Morning Report: US Data & Month End Flows Eyed

KEY DATA RELEASES TODAY (GMT) :

1000 EUR CPI Flash Estimate y/y exp -0.5% v -0.2%
1000 EUR Core CPI Flash Estimate y/y exp 0.6% v 0.8%
1000 EUR Unemployment Rate exp 11.5% v 11.5%
1330 USD Employment Cost Index q/q exp 0.6% v 0.7%
1330 USD Advance GDP Price Index q/q exp 0.9% v 1.3%
1330 USD Advance GDP q/q exp 3.0% v3.5%
1445 USD Chicago PMI exp 57.7 v 58.3
1500 USD Revised UoM Consumer Sentiment exp 98.5 v 98.2

OVERNIGHT:

In contrast to the rest of the month, the final trading day of the January starts off in unspectacular fashion, with the Majors obeying relatively tight ranges and the USD a touch softer across the board. The DXY seems content around the 94.50 level but with important US data looming this afternoon, notably Q4 GDP and ECI (one of Yellen’s preferred indicators of wage growth), it may not hang around this level for long. If ECI is strong, there will be a narrowing of the gap between market pricing and the dots and USD should therefore rally on that. Diverging monetary policy theme will re-emerge and USD will be bought against any currency where central banks are easing… take your pick. Key support comes in at 94.00, while resistance at the yearly highs of 95.527 is the obvious topside level

EURUSD appears to have taken a back seat over the last 24 hours as market taking its direction from the cross JPY complex,if anything we have seen a rally in EUR crosses notably EURJPY. The demand for EUR cross has left EURUSD generally underpinned and resulted in a consolidation period over the last couple of sessions from the aggressive down trend witnessed into the open on the week which looks set to continue with 1.1385 continuing to provide the key intraday resistance level.

The daily candlesticks tell you all you need to know in USDJPY pretty much remains confined inside the 117.20 – 118.90 range, and from the looks of it, market is content (or has given up) to stand aside before any of these levels break. Month-end flows the main story this morning, and USDJPY grinds lower in spite of the weaker-than-expect CPI data, with exporters the main culprits of the move.

GBPUSD contained at the moment aside from a medium term bearish bias on likely month end demand in EURGBP supports today. Expect reactionary moves to the US data later with levels of note at 1.5020/30 supports initially and resistance at 1.5120/30 again.

Elsewhere, in AUDUSD, the McCrann article from Wednesday has caused some fuss, with increased expectations of a RBA rate cut on Tuesday. Even if he is wrong and the RBA doesn’t cut rates on Tuesday, markets do expect them to at least signal a cut. Plenty of supply in AUDUSD at 0.7800, expecting a challenge on the yearly lows at 0.7720, especially if today’s US data is strong.

PRICE ACTION OVERVIEW:

EUR: 1.1220 supports area base for test of 1.1460’s, break targets lows
GBP: 1.5125 caps expect early resumption of down trend, break targets 1.53
JPY: Eight day 119 – 117 range, upside break targets 2014 highs
CAD: 1.30 structural and psych resistance ahead next resistance grind higher supported at 1.2550 near term
AUD: Trend channel support  .7750 holds on first test, below .79 target .7650 next

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDNeutralAwait new signal
GBPUSDNeutralShort Jan 30 1.5125OPEN1.5125Intraday Signal
USDJPYNeutralLong Jan 16116.91OPEN116.91 Intraday Signal
USDCADBullishAwait new signal
AUDUSDBearishShort Jan 29.7878 OPEN.7878Intraday Signal

ANALYSIS:

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

  • While 1.1220’s support remains in tact and has the potential to act as a base  for the anticipated 1.1460 test where descending trendline resistance comes in. Break of 1.1220;s suggests immediate continuation of down trend and a retest of Sunday’s lows. Further strength through 1.15 sets up a test of 1.16 corrective equality target.
  • Order Flow indicators; OBV continues ticking from recent lows, Linear Regression and Psychology bullish.
  • Monitor price action at 1.1460 retest from below to set short positions to target 1.10

eu2015-01-30 07_10_03-

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

  • 1.5250/5350 horizontal and trendline resistance eyed, support at 1.5050 eroded while 1.5225 caps potential for resumption of down trend and retest of tear to date lows
  • Order Flow indicators; OBV rolling over retesting lows, Linear Regression and Psychology rejected at midpoints
  • Risk free shorts in play, see key trades for details

gu2015-01-30 07_13_25-

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

  • Day eight and counting of 117 -119 range, topside break initially targets 120 ahead of 2014 highs. Failure at 117 opens retest/break of key medium term bullish support at 116/115.50
  • Order Flow indicators; OBV continue consolidating below recent highs, Linear Regression and Psychology rotating at midpoints reflecting range trade in price
  • Risk free longs in play, please see key trades for details

uj2015-01-30 07_14_33-

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

  • 1.2550 resistance now near term support 1.2350
  • Daily Order Flow indicators; OBV new highs, Linear Regression and Psychology remain supported at bullish levels
  • Monitoring price action to set long positions around 1.2550 or 1.2350 targeting 1.30

uc2015-01-30 08_15_24-

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

  • .7750 projected channel support tested and supports on first touch while .79 contains upside expect down trend to remain in tact and lower trend channel support at .7650 to be targeted next
  • Order Flow indicators; OBV back at lows, Linear Regression stalling at midpoint, Psychology pierces midpoint from below
  • Risk free shorts in play, see key trades for details

au2015-01-30 08_20_00-

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