London Forex Report: Inflation Data Digested By Dollar

London Forex Report: Inflation Data Digested By Dollar

London Forex Report: US’ inflation cues disappointed market expectations at 0.5% MoM (2.2%YoY), with Fed chair Yellen opining that “my best guess is that these soft readings will not persist” and “we expect the neutral level of the federal funds rates to rise somewhat over time” and “additional gradual rate hikes are likely to be appropriate over the next few years”. This prompted the futures market to pare back expectations for a Dec17 rate hike to 73% probability. This soft inflation tone was reiterated across major central bank policymakers at the G30 meeting over the weekend.

NORTH AMERICA Retail sales rebounded from hurricane-inflicted weaknesses and advanced at a hefty 1.6% MoM in September, its quickest gain since March 2015, although it fell just a tad short of the expected 1.7% MoM increase. A big chunk of the boost came from gasoline sales due to higher prices. Ex-auto and sales, retail sales also managed to register a faster growth of 0.5% MOM during the month, signalling the pick-up was broad based. Preliminary print from University Michigan showed consumer sentiments unexpectedly jumped to 101.1 in October, its highest in nearly 19 years as consumers turned more optimistic over current economic conditions and future outlook. This shall be supportive of the US economy which is still very much consumption-led.

EUROPE ECB’s Draghi remained “confident” inflation will pick up and Constancio reiterated that the reinvestment of maturing assets “will continue until further notice”, ahead of the highly anticipated ECB policy meeting later this month where market players are already primed for some announcement to taper its EUR60b monthly bond purchase program) note that some ECB officials are said to have identified a limit of just over EUR2.5t and purchases are tipped to reach EUR2.28t by end-17). UK Rightmove house prices rose at a faster pace of 1.4% YOY and rebounded to increase 1.1% MoM in October. Gain in house prices however remained near its slowest since 2012, adding to sign the UK housing market is softening, a trend we similarly observed in housing markets of other majors.

ASIA Japan’s elections on 22 Oct 17 may keep the USDJPY this week on a separate path this week, with the consensus favouring a return to power by the LDP-led coalition, underpinning the USD-JPY somewhat. Elsewhere, expect some market caution ahead of China’s Party Congress (18-24 October 17) as traders await accompanying policy pronouncements. China exports picked up less than expected to increase 8.1% YoY in September, while imports growth beat expectations and gained 18.7% YoY. Trade balance narrowed more than expected to a surplus of $28.5bn (Aug: $41.9bn) as a result of more robust imports vis-à-vis exports, suggesting domestic consumption remains solid in China.

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

Technical: 1-3 Day View – Anticipated rejection from 1.18360/80 resistance plays out, as this area caps the correction expect a move back to test bids towards 1.17. Over 1.1920 opens a retest of current cycle highs. A close below 1.17 suggest second leg of broader correction underway targeting 1.1471

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: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – The daily close over 1.3220 opens the anticipated test of 1.3320 and now on towards 1.3360. Failure below 1.31 suggest end of corrective advance and opens 1.29

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: 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 sustained break of 112 opens a move to test 110.85 base break out level, 112 should now act as ear term resistance, only over 112.60 reasserts bullish objective over 113.50

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: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – The snapback close below 132 neutralises upside momentum opening a move back to 130.80, as this area supports there is potential for to regain upside bias, failure below 130 opens 129.30 next

1-3 Week View – 136.10 is the principle upside objective as this area caps the current advance expect a retest of 131.50 to set a base for the next leg higher, only a closing breach of 127 concerns the bullish basis.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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