Morning Report: Consolidation Continues Ahead Of Headline Risk

KEY DATA RELEASES TODAY:

0930GMT GBP Construction PMI exp 61.1 v 61.4
1330GMT USD Fed Chair Yellen Speaks

OVERNIGHT:

Quiet session in Asia, with most of the G10 complex in a tight range. The DXY has one eye on making a new high through the 2010 peak at 88.708, a technical break which could lead to an eventual test of the 2009 high at 89.624. EUR, GBP, JPY and CAD all confined to 20-30pip ranges.

The only real data event overnight was the RBA meeting, which ultimately didn’t yield too much. The statement had some small changes to the language around commodity prices (from “further decline” to “significant decline”), as well as AUD, where they softened the language to “a lower exchange rate is likely to be needed to achieve balanced growth in the economy.” The market had built in a chance of a more dovish outcome, so was left disappointed and we saw mild short covering back through yesterday’s highs up to 0.8543. Bear in mind there is $2.5bn worth of 0.85 strikes expiring today so that level may act as a bit of a magnet into the New York cut 1500GMT.

Elsewhere, from the US, NY Fed President Dudley said the FOMC could be more aggressive with rate rises if financial markets are less responsive than desired. They will not just tighten policy based on how the U.S. economy is faring, but on how well financial markets respond to the eventual interest-rate hikes.

Looking ahead, we have a quiet day on the data front, with only EZ PPI, UK Construction PMI and US Construction spending of note. There are also a few Fed speakers to keep an eye on today, including Fed Chair Yellen

OVERNIGHT PRICE ACTION:

EUR: Range continues to contract, trendline resistance pressured
GBP: Strong rejection from range low retest, trendline resistance eyed
JPY: New year to date highs, watching possible double top
CAD: Regains bullish channel, watching possible double top
AUD: Holding descending trendline support on a closing basis

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDBullishBUY/ Nov 261.2495OPEN 1.2345
GBPUSDBullishBUY/ Nov 251.5745 OPEN1.5580
USDJPYBullishAwait new signal
USDCADNeutral SELL/ Dec 02 1.13 OPEN 1.1490
AUDUSDBearishAwait new signal

ANALYSIS:

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

  • Trend line resistance pressured, monitoring trend line break to confirm counter trend correction
  • Order Flow indicators; OBV ticking up, Linear Regression and Psychology testing midpoint form above
  • Counter trend longs in play, please see key trades

eu212

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

  • Strong rejection candle from range low retest, descending trend line resistance eyed
  • Order Flow indicators; OBV bearish ticking up from depressed levels, Linear Regression and Psychology retesting midpoint form above
  • Counter trend longs in play, please see key trades

gu212

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

  • Potential double top forming failure watching for confirmation
  • Order Flow indicators; OBV bullish retreats from recent highs, Linear Regression and Psychology break lower, currently holding support levels for potential trend continuation
  • Watching for Order Flow indicators to confirm trend continuation for new long positions. Monitoring possible double top with potential divergence in price, Linear Regression and Psychology

2014-12-02 07_52_32-

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

  • Price holds bullish channel but prints strong rejection candle yesterday at a potential year to date double top
  • Daily Order Flow indicators; OBV bullish but no new highs, Linear Regression and Psychology testing midpoints from below
  • Counter trend long orders against potential double top

uc212

AUDUSD: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bearish

  • Rapid retest of descending trendline support but no close below
  • Order Flow indicators; OBV rolling over again, Linear Regression and Psychology rejected at midpoints
  • Monitoring a bullish close above or a break and close below descending trendline support for new positions

au212

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