London Forex Report: Dollar Reversal

London Forex Report: Dollar Reversal

London Forex Report: US data and Fed speeches continued to reaffirm prospects of interest rate hikes sooner than later. Probability of a March rate hike rose to 44% from 34% a day ago. Retail sales surprised on the upside with a 0.4% MOM increase in January while CPI increased at its fastest pace in almost four years, by 0.6% MOM and 2.5% YOY (5-year high), shored up by higher prices of gasoline and new motor vehicles. Other US data suggest that manufacturing activities were on solid pace of expansion although not reflected on the broad IPI number in January. Manufacturing sector sustained a 0.20% monthly gain while Empire manufacturing index ticked up to 18.7 in February (January: 6.5), the highest level since September 2014. USD reversed course and fell against 80% of its G10, amid profit taking after gains in recent days as optimism over Fed rate outlook fizzled despite hawkish Fed speak and positive US data. The Dollar Index fell marginally from 101.25 to 101.18 at the close.

FX Majors: EUR Eurozone’s trade surplus rose € 2.3 billion to an eight month high of € 24.5 billion in December after a monthly increase of exports (2.80%) and imports (1.70%). Annual surplus rose to € 273.90 billion last year (2015: € 238.70 billion), thanks to the pick- up in exports in the final months of the year. GBP UK’s unemployment rate was unchanged at 4.80% in the three months through December, showing little signs that Brexit talks is denting growth prospect in the near term. Employment increased by 37k and labor force participation rose to a record 74.60%. Claimant count rate edged 0.2 ppt down to 2.10%. JPY In the absence of major releases from Japan for the remainder of this week, risk sentiment and the USD’s outlook will likely be key for the pair.

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

Technical: Near term support sited at 1.0670 removed and now becomes near term resistance, the close back below 1.0580 sees the move to test symmetry swing support at 1.0515 which prompts a sharp reversal. Only over 1.0710 stabilises selling pressure.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Equidistant swing objective at 1.2679 capping advance for now. Near term support sited at 1.2345 survives on a closing basis prompting sharp reversal suggesting a retest of recent cycle highs, a close below 1.2330 opens 1.2236 symmetry swing support. Near term resistance is sited at 1.2580
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Only a 112 sustained breach will open 110.70 symmetry swing support underpinned by 109.90 50% retracement of the move from August 2016 lows. Near term resistance sited at 113.30 removed and now becomes near term support, a close over 114.50 reasserts upside targets primarily at 115.50
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Symmetry swing support at 120.40 removed, the failure below 120.40 opens 118.70 as the next downside objective. Near term resistance sited at 121.50 a close over 122.10 resets attention on upside targets.
Retail Sentiment: Neutral
Trading Take-away: Neutral

Commodities FX: GOLD bucked the easing trend despite higher US rate hike expectations as investors sought the precious metal amidst political uncertainty outweighing US rate hike concerns. This gold price increased by US$7.80 to close at US$1,231.70. OIL prices edged lower on Wednesday (15 Feb) after the US Energy Information Administration (EIA) reported the US crude inventory jumped by 9.5mn barrels to reach 518mn barrels, the highest level of stockpile since 1982 while gasoline inventory also increased. EIA also reported that US exported 1.03mn barrels of last week, the most in more than 23 years. US crude oil exports averaged 695,000 for the first six weeks of 2017, up from 450,000 a year ago. AUD benefited of late from stronger local data, broad based selling in the US Dollar, rallying base metals. While Thursday’s better headline print from Aussie employment opened a fresh 2017 high, the market has since pulled back after a closer glance at the data revealed slumping full time jobs. CAD Canadian top tier data releases this week are limited, expect the CAD mixed data out of Canada on Wednesday with manufacturing beating and existing home sales disappointing. The wash translated into less interest on the Canada side, with the Loonie left trading on US fundamentals and broader macro flow.

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

Technical: The next upside objective is sited at .7750. Near term support is sited at symmetry swing level .7600 ahead of pivotal .7449
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1.3150 resistance eroded, over 1.32 opens a move back to test 1.3370.Price action remains erratic as price attempts to base above pivotal 1.30. Near term support is sited at 1.3050, failure here opens a retest of 1.2967
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: The 1225 upside breach confirmed the anticipated move to 1245 as 1218 supports expect a retest of last weeks highs, a failure below 1206 opens a retest of 1180.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Rejection from equality objective area at 55.30, a close below symmetry support at 50.68 confirms a medium term high and opens a retest of pivotal 49.00. Near term resistance is sited at 54.50.
Retail Sentiment: Bearish
Trading Take-away: Long

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