Morning Report: UK Inflation Report, With One Eye On The Wires

KEY DATA RELEASES TODAY (GMT) :

1015 EUR EU Economic Summit
1330 USD Core Retail Sales m/m exp -0.4% v -1.0%
1330 USD Retail Sales m/m exp -0.4% v -0.9%
1330 USD Unemployment Claims exp 282K v 278K
1500 USD Business Inventories m/m exp 0.2% v 0.2%

OVERNIGHT:

Lots of noise and headlines over the last 24 hours driving short term flows in EUR, GBP and JPY. The EU failed to even agree a statement for today so more discussions are needed and we will have to wait till Monday for the next episode in the Greek saga so trading will continue to be dominated by headline driven short term reactionary trading.

At 4.40pm EST CNBC newsflash that Greek agreement in principle had been reached; traders jumped in and lifted EURUSD up to 1.1353. The media, without citing source, said Greece will stay in EU bailout program however, final details of Greek deal to be known Monday. Bloomberg posted that one Greek official said there was no deal. EURUSD fell into 1.1310. The news conference by Euro group head Dijsselbloem sealed it but somehow market decided to stand aside. Most player taking the view that there was no point punting on headlines better wait till Monday The guys who jumped in before NY closed have left tight reported stops below 1.1295. Greek news had the USDJPY up at 120.40’s and that was it. Japan reopened today, investors and exporters sold USD. Positive Nikkei late on helped soak up the supply and we are drifting back towards highs.DTCC report there is a 120.00-strike expiring tomorrow worth $3.9bn.

Elsewhere, AUD January Employment data was softer than expected but the trend pace is not that startlingly different from the end of 2014. AUD traded up to 0.7729 and was at around 0.7720/25 before the release of the employment data. The downside surprise to employment change and higher unemployment rate saw the Aussie immediately drop around 65 pips before slipping further to a low of 0.7644.

Looking ahead Data wise we have German CPI and EC Industrial Production. Today GBP takes centre stage as all eyes will be on the release of the UK inflation report around midday market will look to the interpretation of today’s report and BOE Governor Mark Carney’s comments as the catalyst for GBPUSD to resolve its recent range 1.5150/1.5350.

PRICE ACTION OVERVIEW:

EUR: While 1.1300/1.1250 supports focus on 1.17 upside corrective equality target, below 1.12 targets 1.10
GBP: 1.5350 caps upside expect downtrend resumption, failure at trendline suggest broader correction targeting 1.5450
JPY:  120.50 key resistance while this holds scope for one more corrective leg in broader bullish consolidation pattern
CAD: Bullish consolidation continues to develop while 1.2350 supports 1.28 next upside objective ahead of 1.30 key resistance
AUD:  0.79 resistance rejects caution on potential double bottom as base for .8050 corrective target.

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDNeutralAwait new signal
GBPUSDNeutral Short Feb 111.5233 OPEN 1.5363Intraday signal
USDJPYNeutral Await new signal
USDCADBullishAwait new signal
AUDUSDBearishShort Jan 29.7878 OPEN.7778Intraday Signal

ANALYSIS:

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

  • Headline driven short term price action continues to respect range in the 1.1250 1.1350 area suggests still scope for one final corrective swing to test equality target at 1.17. Loss of 1.12 suggest downside trend resumption.
  • Order Flow indicators; OBV consolidating at lows, Linear Regression and Psychology rotate around midpoints
  • Monitor price action at 1.17 or a break of 1.12 to reset short positions to target 1.10

eu2015-02-12 07_24_39-

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

  • 1.5350 contains upside we look for a loss of 1.52 to open next leg of downtrend towards 1.48. Break of 1.5350 opens 1.5450/1.55 in broader corrective move.
  • Order Flow indicators; OBV consolidating at lows, Linear Regression and Psychology bearish.
  • Shorts in play, please see key trades for details

gu2015-02-12 07_26_02-

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

  • Above 120.80 suggest that the uptrend will resume earlier than anticipated and 2014 highs will be the next upside objective. Price needs to reclaim 119.50 to support the view of a final corrective leg before higher
  • Order Flow indicators; OBV still consolidating below recent highs, Linear Regression pierces midpoint from below, Psychology bullish
  • Will monitor price action at 120.50 to set interim shorts for 117 retest

uj2015-02-12 07_30_10-

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

  • 1.2350 support holds and 1.26 resistance removed path is clear for 1.28 test, with near term potential for 1.25 – 1.28 range trade before higher.
  • Daily Order Flow indicators; OBV retreating from recent new highs, Linear Regression bullish but stalling, Psychology pierce midpoints from below
  • Monitoring price action to set long positions targeting 1.30

uc2015-02-12 08_23_17-

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

  • Rejection from 0.79 encourages bearish view but while .7620 holds still potential for double bottom and broader correction, below .7620 targets .75 next.
  • Order Flow indicators; OBV at new lows, Linear Regression and Psychology bearish
  • Risk free shorts in play, stops amended, see key trades for details

au2015-02-12 08_44_43-

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