Morning Report: USD Approaching 4 Year Resistance Area

KEY DATA RELEASES TODAY:

0930GMT GBP Services PMI exp 56.6 v 56.2
1000GMT EUR Retail Sales m/m exp 0.6% v-1.3%
1230GMT GBP Autum Forecast Statement
1315GMT USD ADP Non-Farm Employment Change exp 223K v 230K
1330GMT USD Revised Nonfarm Productivity q/q exp 2.3% v 2.0%
1500GMT USD ISM Non-Manufacturing PMI exp 57.5 v 57.1

OVERNIGHT:

All about the USD again this morning as the DXY gets closer to the 2010 high at 88.708. To follow on from NY Fed President Dudley’s upbeat economic outlook Monday, Fed Vice Chairman Fischer indicated the FOMC is moving towards dropping the “considerable time” guidance at the upcoming meeting. US yields continue to tick higher (10yr just shy of 2.3%) and the USD is the standout performer over the last 24 hours. We are now approaching critical levels in many of the majors as the moves extend ahead of NFP on Friday. In EURUSD, 1.2350 is the major support level. We have tested close to here twice in November already so a break through could open significant move lower. In USDJPY, another new high of 119.44 printed with the market now firmly focussed on the 120 level.

Elsewhere, Australia’s GDP surprised markets to the downside at 0.3% QoQ (e0.7%) and 2.7% YoY (e3.1%) mostly driven by a sharp reduction in resources capex. Non-dwelling construction fell 6.7% QoQ, detracting -0.6ppt from growth. AUDUSD traded on 0.83 handle for the first time since 2010, with all focus on major support at 0.8315.

Looking ahead, it’s another busy day data wise, with Eurozone and UK services PMI, UK Chancellor George Osborne’s Autumn Statement, and a raft of data from the U.S.

We also have the BoC rate announcement and statement today, but there will be no new forecasts and no press conference from Governor Poloz. As rates will stay unchanged at 1%, all eyes will be on the statement. Of particular interest will be how concerned the BoC is about lower oil prices and whether there is a potential hawkish surprise – the BoC notes inflation pressures turning more broad-based, reflective of a strengthening economy and not just due to temporary effects. 1.1466 remains the key resistance level for USDCAD.

OVERNIGHT PRICE ACTION:

EUR: Range continues to contract, lows pressured
GBP: Back within well established range
JPY: New year to date highs, ascending trendline eyed above
CAD: Regains bullish channel, testing double top resistance again
AUD: Descending trend line support eroding, will be confirmed with bearish close today

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDBearishAwait new signal
GBPUSDNeutralBUY/ Nov 251.5745 OPEN1.5580
USDJPYBullishAwait new signal
USDCADNeutral SELL/ Dec 02 1.13 OPEN 1.1490
AUDUSDBearishAwait new signal

ANALYSIS:

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

  • Trend line resistance rejects and price now tests lows of contracting range
  • Order Flow indicators; OBV consolidating at lower levels, Linear Regression and Psychology pierce midpoints form above
  • Watching for contracting range resolution, for new positions

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

  • Back testing lower end of the established recent range
  • Order Flow indicators; OBV consolidating at lower levels, Linear Regression and Psychology pierce midpoints from above
  • Counter trend longs in play, please see key trades

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

  • Potential double top negated, ascending trendline resistance eyed above 
  • Order Flow indicators; OBV bullish retreats from recent highs, Linear Regression and Psychology break lower,  holding support levels retesting midpoints from below 
  • Watching for Order Flow indicators to confirm trend continuation for new long positions. 

uj2014-12-03 07_28_50-

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

  • Price holds bullish channel but retesting potential double top resistance again
  • Daily Order Flow indicators; OBV bullish but no new highs, Linear Regression and Psychology pierce midpoints from below
  • Counter trend short orders stand against double top resistance

uc2014-12-03 08_02_21-

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

  • Rapid retest of descending trendline monitoring confirmation close below for trend continuation
  • Order Flow indicators; OBV rolling over again retesting lower levels, Linear Regression and Psychology rejected at midpoints and declining to lower levels
  • Monitoring a break and close below descending trendline support for new positions

au2014-12-03 08_37_28-

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