Morning Report: USDJPY Spikes 7 Day Range & Snaps Back

KEY DATA RELEASES TODAY (GMT) :

0930 GBP Manufacturing PMI exp 52.9 v 52.5
1330 USD Personal Spending m/m exp -0.1% v 0.6%
1330 USD Core PCE Price Index m/m exp 0.0% v 0.0%
1500 USD ISM Manufacturing PMI exp 54.9 v 55.5

OVERNIGHT:

Asian equities opened the week on a weaker footing on the back of China PMI’s for January which suggested the overall economy is yet to turn the corner. PMI manufacturing dropped to 49.8 in January vs expectation of a rise to 50.3 – the first contraction reading in more than two years

Handelsblatt report suggests European Commission President Jean Claude Juncker is weighing reforming the Troika’s negotiations with Greek officials over the countries public finances. This news was viewed as a positive step forward and the EURUSD was supported in early Asian trade it has since pulled back but maintains an overall 1.1350 – 1.1250 range for now. GBPUSD also remains in range after holding 1.50 on Friday and opened strongly in Asian trading printing a high of 1.5097 before pulling back, with the BOE meeting on Thursday and NFP’s Friday it is likely we continue to range in the broader 1.50 to 1.52 area more the next directional move

USDJPY opened sharply lowered to 116.65 from 117.35 in early Asian trade possibly reflecting reaction from weekend news of weak China PMI and the death of a Japanese journalist hostage in the Middle East. February marks the end of the Japanese financial year and is likely to witness Japanese repatriation flows from a seasonal perspective.According to DTCC there are two sizeable option expiries to roll off this week 6.69BLN at 116 and 2.9BLN at 118 so market likely to hold range for now., with Fridays NFP release the most likely catalyst for a range break.

Elsewhere, AUDUSD gapped lower at the open to print a low of 0.7732 but subsequently bounced above the 0.7790 levels. The near term focus for AUD however, remains tomorrow’s RBA meeting where most economists’ baseline scenario increasingly appears to be a rate hold but with a much more dovishly oriented bias. RBA watcher McCrann and most local banks are suspiciously in the cut camp. When the RBA started the previous cutting cycle, it was also the locals who were first to pick it up.

Looking ahead, manufacturing data is the main focus today. In morning session we get Eurozone PMI manufacturing revision & UK PMI manufacturing. While in the afternoon, US release ISM manufacturing, construction spending and personal income and spending.

PRICE ACTION OVERVIEW:

EUR: 1.1220 support area base for test of 1.1460’s, break targets lows
GBP: 1.5000 support must be removed to open test of year to date lows
JPY:  119 – 117 range maintained for now, upside break targets 2014 highs
CAD: 1.30 structural and psych resistance ahead, grind higher supported at 1.2550 near term
AUD: Trend channel support  .7750 holds on first test, below .79 target .7650 next

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDNeutralAwait new signal
GBPUSDNeutralShort Jan 30 1.5125OPEN1.5125Intraday Signal
USDJPYNeutralLong Jan 16116.91OPEN116.91 Intraday Signal
USDCADBullishAwait new signal
AUDUSDBearishShort Jan 29.7878 OPEN.7878Intraday Signal

ANALYSIS:

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

  • 1.1220 support area with 1.1350 near term resistance, break of 1.1220 support opens retest of year to date lows above 1.1350 targets descending trendline and horizontal resistance at 1.1450
  • Order Flow indicators; OBV cosolidates at lows, Linear Regression pierces midpoint from above, Psychology is bullish but stalling.
  • Monitor price action at 1.1460 retest from below to set short positions to target 1.10 or on a break of 1.1220

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

  • Support at 1.5050 eroded but bids old 1.50 on a closing basis, while 1.5225 caps potential for resumption of down trend and retest of tear to date lows
  • Order Flow indicators; OBV rolling over retesting lows, Linear Regression and Psychology rejected at midpoints
  • Risk free shorts in play please see key trades for details

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

  • Range lows were breached early in Asian trade before sharp snap back into range 116.65 supports for now with 118.85 as resistance
  • Order Flow indicators; OBV continues consolidating below recent highs, Linear Regression and Psychology rotating at midpoints reflecting range trade in price
  • Risk free longs in play, please see key trades for details

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

  • 1.2600 near term support with 1.28 overhead resistance, break targets 1.30
  • Daily Order Flow indicators; OBV at highs, Linear Regression and Psychology remain supported at bullish levels
  • Monitoring price action to set long positions around 1.26/1.2550 targeting 1.30

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

  • .7750 projected channel support tested and supports on first touch while .79 contains upside expect down trend to remain in tact and lower trend channel support at .7650 to be targeted next
  • Order Flow indicators; OBV back ticking up from lows, Linear Regression and Psychology rotating at midpoints
  • Risk free shorts in play, see key trades for details

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