Morning Report: Crude Declines Set 1.20 Test For USDCAD

KEY DATA RELEASES TODAY:

0930 GBP PPI Input m/m exp -2.5% v -1.0%
0930 GBP RPI y/y exp 1.7% v 2.0%
0930 GBP CPI y/y exp 0.7% v 1.0%
1500 USD JOLTS Job Openings exp 4.86M v 4.83M

OVERNIGHT:

Reversal of yesterday morning as the USD reclaims a bid tone against the majors, albeit in a tight range. The DXY is also back up onto a 92 handle, but crude has sunk below 45. No real surprise to see USDCAD continuing to perform, as it sits just below 1.20. Retracements have been very shallow so far, dips down to around 1.19 will likely garner interest.

In Europe, there were some headlines from ECB’s Coeure saying that the upcoming elections in Greece do not influence the path of the ECB’s monetary policy. Japan posted a current account surplus for the fifth straight month in November, as income from investments abroad, inflated by a weaker JPY, outweighed the negative impact of continuing trade deficits.

USDJPY and the JPY complex traded soggy in Asia. Tokyo players were surprised over the lack of more USD upside Friday after US non-farm payrolls. With the market still long USD, USDJPY fell more as Tokyo longs pared back positions after the long weekend in sync with the fall in the Nikkei. JPY pairs recovered in the afternoon as the Nikkei pared losses seen earlier. USDJPY traded down from 118.49 through bids ahead of 118.00. Stops below sent it down to 117.74 before the market steadied. A pop back up above 118.00 was seen in the afternoon. Heaviness remains above at 118.50. Reported Japanese importer and institutional investor bids are eyed on 117. EURJPY traded to fresh trend lows before bouncing with ranges of 139.45-140.19 seen, the bias is still down.

EURUSD opened in Asia at 1.1833 after a whippy US session where buyers returned on dips below 1.1800. Off to 1.1823 early on EURJPY sales after a very weak Nikkei open, EURUSD bounced on broad USD sogginess to 1.1859 before steadying. EURUSD looks to be in consolidation mode ahead of the ECB meeting on January 22 and the Greek election three days later. Good offers are reported ahead of 1.1950. Elsewhere, GBPUSD edged up from an early low of 1.5158 to 1.5192 before easing back in thin Asian trading.

Looking ahead, today we get CPI from UK. Market expects UK CPI inflation to decline by three-tenths to 0.7%Yin December. This comes on the back of the three-tenths fall to 1%Y in November. Energy prices are likely to be the key downward driver on inflation.

OVERNIGHT PRICE ACTION:

EUR: 1.1750 supports 1.19 first resistance ahead of key 1.20 level
GBP: Descending trendline support holds, remain bearish below 1.54 3 month range lows
JPY: Trend line support eroded, 117 next support area, 119 resistance ahead of key 120
CAD: Continued Crude Oil decline support USDCAD strength 1.20 resistance pressured
AUD: Psychological 0.80 level targeted, while below 0.83 trendline resistance

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDBearishAwait new signal
GBPUSDBearishAwait new signal
USDJPYNeutral Await new signal
USDCADBullishAwait new signal
AUDUSDBearishAwait new signal

ANALYSIS:

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

  • 1.1750 and descending trendline support hold on first test resistance now at 1.19 and trend channel resistance
  • Order Flow indicators; OBV ticking up from recent extremes, Linear Regression and Psychology testing midpoints from below
  • Watching price action for short entries at retest of 1.19/20 from below initially targeting a retest of lows 

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

  • Descending trendline support remains in tact for now 1.50 first downside objective while resistance 1.53 holds
  • Order Flow indicators; OBV ticking back down, Linear Regression pierces midpoint from below and Psychology ticking up to test midpoints from below
  • Monitoring price action to reset shorts against 1.53 targeting 1.50 test initially

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

  • Support at 117.50 attracts buyers resistance at 119 needs to be eroded to target 120 retest
  • Order Flow indicators; OBV consolidating at highs, Linear Regression and Psychology rotating below midpoints
  • No snap back monitoring potential support at 116/17 to reset longs and align with weekly bullish trend

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

  • Topside projected trend channel resistance broken, 1.20 resistance under pressure, further gains to the upside especially as Crude Oil continues to decline.
  • Daily Order Flow indicators; OBV at highs, Linear Regression supported at midpoint and Psychology testing midpoint from above.
  • Watching for retest of 1.19 from above to set longs targeting 1.22/23

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

  • Psychological 0.80 remains downside objective while descending trendline resistance at 0.83 remains intact
  • Order Flow indicators; OBV consolidating at lows, Linear Regression and Psychology recapture midpoints from below but are stalling
  • Monitoring resistance at 0.83 to set short positions initially targeting break of 0.80

au2015-01-13 08_27_38-

 

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