London Forex Report: Budget Deal Boosts Buck

London Forex Report: Budget Deal Boosts Buck

London Forex Report: Volatility in markets persisted as US equities swung between gains and losses before a bout of heavy selling in the last 15 minutes of trade brought major benchmarks to finish in the red on Wednesday after a brief rally the day before. The US Senate reportedly reached a two-year budget deal, which is slated to raise federal spending by almost $300 billion. The agreement is said to raise caps on defence funding and other domestic government spending. The deal also includes an extension of the government debt ceiling deadline to March 2019.

NORTH AMERICA US MBA mortgage applications rebounded with a minor 0.7% WoW increase in the week ended 2-Feb, driven by a rebound in refinancing applications while applications for new purchases turned in flat. Consumer credit increased at a slower than expected rate of $18.4bn in Dec (Nov: $31.0bn revised), as credit card spending and nonrevolving credit (mainly student loans and car loans) both rose at a slower pace, reflecting cautious consumers.

EUROPE European Commission upgraded its growth forecasts for the Eurozone to 2.3% and 2.0% for 2018 and 2019 (previous 2.1% and 1.9%), expecting a return to solid growth despite a slight moderation from the 2.5% in 2017. Officials from the Commission said “Europe economy has entered 2018 in robust health”, and that “unemployment and deficits continue to fall and investment is at last rising in a meaningful way”. Outlook on inflation remained subdued nonetheless, projected at 1.5% this year and 1.6% next year, still below the ECB’s 2% target, as subdued wage growth is expected to keep a lid on inflation. The European Commission also warned against risks from high asset prices, geopolitical tensions, and Brexit uncertainties. The increase in UK house prices as measured by Halifax tapered off for the 3rd consecutive month, and by more than expected to a six month low of 2.2% YoY in Jan. This, coupled with the first back-to-back decline (-0.6% in Jan and -0.8% in Dec) since Aug-16, reaffirmed prospects of a cooling housing market as concerns over Brexit uncertainties continued to linger.

ASIA Japan leading index tapered off more than expected to 107.9 in Dec, offering signs of expectations for softer outlook ahead even as current conditions were more upbeat as seen in the rise in coincident index to 120.7 during the month. This mornings report showed current account surplus narrowed more than expected to 797.2bn in Dec, as deficits in the services account and smaller surplus in the income account offset higher trade surpluses.

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

Technical: 1-3 Day View – Daily close below 1.2290 concerns bullish bias delaying the 1.2635 target, a failure to recapture 1.23 handle today suggest further weakness to test 1.2165. Near term resistance sited at 1.2305/15

1-3 Week View – As 1.2130 now acts as support expect a test of 1.2635 as the next upside objective. Weekly close below 1.19 neutralises bullish objectives opening a test of 1.14.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – The daily closing breach of 1.39 range support opens 1.3710, over 1.40 on a closing basis would stabilise the pair and suggest a return to focusing on upside objectives.

1-3 Week View – As 1.3836 supports 1.45 becomes the next upside objective, only a close back below 1.34 would jeopardise the bullish advance.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – The breach of of 109.50 opened a retest of 108.28 bids came in 108.44 as 110.20 contains upside correction expect a retest of 108.44, over 110.30 opens 111

1-3 Week View – As 108.40 equidistant swing support survives on a weekly closing basis bulls will look for a grind higher to retest 115, a close below 108 negates the broader bullish theme and opens the psychological 100 magnet
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: 1-3 Day View – As pivotal 133.30 support test survives, there is potential for a platform to develop to test 141, as 136.30 supports 137.63 is the near term upside hurdle

1-3 Week View – 136.10 is the principle upside objective , rotation within the broader range persists breach of 132.20 sets a retest of 131.50, a closing breach of 131 concerns the bullish consolidation bias.
Retail Sentiment: Neutral
Trading Take-away: Neutral

Posted in Forex Analysis, London Forex Report, tagged with on