Morning Report: Month End Positioning & Profit Taking Kicks In

KEY DATA RELEASES TODAY (GMT) :

1300 EUR German Consumer Price Index – EUR Harmonised YoY exp -0.5% v -0.5%
1300 EUR German Consumer Price Index YoY exp -0.3% v -0.4%
1330 USD Gross Domestic Product exp 2.0% v 2.6%
1330 USD Personal Consumption exp 4.3% v 4.3$

OVERNIGHT:

Despite Fed Chair Yellen’s best efforts this week to dampen down the markets enthusiasm around dropping “patience” and normalising rates policy, the market was having non of it. Most had in their minds a poor inflation print and wanted to resell rates and buy the USD at better levels. It was not to be as buyers stepped in and both moved sharply,with equities also benefiting, the month end position wash out that ensued saw an up tick in intraday volatility, USD held the 94 level and pushed on to test 95.38 overnight as US10y pulled back 2bps to 2.0139% from its overnight highs.

The EURUSD took the brunt of the USD push, plunging to the lower end of this months range trade testing bids at the 1.12 area on the back of better than expected US Inflation and Business Orders data. A breach of the overnight lows at 1.1182 will open the bearish objective of retesting year to date lows 1.1098, with COT data form last week suggesting a reduction in net short EUR contracts this move could have scope to run the lows and resume the down trend in earnest.

USDJPY rallied to retest offers at the 119.50 area which held firm again and rejected the advance, the pullback overnight was a reflection of the domestic data which showed inflation slowed more than forecast, consumer prices index excluding food rose 2.2YoY, less than the forecast 2.3%.With data supportive of a FED move and the rebound in US yields Japanese investor and importer community are likely buyers on dips in the USDJPY with 119 the initial area of interest now.

GBPUSD traded in tandem with the EUR after shrugging off the second reading of UK GDP in Q4 which was unchanged as 0.5%QoQ and 2.7% YoY GBP held support at 1.55 but as the USD push took centre stage during the US session GBP traded off 140pips to retest bids at 1,54, while 1.5460/80 caps corrective upside there is scope for broader down trend to resume with bears targeting a retest of year to date lows.

AUDUSD declined in line with the other FX majors after weak business investment data added to the chance for more interest rate cuts by the Reserve Bank of Australia, Australian business investment slipped by more than forecast last quarter and future spending plans were on the weaker side of estimations.

Looking ahead the data highlight in the European session will be the German CPI with US GDP and Personal Consumption due during the US session.

PRICE ACTION OVERVIEW:

EUR: While 1.1270 caps upside  targets 1.10/09 above 1.1280 suggest false break in range trade
GBP: 1.5550 rejects while 1.5480 contains upside reaction, donwtrend to resume targeting 1.49
JPY:  While 118.50 supports expect break of 120.50 and target 2014 highs beyond
CAD: 1.2350 trendline supports 1.28 next upside objective ahead of key 1.30
AUD:  0.79 rejects corrective advance while .7860/80 contains downtrend to resume targeting .75

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDNeutralAwait new signal
GBPUSDNeutralAwait new signal
USDJPYNeutral Await new signal
USDCADBullishAwait new signal
AUDUSDNeutralAwait new signal

ANALYSIS:

EURUSD Short Term (1-3 Days): Neutral  – Medium Term (1-3 WeeksBearish

  • A close today below 1.12 suggests resumption of downtrend with 1.10 he next downside objective, a break above 1.1280 would suggest yesterdays decline was a false break in the broader range trade
  • Order Flow indicators; OBV continues to drift up from lows, Linear Regression and Psychology bullish but stalling
  • Monitor price action at 1.1270 or a close below 1.12 to reset short positions to target 1.10/09

eur2015-02-27 07_27_27-

GBPUSD: Short Term (1-3 Days): Bullish – Medium Term (1-3 WeeksBearish

  • 1.5550 offers prevail and prompt 140pip decline, while 1.5460/80 caps correction against yesterdays decline there is the potential for downtrend to resume and target year to date lows
  • Order Flow indicators; OBV continues to drift up from lows, Linear Regression pulling back to test midpoint form above, Psychology bullish.
  • Monitoring price action at the 1.5460/80 area or a break of yesterdays lows to set shorts

gbp2015-02-27 07_31_43-

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

  • A break of 119.50/80 sets up a retest of 120.50 and then the 2014 highs beyond bullish bias remains intact above 118.50, a failure of support at 118.50 opens a deeper retest of range in the 117.50 area.
  • Order Flow indicators; OBV continues consolidation below recent highs, Linear Regression supported at midpoint, Psychology bearish
  • Monitoring price action and Order Flow indicators to set longs to target 2014 highs

jpy2015-02-27 07_34_53-

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

  • Bullish consolidation continues while 1.2350 supports expect retest and break of 1.28 on route to key 1.30 resistance. Below 1.2350 targets trendline test towards 1.2150/2200
  • Daily Order Flow indicators; OBV just off highs, Linear Regression and Psychology pulling back piercing midpoints from above
  • Monitoring price action and Order Flow indicators to reset longs to target 1.30

uc2015-02-27 08_14_18-

AUDUSDShort Term (1-3 Days): Neutral  – Medium Term (1-3 WeeksBearish

  • .79 resistance rejects, aclose below yesterdays low suggest downtrend resumption, .77 likely supports on retest, but while .79 caps target year to date lows and .75 beyond
  • Order Flow indicators; OBV continues ticking up from recent lows, Linear Regression and Psychology bullish but stalling
  • Monitoring price action and Order Flow indicators to set short potions targeting .75

au2015-02-27 08_26_06-

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