London Forex Report: JPY On The Front Foot

London Forex Report: JPY On The Front Foot

London Forex Report: Global risk sentiments are attempting to stabilise, given Wall Street’s bounce overnight, but the rally could be short-lived if US inflation prints surprise on the upside tomorrow. US president Trump unveiled his 2019 Budget wishlist which outlines a US$1.5 trillion infrastructure package, which brilliantly has the federal government only coughing up US$200 with the rest being funded by the state and local governments. As part of suggesting fiscal discipline, the plan also includes deep non-military spending cuts that should pare the federal budget deficit by more than US$3 trillion over the next decade, but basically the budget plan needs to pass Congress and not endanger inflationary concerns either through fuelling wage inflation or warranting higher Treasury issuance. Elsewhere, note that WTO’s quarterly outlook indicator suggests above trend global trade growth in 2Q18, with fullyear performance tipped around 3.2% (range: 1.4-4.4%) this year, slightly slower than 3.6% in 2017. Meanwhile, China’s new yuan loans surged to a record in Jan amid strong seasonal demand.

NORTH AMERICA Despite a firmer UST curve (alongside bund yields), positive global equities and stabilising commodities left the USD weaker across G10 on Monday. Ahead of Wednesday’s US CPI numbers investors may be slightly cautious of any USD-positive cues or any implied changes to the projected Fed trajectory (with selected FOMC members having acknowledged the near term potential positive impacts of US tax cuts on growth). This caution is expected to be balanced by a community that remains inherently suspicious of the broad dollar.

EUROPE Hawkish BOE expectations rose after Vlieghe opined that the Nov17 rate hike was not one-off and further rate hikes are likely necessary amid the global recovery and wage inflation which offsets the Brexit headwinds. However, McCafferty warned that rate hike expectations could be derailed by Brexit

ASIA Japan producer prices moderated in Jan, rising 2.7% YoY compared to the 3.0% increase in Dec last year. The below expected figure was mostly attributed to slower increase in import

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

Technical: 1-3 Day View – Daily close below 1.2290 concerns bullish bias delaying the 1.2635 target, the failure to recapture 1.23 handle on the weekly close suggests further weakness to test 1.2165. Near term resistance sited at 1.2330/50

1-3 Week View – As 1.2130 now acts as support expect a test of 1.2635 as the next upside objective. Weekly close below 1.19 neutralises bullish objectives opening a test of 1.14.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – The daily closing breach of 1.39 range support opens 1.3710, over 1.40 on a closing basis would stabilise the pair and suggest a return to focusing on upside objectives

1-3 Week View – As 1.3836 supports 1.45 becomes the next upside objective, only a close back below 1.34 would jeopardise the bullish advance.

Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – Anticipated breach 108.44 to test 107.20 only over 110 stabilises pair and opens 111

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: Bullish
Trading Take-away: Short

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

Technical: 1-3 Day View – 1-3 Day View – Breach of 132.90 opens 131.60/40 next near term resistance sited at 133.30/60

1-3 Week View – 136.10 is the principle upside objective , rotation within the broader range persists breach of 132.20 sets a retest of 131.50, a closing breach of 131 concerns the bullish consolidation bias

Retail Sentiment: Neutral
Trading Take-away: Neutral

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