.5225 caps potential for resumption of down trend and retest of tear to date lows
  • Order Flow indicators; OBV ticking lower, Linear Regression and Psychology rejected at midpoints
  • Risk free shorts in play please see key trades for details

gu2015-02-03 07_21_22-

USDJPY: Short Term (1-3 Days): Neutral  – Medium Term (1-3 WeeksBullish

  • Range lows continue to be pressured but hold so far on a closing basis, 116.65 supports for now with 118.00 as resistance.
  • Order Flow indicators; OBV continues consolidating below recent highs, Linear Regression and Psychology rotating at midpoints reflecting range trade in price
  • Monitoring price action for a range break and retest to reset positions

uj2015-02-03 07_26_11-

USDCAD: Short Term (1-3 Days): Bullish  – Medium Term (1-3 Weeks) Bullish

  • 1.2500 near term support holds on first test  with 1.28 overhead resistance, break targets 1.30
  • Daily Order Flow indicators; OBV retesting highs, Linear Regression pulling back to test midpoint from above, Psychology remain supported at bullish levels
  • Monitoring price action to set long positions targeting 1.30

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AUDUSDShort Term (1-3 Days): Bearish  – Medium Term (1-3 WeeksBearish

  • testing secondary target of trend channel support at .7650 near term resistance at 0.77
  • Order Flow indicators; OBV ticking down but yet to confirm new lows in price, Linear Regression pierces midpoint from below, Psychology pierces midpoint from above
  • Risk free shorts in play, see key trades for details

au2015-02-03 08_37_29-

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