London Forex Report: Hawkish Yellen Boosts Buck

London Forex Report: Hawkish Yellen Boosts Buck

London Forex Report: USD strengthened against 80% of its G10 counterparts, boosted by hawkish remarks from Fed Chair Yellen. The Dollar Index surged on views that the Fed still eyes near-term rate hikes, gaining 0.29% to 101.25. Fed Chair Yellen’s speech to the US Senate Banking Committee and speeches from Fed Lacker and Fed Kaplan last night were hawkish, offering stronger signals that a March Fed rate hike is very much live, but in general markets see no shift away from the Fed’s gradual normalisation stance. Yellen mentioned that “At our upcoming meetings, the committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate”. She also cautioned against risks of staying accommodative for too long: “waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession”, although she remained wary over Trump policy uncertainties.

FX Majors: EUR In line with the European Commission concerns over growth momentum in the Eurozone, 4Q GDP moderated a tad to 0.4% QOQ in 4Q, below expectations for a sustained 0.5% QOQ gain dampened by growth in Germany, Italy and Netherlands. Industrial production in the region also fell more than expected while a survey by ZEW showed reduced optimism. GBP will be looking to build on its bullish momentum following a recent run of impressive local data when it takes in UK CPI today. Anything on the hotter side of expectation will likely give the currency another boost against the Buck. 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): Bearish – 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 resets focus on larger downside objectives, opening a move to test symmetry swing support at 1.0515. Only over 1.0710 stabilises selling pressure..
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 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: Bearish
Trading Take-away: Long

Commodities FX: GOLD eased for the third straight session on Tuesday hit by the expectations of another Fed rate hike coming soon in 2017. This gold price decreased by US$0.50 to close at US$1,223.90 on Tuesday. OILprices recovered a bit on Tuesday (14 Feb) after OPEC’s Monday report that said that the group’s total production fell by 890,000 barrels in January (from Dec) and a compliance record of 90%, indicated that OPEC deal is holding for now although the future remains uncertain. AUD Australia February consumer confidence jumped 2.3% to 99.6 (from 0.1% increase, 97.4 in January. China’s CPI accelerated by 0.40 ppt to increase 2.50% YOY in January, marking its quickest price growth since November 2013. Affirming that price pressure is gaining traction, PPI rose 6.90% YOY last month which was the highest print in more than five years. Price growth is evidently picking up, signalling that the country is heading toward its 3.00% inflation goal. A broad based increase in prices suggests that domestic demand is on solid footing, closing the gap for China to achieve its 6.50% GDP growth in 2017. CAD Canadian top tier data releases this week are limited, expect the CAD to look towards the US for a sense of trading direction this week. On the topside, stable oil prices should provide a cap on any major gains the USD has on CAD. Conversely, on the bottom end, USDCAD should be capped by the expectation of interest rate divergence as highlighted by Poloz.

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.
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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