Morning Report: USD Longs Squeezed Ahead of NFP’s

KEY DATA RELEASES TODAY (GMT) :

0930 GBP Services PMI exp 56.6 v 55.8
1000 EUR Retail Sales m/m exp -0.1% v 0.6%
1315 USD ADP Non-Farm Employment Change exp 224K v 241K
1500 USD ISM Non-Manufacturing PMI exp 56.6 v 56.2
1530 USD Crude Oil Inventories exp 4.0M v 8.9M

OVERNIGHT:

Market sentiment appears to be slowly shifting to one of optimism with hopes that the Eurozone may work out a new agreement with the new Greek government, with both parties adopting a more agreeable rather than confrontational stance. Add to the mix the four day rally in crude and it’s not hard to see why equities are buying into the broader shift in sentiment with the second consecutive session of strong gains on Wall Street boosting regional indices in Asia.

Optimism on a potential resolution to the Greek debt situation, weaker US factory orders and a decent spike in crude oil led EURUSD to break above the 1.1370 area with plenty of buy stops chasing the market to a high of 1.1534, larger stops are reported above 1.1550, yesterdays 220pip rally was the EURUSD’s best one day performance in over three months.

Sharp JGB sell off lead Nikkei and USDJPY softness yesterday, markets are monitoring 10 yr JGB move, with selling interest from domestic investors due to the coupon payment toward the middle of Feb. USDJPY was supported by bids in the crosses and short covering even with the USD selling pressure. As a result USDJPY is still sidelined and although drifting lower the broader range remains in tact for now. Expect some supply from long gamma players near 118.00 and demand from 116.00/50 area.

GBPUSD once again failed to break through the 1.5000 area and with some stronger construction CIPS data managed to maintain a decent rally up to the high 1.51s. Wider range still in play 1.50-1.5250. Elsewhere, the sharp reversal in commodities and specifically crude oil spurred profit taking in the AUDUSD and the USDCAD, both pairs are now testing key support and resistance levels for trend continuation.

Looking ahead the focus this morning will be on Eurozone & UK PMI data while in the US session we get ADP & ISM Non-manufacturing composite.

PRICE ACTION OVERVIEW:

EUR: While 1.1400 supports focus on 1.1590 upside corrective equality target
GBP: 1.5225 upper end of range should cap upside to resume down trend
JPY:  119 – 117 range lows pressured but holding on a closing basis for now
CAD: 1.28 caps advance for now, 1.2350 support being tested
AUD: Sharp reversal from trend channel support  at .7650, 0.79  first resitance

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDNeutralAwait new signal
GBPUSDNeutralAwait new signal
USDJPYNeutral Await new signal
USDCADBullishAwait new signal
AUDUSDBearishShort Jan 29.7878 OPEN.7878Intraday Signal

ANALYSIS:

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

  • 1.1450 horizontal and trendline resistance eroded upside focus shifts to equality corrective target of 1.1590  while 1.1400 supports
  • Order Flow indicators; OBV stalling above recent lows, Linear Regression and Psychology continue rotating at midpoints.
  • Monitor price action at 1.1460/1.1590 retest from below to set short positions to target 1.10

eur2015-02-04 07_19_18-

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

  • Bids hold 1.50 on a closing basis, price now looking to test upper end of range at 1.5225 while this caps to the upside expect bearish trend resumption
  • Order Flow indicators; OBV consolidating at lows, Linear Regression and Psychology continue testing midpoints from below
  • Monitoring price action to reset short positions to target retest of year to date lows

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

  • Range lows continue to be pressured but hold so far on a closing basis, 116.65 supports for now with 118.00 as resistance.
  • Order Flow indicators; OBV continues consolidating below recent highs, Linear Regression and Psychology rotating at midpoints reflecting range trade in price
  • Monitoring price action for a range break and retest to reset positions

jpy2015-02-04 07_24_02-

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

  • 1.2350 support being tested, near term resistance 1.2550 ahead of 1.28
  • Daily Order Flow indicators; OBV consolidating at highs, Linear Regression and Psychcology pulling back to test midpoint from above.
  • Monitoring price action to set long positions targeting 1.30

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

  • Projected trend channel support prompts sharp reversal, first resistance at 0.79
  • Order Flow indicators; OBV ticking up form recent lows, Linear Regression and Psychology pierces midpoint from below
  • Risk free shorts in play, see key trades for details

aud2015-02-04 08_01_53-

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