Morning Report: EUR Consolidates At Nine Year Lows

KEY DATA RELEASES TODAY:

0930GMT GBP Services PMI exp 58.9 v 58.6
1500GMT USD ISM Non-Manufacturing PMI exp 58.2 v 59.3
1500GMT USD Factory Orders m/m exp -0.3% v -0.7%

OVERNIGHT:

USDJPY continued lower in Asia with risk-off sentiment pervasive and offshore yields off large. Reflecting this sentiment and following plunges on Wall Street and on European bourses, the Nikkei plunged. This helped USDJPY fall from a retracement high of 119.79 in New York and 119.64 early in Asia to 119.15 before steadying. Japanese importers were buyers from 119.30. Bids continue down into the 118-handle but stops are mixed in sub-119.00, 118.85 (118.86 12/30 spike low). Japanese bids are thick pre-118.85 where GPIF is reported to have bought last week. Heaviness is seen from 119.50 with large option expiries at 119.80 (660 mln) and 120.00 (1.28 bln). EURJPY moved towards 141.63, off from a retracement high of 142.96 and 142.71 early to 142.28.

EURUSD opened in Asia at 1.1932 after recovering from 1.1887 overnight as long-dated Treasury yields fell sharply and as USDJPY led USD broadly lower. Dipping a bit to 1.1927 early, it grinded higher still to 1.1955. Sentiment remains decidedly bearish however with uncertainties surrounding the Greek election on January 25 and ECB policy on January 22 definite weights. Resistance is eyed from 1.1975-80 with more sellers eyed ahead of former support at 1.2000-05. A break above 1.2010 could alter current scenarios in the near term.

Elsewhere GBPUSD traded modestly higher in Asia from 1.5247 to 1.5274 alongside EURUSD with late shorts continuing to cover. AUDUSD opened in Asia at 0.8084 and rallied from 0.8081 to 0.8152 in an apparent short-squeeze, making more tracks away from the 0.8036 Asia afternoon low yesterday. Good trade data and reports of Chinese spending to boost growth helped. AUDUSD has since eased back with bear sentiment hard to shake for long.

Looking ahead GBP Services PMI is the highlight on the data front during the European session with USD ISM Non Manufacturing released during the US session.

OVERNIGHT PRICE ACTION:

EUR: 2010 lows hold on a closing basis for now
GBP: Break lower from 3 month range supported at descending trendline
JPY: Testing trend line support for trend continuation
CAD: Rejected at ascending trendline resistance
AUD: Psychological 0.80 level targeted, while below 0.82

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDBearishAwait new signal
GBPUSDBearishAwait new signal
USDJPYBullish BUY/06 JAN 119.50 OPEN118.20
USDCADBullishAwait new signal
AUDUSDBearishAwait new signal

ANALYSIS:

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

  • 1.1876 2010 lows hold on a daily closing basis, immediate resistance at 1.20 previous support
  • Order Flow indicators; OBV consolidating at recent lows, Linear Regression and Psychology bearish
  • Watching price action for short entries at retest of 1.20 from below

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

  • Range lows break descending trendline support holds on first test 
  • Order Flow indicators; OBV consolidating at lows yet to confirm new lows in price, Linear Regression and Psychology bearish
  • Watching for a retest of range lows from below to set short positions

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

  • Bullish consolidation continues next resistance area is 2014 highs
  • Order Flow indicators; OBV consolidating at recent highs, Linear Regression and Psychology pulling back to test midpoint from above, setting potential platform for trend continuation 
  • Long orders in play, please see key trades for details

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

  • Upside break from consolidation rejected by topside of projected trend channel resistance on first test
  • Daily Order Flow indicators; OBV consolidating at highs, Linear Regression pulling back and Psychology bullish
  • Watching retest of previous highs as support to set new long positions

uc2015-01-06 08_16_31-

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

  •  Psychological 0.80 and descending trendline support the next downside objective while below 0.82 resistance
  • Order Flow indicators; OBV consolidating at depressed levels, yet to confirm new lows in price, Linear Regression ticking up to test midpoint from below and Psychology pierces midpoint from above
  • Monitoring trendline resistance and previous spike lows to set new shorts

au2015-01-06 08_19_58-

 

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