Morning Report: USD Correction Deepens

Key Data Releases Today

0900GMT – EUR EuroZone CPI Core exp 0.7% v 0.7%
0900GMT – EUR EuroZone CPI (SEP) exp 0.3% v 0.3%
1230GMT – USD Continuing Claims exp 2380k v 2381k
1230GMT – USD Initial Jobless Claims exp 290k v 287k
1315GMT – USD Industrial Production (SEP) exp 0.4% v -0.1%
1400GMT – USD Manufacturing Production (SEP) exp 0.3% v -0.4%
2000GMT – USD Net Long-Term TIC Flows (AUG)


Overview:

Yesterday saw US data, including retail sales and PPI inflation, miss the consensus by a substantial margin. Disinflation fears haunted the dollar which took a nosedive across the board as global uncertainty ripped through the market. Further complicated by geopolitical issues, the threat of Ebola and strong oil supply, markets are seeing a wave of risk aversion which has pushed the UST10Y down to 2.15%.

EURUSD:

Price has closed above 1.2784 for the first time in 15 days on the back of disappointing US data and could be set to build upon this base for a further correction to the upside. EuroZone CPI today is  expected to come in flat and as the inflationary downtrend seems pretty well priced in currently, an unchanged figure should still leave the pair with a chance for further upside, but any downside surprise is like to spur continuation lower.

I will be using a confirmed break of yesterday’s high in line with Order Flow Indicators crossing to the upside to set longs.  Sidelines ahead of CPI.

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GBPUSD:

Stronger than expected employment saw price spike as USD fell on data misses. However, the better data does little to offset falling inflationary pressure and the deteriorating growth outlook and price reversed its gains ending the day lower confirming the bearish sentiment.

I am still looking to trade pullbacks with a view to further downside and with Daily Order Flow Indicators threatening to cross to the upside I still see a retest of the descending trendline as a potential entry zone.

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USDJPY:

The USD weakness pushed price into our 105.40 target Yesterday where we exited our 107.70 short.  Price is currently holding the retest of the breakout level and is likely to consolidate here before we get a clearer picture of the next likely move though safe haven flows amidst growing risk aversion suggest downside will prevail.

I am sidelines here waiting for a new signal. Order Flow Indicators are close to crossing to the upside signalling some consolidation at this level. I will trade a continued breakdown lower on the Lower timeframes looking for a close below Yesterday’s low to enter.

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GBPCHF:

Price fell hard yesterday on risk aversion and stronger than expected UK employment did little to offset falling inflationary pressures & a deterioration in the growth outlook.

I will sell a breakdown through the horizontal support at 1.4970 with Daily Order Flow Indicators firmly to the downside and On Balance Volume trending downward.

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