Morning Report: USDJPY To Test 1.20 – 2007 Levels

KEY DATA RELEASES TODAY:

1200GMT GBP Official Bank Rate exp 0.50% v 0.50%
1200GMT GBP Asset Purchase Facility exp 375B v 375B
1203GMT GBP MPC Rate Statement
1245GMT EUR Minimum Bid Rate exp 0.05%v 0.05%
1330GMT EUR ECB Press Conference
1330GMT USD Unemployment Claims exp 296K v 313K

OVERNIGHT:

Unsurprisingly, a quiet session so far in FX markets as we approach majors risk events today (ECB) and tomorrow (NFP). In terms of price action, the USD still reigns supreme, broadly bid against the majors with the DXY comfortably above the 2010 highs. The next key resistance level is the 2009 highs at 89.624, a test of which, by the end of the week, would not be a surprise.

In EUR and JPY, important psychological big figures are in play, with EURUSD continuing to hover precariously above 1.23 level and USDJPY with touching distance of 120.00 (first time since 2007).

Elsewhere, better than expected Australian retail sales (0.4% vs. e0.1%) and trade balance (AUD-1.3bio vs e-1.8bio) caused AUDUSD to spike to an intra-day high of 0.8429. The market, however, seems determined to sell AUD and quickly ignored the positive data to pull the pair back below 0.8400 to a new-low of 0.8380. Key support level remains 0.8315, July 2010 low.

Looking ahead, in terms of the ECB today, market consensus appears to be that they won’t announce sovereign QE but might announce a corporate bond purchase program and will be doveish enough in its message to signal a rising likelihood of more to come in early 2015. Market also expects an unchanged policy stance mainly because the Bank only very recently started to roll out its ABSPP and is only a few more weeks into its CBPP. In addition, several Executive Board members have indicated that the ECB will only assess its stance again in Q1 2015. Hence, the key event will likely be the release of a fresh set of staff projections.

OVERNIGHT PRICE ACTION:

EUR: New year to date lows
GBP: Holds established range
JPY: New year to date highs, ascending trendline eyed above
CAD: Double top resistance holds for now
AUD: Descending trend line broken potential trend continuation

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDBearishAwait new signal
GBPUSDNeutralBUY/ Nov 251.5745 OPEN1.5580
USDJPYBullishAwait new signal
USDCADNeutral SELL/ Dec 02 1.13 OPEN 1.1490
AUDUSDBearishAwait new signal

ANALYSIS:

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

  • Trend line resistance rejects, previous lows 1.2350 become immediate resistance
  • Order Flow indicators; OBV bearish and ticking lower, Linear Regression and Psychology bearish
  • Watching for rejection at previous support to set new short positions.

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

  • Supported again at lower end of the range, continues to consolidate in  1.56-1.58 area
  • Order Flow indicators; OBV ticking up from lower levels, Linear Regression and Psychology rotating around midpoints
  • Counter trend longs in play

gu2014-12-04 07_27_11-

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

  • Key 120 test next then ascending trendline resistance eyed above
  • Order Flow indicators; OBV bullish, Linear Regression and Psychology piercing midpoints from below
  • Watching for rejection of previous resistance to set new long positions

uj2014-12-04 07_30_25-

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

  • Price holds bullish channel but retesting potential double top resistance again, range contracting
  • Daily Order Flow indicators; OBV bullish but no new highs, Linear Regression and Psychology rotating at midpoints
  • Counter trend short orders stand against double top resistance

UC2014-12-04 08_37_43-

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

  • Close below descending trendline support suggests trend continuation
  • Order Flow indicators; OBV ticking lower confirming price action, Linear Regression and Psychology bearish
  • Monitoring retest of previous support as resistance to set new shorts

AU2014-12-04 08_41_41-

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