Morning Report: EUR & US Yeilds Under Pressure

KEY DATA RELEASES TODAY:

1000GMT EUR CPI Flash Estimate y/y exp 0.0% v 0.3%
1000GMT EUR Core CPI Flash Estimate y/y exp 0.6% v 0.7%
1000GMT EUR Unemployment Rate exp 11.5% v 11.5%
1315GMT USD ADP Non-Farm Employment Change exp 227K v 208K
1330GMT USD Trade Balance exp -42.3B v -43.4B
1900GMT USD FOMC Meeting Minutes

OVERNIGHT:

USDJPY led the JPY complex higher in Asian trade. Bargain hunting by Japanese importers into the Tokyo fix saw USDJPY up from 118.45 to 119.16. A modest push up in the Nikkei after four consecutive down days helped as did trader stops above 119.00. Lower US Treasury yields continue to weigh but Japanese yields are down too with the 10s at a fresh record low of 0.265%. US Treasury 10s would have to fall below 1.90% again to have a more lasting impact. The 10s are firmer in Asia, up modestly from 1.945% to 1.952%. The JPY cross capitulation trade looks to be over too with weak longs having pared back positions considerably. Those shorting EURJPY afresh on shifting central bank expectations look to be catching their breath. EURJPY bounced from 140.58 to 141.50.
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EURUSD opened in Asia at 1.1888. Up a bit to 1.1892 early, it was aggressively sold thereafter. Stops sub-1.1880,1.1860 and 1.1850 were triggered in a flash for a low of 1.1842 before buyers returned. The market later drifted back up into a mostly 1.1870-80 range. Sentiment remains bearish on continuing Greek exit news,views and expectations the ECB will announce full blown QE (a Dutch newspaper highlighted three options and all with bearish implications).

GBPUSD swooned alongside EURUSD early from 1.5154 to 1.5118 before bouncing to around 1.5140. The bias remains down however with stops eyed sub 1.5100.

Elsewhere, AUDUSD opened in Asia at 0.8085 and fell back modestly from 0.8086 to 0.8055 with the market back in bear mode after yesterday’s short squeeze up to 0.8158. Crumbling crude oil prices and record low Aussie yields helped. Many eye an AUDUSD break below 0.8000 soon. Canadian PPI -0.4% vs -0.7% f/c, RMPI -5.8% vs -4.0% f/c, Y/Y +1.9% & -4.0% offset each other, although the Y/Y PPI dip below the BoC’s 2.0% target has taken some pressure off Gov Poloz & the BOC for their dovish stance.  USDCAD holds above 1.18 handle traders just can’t ignore oil prices which are also driving buying and keeping the USDCAD supported at elevated levels.

The markets will remain volatile on upcoming event risks including Eurozone inflation data and FOMC minutes today and the US jobs report Friday.

OVERNIGHT PRICE ACTION:

EUR: 2010 lows back under pressure
GBP: Descending trendline support retested
JPY: Testing trend line support for trend continuation
CAD: Ascending trendline resistance retested
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 OPEN118.00
USDCADBullishAwait new signal
AUDUSDBearishAwait new signal

ANALYSIS:

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

  • Retesting 2010 lows overnight, immediate resistance at 1.20 previous support
  • Order Flow indicators; OBV consolidating at new 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 being retested
  • Order Flow indicators; OBV consolidating at lows yet to confirm new lows in price, Linear Regression ticking up from new lows and Psychology bearish
  • Watching for a retest of range lows from below to set short positions

gu2015-01-07 07_30_06-

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

  • Key test of trendline support to confirm bullish consolidation and set platform to retest 2014 highs
  • Order Flow indicators; OBV consolidating at recent highs, Linear Regression bearish and Psychology rotating at midpoint
  • Monitoring price action at ascending trendline support to set new long positions

uj2015-01-07 07_33_50-

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

  • Trend channel resistance being retested
  • Daily Order Flow indicators; OBV consolidating at highs, Linear Regression pulling back and Psychology retesting midpoint from above
  • Watching retest of previous highs as support to set new long positions

uc2015-01-07 08_10_53-

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 and Psychology attempting to to regain midpoints from below
  • Monitoring trendline resistance and previous spike lows to set new shorts

au2015-01-07 08_12_51-

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