London Forex Report: EUR Political Risk Ebb Prompts

London Forex Report: EUR Political Risk Ebb Prompts Reversal

London Forex Report: Minutes of the January FOMC meeting reaffirmed expectations that the Fed is prepared to raise rates earlier than later. Policy makers said it might be appropriate to raise rates again “fairly soon” if incoming information on the labour market and inflation was in line with or stronger than expectations; of if the risks of overshooting the committee’s maximum employment and inflation objectives increased. Futures pricing of a March rate hike remained little changed at 34% after the release of the minutes. USD reversed all early gains and slipped against 60% of its G10 peers after bets of an earlier than expected rate hike were pared as the Fed does not appear to be pressured by prospects of rising inflation. The Dollar Index retreated from intraday high in US morning and tumbled further after FOMC minutes, down 0.15% to 101.22.

FX Majors: EUR French Centrist politician Bayrou announced that he will not stand in presidential election and instead, he will back independent front-runner Emmanuel Macron prompting an intraday reversal of fortunes for the EUR. German IFO survey for February was broadly more positive with the expectations index higher at 104 (from 103.2 in January, forecast of 103.0), current assessment index higher to 118.4 (from 116.9 in January and forecast of 116.6) and business climate index higher at 111 (from 109.9 in January and forecast of 109.6).The final print for January CPI inflation data for Eurozone was unchanged at -0.8%m/m (+1.8%YoY) and core CPI inflation also unchanged at 0.9%YoY. GBP The UK economy expanded 0.70% QoQ in 4Q, slightly quicker than the 0.60% QoQ pace in 3Q. UK grew at its fastest pace in one year, helped by the 1.20% QoQ increase in exports growth (3Q: -0.80% QoQ). Household spending moderated to 0.40% QoQ (3Q: +0.50% QoQ) while fixed investment dropped 1.10% QoQ (3Q: +1.20% QoQ). On another report, index of services rose at a slower pace of 0.80% in the three months through December, followed a 0.90% expansion in the three months through November. JPY Japan January PPI services increased 0.5%YoY (from an upwardly revised +0.5%YoY in Dec and in line with the forecast for +0.5%YoY

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

Technical: Expected retest of 1.0521 base plays out potential here for interim double bottom, a breach opens a move to 1.0450 next, intraday 1.0575 is the first upside hurdle, only over 1.0635 arrests bear term bearish bias.
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Equidistant swing objective at 1.2679 capping corrective advance. Near term support sited at 1.2345 survives on a closing basis with range resistance sited at 1.2580
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

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 113.80, 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): Bearish – Medium Term (1-3 Weeks): Bearish

Technical:

118.70 downside objective achieved as near term resistance sited at 120.50 caps corrections bears target 117.75 next, only a close over 121.50 stems near term selling pressure
Retail Sentiment: Bullish
Trading Take-away: Short

Commodities FX: GOLD price eased despite a broadly weaker US dollar post FOMC minutes as investors focused on the fact that US Fed rate hike trajectory remained in place. OIL prices eased lower on Wednesday (21 Feb) as investors refocused on the ever-growing US crude inventories. AUD Australian private capital expenditure continued to decline but at a slower pace of –2.1%QoQ in 4Q 2016 (from -3.3%QoQ in 3Q) even as the pace of decline was well below the Bloomberg median forecast of -0.5%. CAD relative underperformance has come on the back of Wednesday’s much weaker than expected Canada retail sales print. Meanwhile, the stagnation in OIL prices have eliminated this variable as a volatility driver for the time being

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

Technical: The next upside objective is sited at .7750 as price continues to consolidate at elevated levels. 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: Neutral
Trading Take-away: Neutral

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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