Morning Report: Thin Trade Conditions Confine Ranges

KEY DATA RELEASES TODAY:

0900GMT EUR GfK German Consumer Climate exp8.9 v 8.7
0915GMT EUR EU Economic Summit

OVERNIGHT:

USDJPY was contained for most of Asian trade before popping higher. USDJPY was again in the lead and holding initially between 118.82-119.01. Large option expiries at 119.00 helped cap it. Bids proved strong however, and pushed it higher after the BOJ upped its economic assessment. Another push up in the Nikkei and risk-on feel and higher US Treasury yields aided ascent. Shorts were forced to cover and 119.37 traded. Despite the leg up, more headwind is eyed with more large option expiries at 119.50 ($1.384 bln) and 120.00 ($6.695 bln). EURJPY popped in sympathy with USDJPY, up from a 145.95-146.27 range to 146.49 despite the broad EUR bearish bias.

EURUSD did little in Asia again and especially so with Christmas/the New Year fast approaching and many already sidelined. Large vanilla option expirations on both sides virtually straight-jacketed EURUSD. E3.785 bln 1.2250-60 and E10.695 bln 1.2300 strikes will expire at the New York cut today. The overall EUR bias remains down with the Fed now more hawkish than heretofore and the ECB expected to embark on QE next year.

GBPUSD supported yesterday by upbeat retail sales data. UK retail sales in November increased 6.4% YoY, beating the forecast 4.4%, the biggest rise since 2004. Overnight confined to a tight range 1.5651-73 in Asian trade. Weaker GfK consumer confidence data had little effect.

Elsewhere, AUDUSD traded a 4-1/2-year low of 0.8113, having shed more than 1 percent on Thursday but managed to rebound. Traders eye the major support was found at the mid-2010 low at 0.8065 and the psychological 0.80 level below. AUDUSD has stumbled 9 percent this year, an outcome that will satisfy the RBA which has called for a lower currency to support a slowing economy

Looking ahead ECB LTRO repayments the data highlight today. Tier one dealers continue reporting that liquidity is tightening as we head into the holidays.

OVERNIGHT PRICE ACTION:

EUR: Retest of year to date lows continues
GBP: Range lows support again
JPY: Channel support holds as platform to retest highs
CAD: Consolidating at highs
AUD: Rebounds form 4 1/2 year lows

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 testing year to date lows
  • Order Flow indicators; OBV consolidating at lower levels, Linear Regression and Psychology pierces midpoint from above
  • Watching for potential double bottom support

eu2014-12-19 07_57_20-

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

  • Sharp rejection at range resistance, retest of range lows finds support
  • Order Flow indicators; OBV ticking up from lows, Linear Regression and Psychology rotating at midpoints
  • Watching for potential double bottom support

gu2014-12-19 07_59_38-

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

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

uj2014-12-19 08_01_17-

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

  • Continuing consolidation at highs still targeting topside of projected trend channel
  • Daily Order Flow indicators; OBV consolidating at highs, Linear Regression pierces midpoint from above and Psychology rotating at midpoints
  • Target and stops amended, please see key trades

uc2014-12-19 08_13_39-

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

  • Pause in the decline watching for retest of previous support as resistance
  • Order Flow indicators; OBV consolidating at depressed levels 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

au2014-12-19 08_17_06-

Posted in Forex Analysis, tagged with on