Morning Report: Central Bankers On Watch

KEY DATA RELEASES TODAY (GMT) :

1000 GBP BOE Gov Carney Speaks
1500 USD Fed Chair Yellen Testifies
1500 USD New Home Sales exp 471K v 481K
1630 EUR ECB President Draghi Speaks

OVERNIGHT:

USDJPY fell sharply towards 118.80 from yesterdays high of 119.83 after Fed’s Chair Yellen said a change in the central bank’s guidance will not lock it into a timetable for rising interest rates with markets leaning towards a dovish interpretation of yesterdays testimony, however, noted FED watcher Hilsenrath of the Wall Street Journal was quick to point our that Chair Yellen had chosen her words carefully and in his estimation had moved the committee closer towards taking action this year. Overnight Japans small business confidence index in February rose to 46.5 from January’s eight-month low of 46.3. EURJPY also retreated as the EU confirmed the Greek debt deal as it appears a by the rumour sell the fact trade reached fruition.

EURUSD held steady on Tuesday with February’s range trade firmly intact for now closing up 0.04% for the day The broad USD sell off post Yellen’s testimony did little to really rouse Euro bulls with participants appearing to be waiting for some meaningful resolution to the protracted range before placing directional bets. On the data front Germany’s economy expanded at an expected pace of 1.6% YoY in fourth quarter last year while Eurozone’s inflation for January stayed the same as its flash value at -0.6% YoY Worth noting very large option expirations today with 3.4B at 1.12 and 5.4B at 1.1250 which roll off at the NY cut today.

GBPUSD remained bid above 1.5400 level and reached 1.5473 high as BOE sounds increasingly hawkish we are testing the 1.55 handle this morning. BOE policy maker Martin Weale said it may be appropriate to start raising interest rate rather earlier than financial markets currently anticipate. BOE Governor Mark Carney told lawmakers the BOE was aiming to bring inflation back to its 2 percent target within two years. Markets appear to be supporting GBP as a close contender to be next in line to the USD to commence normalising monetary policy.

Looking ahead BOE’s Carney speaks this morning during the European session while all eyes will be back on the Chair Yellen this afternoon as she continues her testimony while ECB’s Draghi participates in European Parliamentary debate later this afternoon.

PRICE ACTION OVERVIEW:

EUR: While 1.1270 supports focus on 1.17 upside corrective equality target, below 1.12 targets 1.10
GBP: Testing 1.55/5550 corrective target area, upside break targets 1.58 next
JPY:  While 117.50 supports expect break of 120.50
CAD: While 1.2350 trendline supports 1.28 next upside objective ahead of key 1.30
AUD:  0.79 remains the key hurdle to further corrective upside objective of .8050

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDNeutralAwait new signal
GBPUSDBullishBuy/18th Feb1.5386OPEN1.5486
USDJPYNeutral Await new signal
USDCADBullishAwait new signal
AUDUSDNeutralBuy/ 16Feb 0.78 0.8050 0.78Counter-trend

ANALYSIS:

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

  • February’s range trade persists while 1.1270 holds as support the EURUSD is on track to test a daily corrective equality target at 1.17, below 1.12 suggest early resumption of downtrend
  • Order Flow indicators; OBV consolidates at  lows in line with price action, Linear Regression and Psychology bullish
  • Monitor price action at 1.16/17 or a break of 1.12 to reset short positions to target 1.10

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

  • Test of 1.55/5550 under way if this caps upside there is potential for downtrend to resume, above 1.5550 targets 1.58 next
  • Order Flow indicators; OBV continues to drift up from lows, Linear Regression and Psychology bullish.
  • Risk free longs in play, monitoring price action and Order Flow indicators in the 1.55/5550 area to reverse short

gu2015-02-25 06_44_20-

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

  • 118 acts as base for now for resumption of uptrend 120.50 next upside objective, a break of 117.50 would raise concern for the bullish bias
  • Order Flow indicators; OBV continues consolidation below recent highs, Linear Regression regains midpoint form below but lacks upside momentum, Psychology bullish but also stalling
  • Monitoring price action and Order Flow indicators to set longs to target 2014 highs

uj2015-02-25 06_48_40-

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

  • Bullish consolidation continues while 1.2350 supports expect retest and break of 1.28 on route to key 1.30 resistance. Below 1.2350 targets trendline test towards 1.2150/2200
  • Daily Order Flow indicators; OBV just off highs, Linear Regression and Psychology pulling back to test midpoints from above
  • Monitoring price action and Order Flow indicators to reset longs to target 1.30

uc2015-02-25 08_48_42-

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

  • .79 resistance being tested if regained on a closing basis .8050 the next corrective target.
  • Order Flow indicators; OBV ticking up from recent lows, Linear Regression and Psychology bullish
  • Longs in play will look to reverse at corrective targets to rejoin broader trend, please see key trades for details

au2015-02-25 08_51_50-

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