On the back of last weeks Hawkish FOMC statement and the aggressive moves by the BOJ, this week started with a continuation of the USD bullish tone. USDJPY started Monday in fine fashion accelerating the gains of last week to register new multi year highs squeezing shorts. AUD,EUR and GBP consolidated ahead of their respective Central Bank decisions, the key consideration being the ECB. Draghi delivered on much touted dovishness, the fact that Draghi himself referenced policy divergence is a significant step change and sent all the majors to new cycle lows on Thursday.
- USD bullish tone from last week carried over into this week, capitalising on significant strength specifically against the JPY as new multi year highs were printed at the beginning of the week. Although Friday saw a pullback on marginal NFP miss, sitiing just highs into the weekend.
- GBP consolidated early in the week, rotating within its contracting range. The BOE pulled back from the once near certain November rate move, Cable weakened helped lower on more softening in domestic data. All eyes on inflation data due next week which may offer some reprieve to the deflated GBP
- JPY hammering continues last week’s BoJ and GPIF announcements validating JPY bearish views. Policy divergence is back, coupled with Japan’s deteriorating balance of payments position this combination should act as a significant negative for the JPY over the coming weeks.
- EUR started the week in wait and see mode but it is now clear that the market favours continued declines in EUR as expectations build for additional ECB accommodation in December, since President Draghi suggested that institutional impediments to taking further action were lower than many anticipated.
- AUD traded lower, RBA on hold but the Aussie unable to resist the broad USD strength and breaks the much watched eight week trading to the downside, although Friday’s action has been more bullish on USD softening. The key now will be watching price action into next week to assess whether the break is trend continuation to the downside or a fake out.
- CAD in concert with the USD bullishness prints new multi year highs at the beginning of the week. Strong Canadian payrolls today unemployment rate drops. Also, wage growth was relatively soft, suggesting inflationary pressures remain soft. With oil prices consistently weak, we’d expect this to remain the key driver of USDCAD. Buying on dips remains the preferred play for now.
USDCAD: Bullish – Revised (New long positions in play)
EURUSD: Bearish – Stopped on spec longs this week, watching retest of range lows from below to set shorts
GBPUSD: Bearish – Holding shorts tightening stops as we break lows.
USDJPY: Bullish – Still holding longs locking in profits tightening stops
AUDUSD: Bearish – Watching retest of range lows from below to set shorts
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