Morning Report: USDCAD 5 Year Highs AUDUSD 4 Year Lows

KEY DATA RELEASES TODAY:

0900GMT EUR Flash Services PMI exp 51.6 v 51.3
0900GMT EUR Flash Manufacturing PMI exp 50.5 v 50.4
1000GMT EUR German ZEW Economic Sentiment exp 19.8 v 11.5
1000GMT EUR ZEW Economic Sentiment exp 20.1 v 11.0
1330GMT USD Housing Starts exp 1.04M v 1.01M
1330GMT USD Building Permits exp 1.06M v 1.08M
1445GMT USD Flash Manufacturing PMI exp 56.1 v 54.7

OVERNIGHT:

USDJPY moved lower in Asian trade with the Nikkei off large at the open and continuing lower in the afternoon. USDJPY peaked at 118.01 before another leg down as Nikkei losses increased. Good support is eyed ahead of 117.00, $2.744 bln in vanilla option expiries at the strike also look to be supportive. EURJPY traded similarly, off from 146.71 to 146.20. Sentiment here looks to be more bearish given Eurozone negatives and suggestions of deflation.

EURUSD opened in Asia at 1.2437 after being pressured overnight on widening US Treasury-Bund interest rate differentials as well as dovish comments from ECB’s Nowotny, uncertainty over Greece and EURJPY sales. Asian trade saw it consolidate between 1.2434-51 before a late move up to 1.2463 on fresh USDJPY weakness. Central bank expectations look to remain a major focus for EURUSD into Wednesday’s FOMC meeting. E1.397 bln in 1.2500-strike option expiries will be seen at the New York cut today.

Elsewhere, GBPUSD was the worst performing G10 currency against the dollar. It fell towards a 15-month low yesterday as concerns regarding the FOMC meeting also weighed on the pair.The Aussie dropped to 4-1/2-year lows overnight and slipped to 0.8198, the lowest since mid 2010 on the back of RBA minutes which reiterated the AUD remained above most estimates of its historical standards, with more depreciation likely needed to achieve balanced growth. USDCAD broke 1.16 to print its highest level in 5-1/2 years yesterday as crude prices hit multiyear lows after OPEC remained firm on its production stance.

Looking ahead key data points in the European session will be the German ZEW sentiment release and in the US more housing data with Nov housing starts and building permits.

OVERNIGHT PRICE ACTION:

EUR: Still holding for another 1.25 test
GBP: Retreats to mid range, trendline resistance still eyed
JPY: Stern test of 117 support under way
CAD: 5 year highs,  consolidating
AUD: 4 year lows, consolidating

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDBullish BUY 13 DEC1.2495 OPEN1.2345
GBPUSDNeutralAwait new signal
USDJPYNeutralAwait new signal
USDCADBullishBUY 9th DEC1.1495 1.1695 1.1545Risk Free
AUDUSDBearishAwait new signal

ANALYSIS:

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

  • Range contraction below key 1.25 resistance a break to open 1.26
  • Order Flow indicators; OBV ticking back up, Linear Regression pierces midpoint form above and Psychology is bullish pulling back to test midpoint
  • Counter trend long orders in play

eu2014-12-16 07_29_20-

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

  • Price retreats to middle of recent range while lower levels hold trendline resistance break eyed
  • Order Flow indicators; OBV ticking back up, Linear Regression pierces midpoint from above and Psychology setting up to retest midpoint from above
  • Watching trendline resistance break and retest for new positions

gu2014-12-16 07_32_46-

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

  • 117 area horizontal support continues to hold decline for now
  • Order Flow indicators; OBV bullish consolidating at highs, Linear Regression ticking back up piercing midpoint and Psychology attempting to recapture midpoint from below
  • Monitoring price action at 117 for potential new long positions

uj2014-12-16 07_37_05-

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

  • New multi year highs trend continuation targeting topside of projected trend channel
  • Daily Order Flow indicators; OBV bullish new highs, Linear Regression and Psychology bullish
  • Target and stops amended, please see key trades

uc2014-12-16 08_03_31-

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

  • New multi year lows continue to print. 
  • Order Flow indicators; OBV bearish and consolidating at depressed levels, Linear Regression bearish and Psychology ticking up to test midpoint from below
  • Monitoring trendline resistance and previous spike lows to set new shorts

au2014-12-16 08_00_28-

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