London Forex Report: ISM Injects Further USD Upside

London Forex Report: ISM Injects Further USD Upside

London Forex Report: US ISM manufacturing index surged to 54.7 in December, pointing to the quickest expansion in the sector in the past two years. The improvement was led by the strongest increase in new orders since summer 2009 and a pick-up in inflationary pressure which drove input costs higher. Broad based recovery was also reflected in the final Markit manufacturing PMI reading, which ticked up from 54.1 in November to 54.3 in December. USD climbed against 70% of its G10FX peers, boosted by firmer US data. The Dollar Index retreated slightly but kept gains to close 0.42% higher at 103.21.

FX Majors: EUR German prelim December CPI inflation (EU harmonized) came in at a surprisingly higher 1.7%y/y, the strongest since July 2013 and more than twice the inflation pace recorded in November (0.7%y/y). Expectations were for inflation to be 1.3%y/y. According to the Federal Statistics Office in Wiesbaden, the 1 percentage point jump in inflation was the highest on record. The jump in December inflation is attributed to the surge in oil price (Brent crude prices surged 12.6% in December, recording the biggest monthly increase since April 2016) and is set to mask continued weakness in the underlying price pressures ahead. GBP UK Markit manufacturing PMI climbed to 56.1 in December (November: 53.6) and marked its highest reading since June 2014 despite concerns over Brexit uncertainties. JPY Japan Nikkei manufacturing PMI print was at a one year high of 52.4 in December (November: 51.3).

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

Technical: Near term bears have the ball below 1.0520 targeting a retest of 1.0350, a close over 1.050 opens symmetry swing resistance sited at 1.0720
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Near term sellers still in charge while below 1.23 targeting a retest of 1.2198 ahead of 1.21, only over 1.2440 suggest some selling relief.
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Bulls have the ball as 116.10 supports looking for a challenge of psychological 120 level, a break below 116 opens pivotal 114.70
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: Buyers on the front foot while 121.60 supports on a closing basis, 124.42 symmetry swing resistance remains the upside objective
Retail Sentiment: Bearish
Trading Take-away: Long

Commodities FX: GOLD ended higher on Tuesday despite the positive US dollar and strong US manufacturing data, gold price increased by US$7.70 to close at US$1,159.40. OIL initially was on rapid ascent on Tuesday (3 Jan) with the US WTI futures briefly rising above US$55/barrel for the first time since July 2015 on the hopes that OPEC & major non-OPEC producer’s self imposed production cuts can help reduce the global oversupply glut. But sentiment quickly reversed and the optimism gave way to scepticism, sending oil prices more than 2% lower in the end. AUD catching a bid on stronger China data. Caixin pointed to the quickest acceleration in the manufacturing sector in December since January 2013, driven by healthy level of factory output and solid increase in total new work. The Caixin manufacturing PMI, a gauge of smaller and medium size firms, climbed a full point to 51.9 in December amid economic stabilisation in the world’s second largest economy. CAD event risk will remain muted until the release of the Canadian employment and trade reports on Friday. As such, USD CAD interest rate differentials and broader moves in the USD are expected to serve as catalysts for price direction.

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

Technical: While .7300 contains upside reactions .7092 AB=CD is the next downside objective. Over .7300 opens symmetry swing resistance sited at .7370

Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: 1.3620 becomes the next upside objective. Only a close below 1.3250 concerns the bullish bias
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: As 1165 stems the upside correction bears target 1113. Over 11.65 on a closing basis opens 1190
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Sharp 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.
Retail Sentiment: Bearish
Trading Take-away: Long

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