London Forex Report: Dollar Doing Better, Payrolls Disappoint

London Forex Report: Dollar Doing Better, Payrolls Disappoint

London Forex Report: With a robust week for risk assets, especially equities, last week, the question on many traders’ mind must be if the January effect will continue? US’ nonfarm payrolls (NFP) disappointed at 148k in Dec, coming on the back of a healthy ADP data earlier and a revised 252k print in Nov, but was weighed down by weakness in retail, transportation and trade sectors. There was a marginal -9k revision for the previous two months, but the unemployment rate sustained at 4.1% for a third month and the workweek was unchanged at 34.5 hours. The average hourly earnings also accelerated as expected to 0.3% mom (25% yoy), which helped to mitigate any fallout from the weaker than expected headline NFP print, and a March FOMC rate hike is still seen as likely (futures pricing is still elevated at 81% probability).

NORTH AMERICA Other US reports that came out on Friday showed improved consumption in Nov. Final reading on growth of durable goods orders was affirmed at 1.3% MOM, rebounding from a 0.4% fall in Oct. Meanwhile, factory orders saw an increase of 1.3% MOM in Nov, rebounding from a 0.1% dip in Oct. In a separate report, trade deficit widened to $ 50.5b in Nov, rising from a shortfall of $ 48.9b.

EUROPE Eurozone’s macro outlook continues to be firm as retail sector improves while producer prices picked up. The retail PMI climbed to 53.0 in Dec, up from 52.4, lifted by accelerated expansion in employment, purchasing activity and inventory. Producer prices picked up in Nov, rising 2.8% YoY from 2.5% previously. However, CPI estimate for Dec eased to 1.4% from 1.5% in Nov, denting hopes that rise in producer prices will be passed on to consumers.

ASIA Japan’s services PMI ticked lower from 51.2 in Nov to 51.1 in Dec, the slowest growth since Sept. Growth pace was slower in business activity and output but there were bright spots as new business orders and employment recorded quicker growth.

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

Technical: 1-3 Day View – 1.2077 achieved as 1.1990/60 supports expect a test of 1.2135/65 this area should stall the advance on the initial test. Only a move south of 1.1810 concerns the near term bullish bias.

1-3 Week View – 1.2130 the next upside objective. Weekly close below 1.16 neutralises bullish objectives opening a test of 1.14.
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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

Technical: 1-3 Day View – Prior cycle highs of 1.3545 achieved as 1.3490 supports expect a test of 1.3657, only below 1.34 concerns the near term bullish bias

1-3 Week View – 1.3263 achieved as this acts as support 1.3836 is the next upside objective only a close back below 1.30 would jeopardise the bullish advance.
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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

Technical: 1-3 Day View – Anticipated 113.30/60 resistance capped the advance a breach of 112 will open a retest of pivotal 110.80/60, near term price action is consolidating in 113.60/112 range.

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: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – 136 the primary upside objective is achieved expect 136.70/137 to cap advance on initial test, near term support is sited at 135.60/40. As 135 survives on a closing basis 141 becomes the next upside magnet.

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: Bearish
Trading Take-away: Sidelines