Morning Report: Copper Decline Pressures Commodity FX

KEY DATA RELEASES TODAY:

1330GMT USD Import Prices m/m exp -2.7% v -1.5%
1330GMT USD Core Retail Sales m/m exp 0.1% v 0.5%
1330GMT USD Retail Sales m/m exp 0.2% v 0.7%
1500GMT USD Business Inventories m/m exp 0.2% v 0.2%

OVERNIGHT:

USDJPY and the JPY complex traded heavily with weakness in the Nikkei and risk sentiment, Crude oil and copper tumbled. Copper in Shanghai fell another 5% on top of the 9% fall in London, biggest fall in six years. The World Bank reported cuts to 2015 world growth with a fall from 3.4% to 3.0% with Euro area down from 1.8% to 1.1% and US 3.2% to 3.0%

USDJPY traded down from 117.95 through bids at 117.40-50 to 117.28. It remains soggy with the Nikkei still on the back foot, US yields easy and little technical support till the 117 big figure and below. EURUSD opened in Asia at 1.1770 after easing across the board overnight with EURJPY in the lead. EURUSD was sidelined in Asia, drifting between 1.1764-85. Decent bids are reported ahead of 1.1750 but stops are eyed just below and sentiment remains bearish ahead of the ECB meeting on the 22nd and then the Greece election on the 25th. Rallies will continue to be eyed as selling opportunities in the meantime. GBPUSD remained heavy after weak CPI data and growing expectations the BOE MPC will remain more dovish for longer.Asia saw it down from 1.5176 to 1.5145 before steadying.

Elsewhere, The huge decline in copper has dragged AUDUSD to within touching distance of the yearly lows. A break through here, 0.8033, will almost certainly mean that a move sub 80 would be imminent. The main level the market is focused on below 0.80 is 0.7945, the 62% Fibonacci level of the 2008-2011 range.

Looking ahead, main risk event today is the ECJ’s initial assessment on the OMT program. It is important to note that the opinion of the Advocate Generale is not yet the final ruling of the ECJ and the any ruling of the ECJ will only be one aspect in the GCC’s final verdict. While EURUSD has not been immune to the choppy moves experienced this week, it still seems happy to revert back to around the 1.18 level for now ahead of the multiple risk events looming.

OVERNIGHT PRICE ACTION:

EUR: 1.1750 supports 1.19 first resistance ahead of key 1.20 level. OMT event risk today.
GBP: Descending trendline support holds, remain bearish below 1.54 3 month range lows
JPY: Trend line support eroded, 116/17 next support area, 119 resistance ahead of key 120
CAD: Continued Crude Oil decline support USDCAD strength 1.20 resistance probed
AUD: Psychological 0.80 level targeted, while below 0.83 trendline resistance

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDBearishShort  13 Jan 1.1761OPEN 1.1881Intraday 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 support under pressure, 1.19 trend channel resistance caps upside for now
  • Order Flow indicators; OBV consolidates at lows, Linear Regression and Psychology testing midpoints from below
  • Shorts in play, please see key trades for details

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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 1.54 holds. Shorter term resistance at 1.5250/1.53 could prompt early resumption of downtrend
  • Order Flow indicators; OBV consolidating at lows, Linear Regression and Psychology ticking up piercing midpoints from below
  • Monitoring price action to reset shorts towards 1.53 against 1.54 targeting 1.50 test and break

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

  • Support at 116/17 to hold to avoid risk of deeper correction  119 needs to be eroded to target 120 retest
  • Order Flow indicators; OBV consolidating at highs, Linear Regression and Psychology  breaking midpoints from above to test recent support levels
  • 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

  • 1.20 resistance being probed , further gains likely especially as Crude Oil continues to decline.
  • Daily Order Flow indicators; OBV yet to confirm new highs in price, Linear Regression and Psychology bullish
  • 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 and rolling back over
  • Monitoring resistance at 0.83 to set short positions initially targeting break of 0.80

au2015-01-14 08_18_23-

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