Morning Report: Global Growth Concerns

Key Data Releases Today:

0830GMT       – GBP Claimant Count Rate (SEP) exp 2.8% v 2.9%
0830GMT      – GBP Jobless Claim Change (SEP) exp -35k v -37.2k
1230GMT       – USD Advance Retail Sales (SEP) exp -0.1% v 0.6%
1800GMT       – USD Fed Reserve Release Beige Book


Overview:

Volatility in the FX markets has increased substantially over recent weeks as a deceleration in inflationary pressure and the global growth outlook have seen market expectations of Fed & BoE rate hikes pushed further out. The Eurozone economic situation continues to deteriorate as weak data yesterday sparked expectations that further monetary stimulus may be needed to kickstart the economy. Safe haven buying of USD & JPY have been the standout moves.

GBPUSD:

Fresh shorts in play on Daily bearish close through NFP low as dissapointing inflation data pushes out expectations of a BoE rate hike even further. Having broken the 50% fib retracement from 2013 lows, the path to the 61.8% retracement at 1.5740 is clear. Employment data today will dictate short term direction.

With Daily Order Book Regression & Psychology Indicators having crossed lower, I will look to sell any pullbacks using bearish rejection candlesticks on the lower timeframes in line with order flow indicators. Ideally would like to see pin bars at a retest of the descending trendline.

11gb

EURUSD:

Short term signals still mixed whilst we hold in this consolidation at lows. Sold off yesterday on dissapointing data and the fundamental deterioration in the Eurozone suggests the NFP lows might not have long to go, supported by negative Daily Order Flow Indicators

No clear trading signal at the moment and prefer to engage better risk:reward opportunities in other pairs until we resolve this consolidation.

1eur

USDJPY:

JPY is still going strong, benefiting from rising market volatility and safe haven flows as a drop in global growth outlook, a deceleration in the pace of inflation and rising market volatility have all helped to push a re‐pricing in Fed interest rate hike expectations.

Our 105.40 Short target is firmly in play and I will use a retest of the consolidation at highs to add to short positioning using lower timeframe Order Flow Indicators for entries.

1jpy

USDCAD:

Growing concerns over deteriorating global growth are weighing heavily on the pro‐cyclical CAD as price breaks YTD highs with CPI data on Friday unlikely to help the case of the flagging currency.

Yesterday’s Daily candle failed to close convincingly through highs but I still look to trade a breakout higher, will wait for a break higher then retest of the 1.1287 levels on the lower timeframes, entering on rejection candles. Alternatively, if we move down from here I will look to establish longs on a test of the bullish trendline in line with price action and Order Flow Indicators confirming the move.

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