Morning Report: FOMC On Track, USD Higher

KEY DATA RELEASES TODAY:

0900GMT EUR German Ifo Business Climate exp 105.6 v 104.7
0930GMT GBP Retail Sales m/m exp 0.3% v 0.8%
1330GMT USD Unemployment Claims exp 297K v 294K
1500GMT USD Philly Fed Manufacturing Index exp 26.3 v 40.8

OVERNIGHT:

USDJPY whipsawed from a day low of 116.29 to a session high of 118.89 after the Federal Reserve’s latest policy statement and comments from Janet Yellen that signalled the central bank was on track to hike rates next year. Investors will focus on the start of 2-day BOJ board meeting which will be concluded by tomorrow for further indication on the health of the Japan economy.

November Eurozone CPIs were unrevised in the final readings, printing 0.3% YoY and core at 0.7% YoY which was in-line with the forecasts, while labour cost growth in Q3 rose to 1.3% YoY from 1.2% prev. EURUSD sold off sharply against the dollar as Fed showed optimism in US economy, printing an Asian session low of 1.2321.

The UK economy increased 115k job in August to October, worse than the exp. 137k, while ILO unemployment rate remained at 6.0%. However, GBPUSD dropped to two week low against the dollar at 1.5543 with the FOMC signalling a possible rate hike in US mid next year in advance of the BOE expected move.

The Canadian dollar finished the session at 1.1629 which got a boost from oil prices and the balanced rate statement from the Fed also help to send USDCAD higher. The Federal Reserve altered a pledge to keep rates near zero for a “considerable time” in a show of confidence in the US economy.

The AUDUSD printed a new low at 0.8104 as US dollar lifted after the Federal Reserve signalled it was on track to raise interest rates next year. AUDUSD remains under pressure on several fronts, as the RBA has expressed a preference for 0.75 and growth in China slowing down which affects the prices of Australia’s export commodities.

Looking ahead German IFO and UK retail sales are the highlights in the European session and the jobless claims and US service PMI.

OVERNIGHT PRICE ACTION:

EUR: Sharp rejection ahead of 1.26 lows retested
GBP: Sharp rejection ahead of range resistance to retest lows
JPY: Channel support holds on first test
CAD: Whipsaw consolidation at highs
AUD: New multi year lows, 0.80 still eyed

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDBearishAwait new signal
GBPUSDBearishAwait new signal
USDJPYNeutralAwait new signal
USDCADBullishBUY 9th DEC1.1495 1.1695 1.1545Risk Free
AUDUSDBearishAwait new signal

ANALYSIS:

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

  • Rejected sharply ahead of 1.26 now to retest lows
  • Order Flow indicators; OBV consolidating, Linear Regression and Psychology pierces midpoint from above
  • Watching for potential double bottom support

eu2014-12-18 07_21_17-

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

  • Sharp rejection at range resistance, retesting range lows
  • Order Flow indicators; OBV consolidating, Linear Regression and Psychology pierce midpoints from above
  • Watching for potential double bottom support

gu2014-12-18 07_23_30-

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

  • Trend channel support holds on first test
  • Order Flow indicators; OBV consolidating at highs, Linear Regression rotating at midpoint and Psychology piercing midpoint from below
  • Monitoring price action for favourable risk reward to set new long positions

uj2014-12-18 07_27_44-

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

  • Whipsaw price action consolidation at highs still targeting topside of projected trend channel
  • Daily Order Flow indicators; OBV bullish pulling back from recent new highs, Linear Regression and Psychology rotating at midpoints
  • Target and stops amended, please see key trades

uc2014-12-18 07_58_20-

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

  • New multi year lows continue to print, psychological 0.80 eyed
  • Order Flow indicators; OBV consolidating at depressed levels but not confirming new lows in price, Linear Regression and Psychology ticking up to test midpoint from below
  • Monitoring trendline resistance and previous spike lows to set new shorts

au2014-12-18 08_01_12-

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