Morning Report: Calm Before The ECB Storm

KEY DATA RELEASES TODAY (GMT) :

1245 EUR ECB Minimum Bid Rate exp 0.05% v 0.05%
1330 EUR ECB Press Conference
1330 USD Unemployment Claims exp 301K v 316K

OVERNIGHT:

USDJPY was better bid in Asian trading, helped out by higher US yields, the modest Wall St rally and continuing short-covering from last night’s 117.18 spike low. Pre-118.00 offers were absorbed without effort and trader stops above tripped to 118.16. It fell back below 118.00 as the Nikkei fell into the red before another rush higher to 118.34 despite the still heavy Nikkei. EU/JPY traded up from 136.78 to 137.31 as more shorts covered ahead of today’s ECB announcement.

EURUSD and most of the EUR complex did little in Asia, consolidating ahead of the ECB policy announcement today. The extent of QE and whether it will be the ECB or national central banks doing the bond buying remain the focus. QE below E1 trln looks to disappoint after the “leak” overnight of E50 bln/month. EURUSD saw some to-fro action but within a relatively tight 1.1592-1.1629 range. Large, E1.2 bln in option expirations at 1.1600 helped anchor the market down. Bids remain between 1.1590-1.1600 and offers from 1.1650. Resistance is eyed at yesterday’s 1.1680 high ahead of 1.1700. GBPUSD see-sawed between 1.5134-59, slightly better bid despite the BOE MPC’s more neutral rate stance.

Elsewhere, USDCAD spiked higher on the surprise 25bp cut by the BoC, by raising the SELIC 50bps in an unanimous decision. The accompanying statement was neutral (data dependent) and largely priced in. The BOC surprise cut spilled over to RBA doveish pricing. Rates have rallied, now pricing probabilities of cut in the next few meetings and AUD has broken to the downside.

Looking ahead all eyes will be on the ECB rate decision and President Draghi’s press conference

OVERNIGHT PRICE ACTION:

EUR: Bias remains down below 1.1750 positions pared ahead of risk event
GBP: Below 1.53 keeps focus on 1.50, break opens 1.54/55 test before lower
JPY: 119 resistance, while 117 supports expect a 120 test
CAD: 1.25 next resistance, 1.2050 support for next leg higher
AUD: 0.83 trendline rejects, 0.80 targeted

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDBearishAwait new signal
GBPUSDBearishShort Jan 191.5100OPEN1.5280Intraday Signal
USDJPYNeutralLong Jan 16116.91OPEN116.91 Intraday Signal
USDCADBullishAwait new signal
AUDUSDBearishAwait new signal

ANALYSIS:

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

  • Projected down trend channel support remains in tact on a closing basis, previous support at 1.1750 now resistance. Positions pared ahead of todays event risk
  • Order Flow indicators; OBV consolidating at lows, Linear Regression pierces midpoint from below and Psychology stalling ahead of midpoint
  • Monitor price action at 1.1750 retest from below to set short positions to target retest of lows

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

  • 1.50 first downside objective while trendline resistance 1.54 holds. Shorter term  horizontal resistance at 1.5250/1.53 continues to cap. Break of 1.5075 support to open downside objectives
  • Order Flow indicators; OBV retesting lows, Linear Regression and Psychology attempting midpoint test from below
  • Shorts in play, please see key trades

gu2015-01-22 07_23_20-

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

  • 117 supports for retest of 119 on way back to 120. Failure at 117 opens retest/break of key medium term bullish support at 116
  • Order Flow indicators; OBV consolidating below recent highs, Linear Regression rejected at midpoint, Psychology piercing midpoint from below
  • Risk free longs in play, please see key trades for details

uj2015-01-22 07_25_58-

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

  • 1.25 next resistance, 120.50 support
  • Daily Order Flow indicators; OBV consolidating at new highs, Linear Regression and Psychology bullish
  • Monitoring price action to reset long positions around 1.2050

uc2015-01-22 08_15_35-

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

  • Trend channel resistance at 0.83 rejects, key support at 2014 lows tested break opens full test of .80
  • Order Flow indicators; OBV at lows, Linear Regression and Psychology bearish
  • Monitoring price action for beneficial risk reward set up to enter short positions

au2015-01-22 08_26_23-

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