Morning Report: USD Profit Taking Ahead Of Risk Events

Key Data Releases Today

0930GMT – GBP Industrial Production exp 1.6% v 2.5%
0930GMT – GBP Manufacturing Production exp 2.8% v – 3.9%
1200GMT – GBP Bank of England Interest Rate Decision exp 0.5% v 0.5%
1245GMT – EUR European Central Bank Rate Decision exp 0.05% v 0.5%
1330GMT – EUR ECB Draghi Press Conference
1330GMT – USD Initial Jobless Claims exp 236.5K v 238.4K
1330GMT – CAD Ivey Purchasing Managers Index exp 57.5 v 58.6


Overview:

USD gave back a lot of its gains from yesterday during the Asian session. After making a new four year high at 87.60, the DXY has dipped back to 87.20 overnight. USDJPY testing the 115 handle printing for the first time in 7 years, as the Nikkei started to fall sharply, profit takers took USDJPY back down to the lows 114s. There is still no rhetoric from Japanese officials regarding the negative effect of JPY weakness, but price action is choppy and demonstrates that market participants are very keen to lock in any profits ahead of risk events.

Australian employment data was marginally better than expected. AUDUSD moved back to an 86 handle but closing below the yearly lows yesterday at 0.8642 was bearish, so any rallies should be sold into. EURUSD and GBPUSD continue to rotate around their 1.25 and 1.60 magnets ahead of Central Bank decisions today.The ECB will be the more interesting of the two events with the market looking for clues on further ECB action. Added focus will be on Draghi himself after the Reuters article about internal fraction within the ECB.

EUR range bound ahead of ECB.
CAD bearish rejection at new year to date highs.
GBP range bound ahead of BOE.
JPY strengthens overnight with pullback in Japanese equity markets.
AUD breaks range lows but recovers on better jobs data.

Key Trades:

EURUSD: Neutral to Bearish – Revised (spec longs in play)
USDCAD: Bullish – Revised (spec longs in play)
GBPUSD: Neutral to Bearish – Revised (trailing stops on shorts)
USDJPY: Bullish – No Change (trailing stops on longs)
AUDUSD: Neutral to Bearish – Revised (monitoring confirmation of range break)

Analysis:

EURUSD: Neutral to Bearish – No Change

  • Ranging rice action ahead of ECB
  • Order Flow indicators remain negative although Linear Regression and Psychology are ticking up to test mid points, indicative of participants squaring positions ahead of key risk event
  • Follow through on Mondays Pin Bar triggered spec longs Tuesday, stops in tact below Tuesday’s low

EURO

USDCAD: Neutral to Bullish – Revised

  • Price retreats from new year to date highs on USD profit taking
  • Daily Order Flow indicators are pulling back as longs lock in profits
  • Corrective price action confirmed with new highs, monitoring for trend continuation
  • Break and close above previous highs has triggered new long positions, stops in place below breakout bar

loonie

GBPUSD: Neutral to Bearish – Revised

  • Pin bars and neutral bars continue to print in contracting range
  • Have moved stops on shorts to above yesterdays highs
  • Will try spec longs on break higher from yesterday pin bar at year to date double bottom targeting last week highs initially and then on to the major trend line
  • Order Flow indicators remain negative, but are ticking up as participants square positions ahead of key risk events into the end of the week

CABLE

USDJPY: Bullish – No Change

  • Price retreats from year to date highs
  • Order Flow indicators retreating from bullish elevated levels with profit taking ahead of key risk events
  • Long positions intact with stops trailed below Wednesday’s low to lock in significant gains

yen

AUDUSD: Neutral – No Change

  • Range retest from above triggers stops at range lows
  • Monitoring price action cautious of fake out from obvious range break
  • Order Flow indicators are drifting towards midpoints
  • Key now is monitoring range low retest from below, a strong close today back in the range would suggest break was a fake out
  • If price is rejected from range lows this suggests bearish trend continuation

aussie

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