Morning Report: Tories Returned, GBP Soars, For Now… NFP’s Next

KEY DATA RELEASES TODAY (BST) :                                                                                                                                                                   
09:30 GBP Trade Balance -9.8B v-10.3B
13:30 USD Unemployment Rate 5.4% v5.5%
13:30 USD Non-Farm Employment Change 228K v126K
13:30 USD Average Hourly Earnings m/m 0.2% v0.3%
14:45 USD FOMC Member Dudley Speaks

OVERNIGHT:

EURUSD posted its biggest one day drop against the dollar in nearly a month, as the dollar recovered on the back of the better-than-expected US initial jobless claims.The pair reached its 2-month high at 1.1391 at the beginning of the European session as German 10-year Bund yields retreated from a 5.5-month high.

GBPUSD was lifted to its one-week high on the prospect that British Prime Minister David Cameron’s Conservatives will stay in the government exit polls of the UK election gave the Conservatives a slim majority in the parliament. The final result will be announced later this morning.

The dollar strengthened against the yen overnight post the strong US data. Japan April Composite PMI printed at 50.7 versus 49.4 in March while Japan April Services PMI rose to 51.3 from 48.4 in March. All eyes now turn to today’s Non farm payrolls data as the headline data is most likely to define the the resolution of the near term range.

PRICE ACTION OVERVIEW:

EUR: The sharp reversal from 1.1390 should see initial support in the 1.1160/40
GBP: Break of 1.55 en route to 1.5560 key resistance expect offers on first test
JPY:  Retesting 120 descending trendline resistance offers a break and close above 120.50 opens April highs
CAD: Bids at 120 continue to support on a closing basis, while this level survives anticipate a retest of 123/24 from below
AUD:  Offers at .8050 reject while .78 supports potential for another run at .8050

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDBullish Await new signal
GBPUSDBullishAwait new signal
USDJPYNeutralAwait new signal
USDCADNeutral Buy/May 7 1.2090 Open1.2090
AUDUSDNeutralSell/May 7.7930Open.7930

ANALYSIS:

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

  • The sharp reversal from 1.1390 should see initial support in the 1.1160/40 area if the next reaction higher form this area fails to print new cycle highs expect further pullback to test the 1.10 base
  • Order Flow indicators; OBV ticking down, Linear Regression and Psychology retest midpoints
  • Monitoring price action and Order Flow indicators to set shorts against 1.1350

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

  • Break of 1.55 en route to 1.5560 key resistance expect offers on first test, while this area caps expect reaction lower to retest 1.51/1.50 base, a close above 1.56 targets 1.58 next
  • Order Flow indicators; OBV ticks back up, Linear Regression and Psychology bullish but rolling over to retest midpoints from above
  • Monitoring price action and Order Flow for shorts targeting 1.45 initially and 1.42 in extension against 1.5560

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USDJPY: Short Term (1-3 Days): Neutral  – Medium Term (1-3 WeeksBullish
  • Retesting 120 descending trendline resistance offers a break and close above 120.50 opens April highs, failure suggests another retreat back to range lows.
  • Order Flow indicators; OBV ticking up from recent lows, Linear Regression and Psychology pierce midpoints from above
  • Monitoring price action and Order Flow indicators to set longs against 118 targeting 124

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

  • Bids at 120 continue to support on a closing basis, while this level survives anticipate a retest of 123/24 from below. A break of 120 target 118 next
  • Daily Order Flow indicators; OBV ticking down, Linear Regression and Psychology bearish
  • Monitoring price action and Order Flow indicators on retest of 123/124

uc2015-05-08 08_14_54-

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

  • Offers at .8050 reject while .78 supports potential for another run at .8050, below .78 concerns near term bullish bias
  • Order Flow indicators; OBV ticking up, Linear Regression and Psychology pierce midpoints from below
  • Monitoring price action and Order Flow indicators to set shorts targeting .72 against .8050

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