London Forex Report: Markets Muted Ahead of ECB

London Forex Report: Markets Muted Ahead of ECB

London Forex Report: The USD dipped yesterday following US Treasury bond yields easing as traders eye today’s ECB meeting and start looking ahead to the Federal Reserve meeting due next week. It is widely expected that the US central bank would raise interest rates but adopt a cautious tone on the economy. The USD index dropped 0.26% to 100.23. Terry Branstad will be nominated as the next US ambassador to China by Donald Trump. Traders believe Branstad’s appointment suggested that Trump maybe ready to take a less combative stance toward China than campaign rhetoric suggested.

FX Majors: EUR market participants have been awaiting the closely-watched European Central Bank (ECB) monetary policy meeting scheduled today. The ECB is widely expected to announce an extension to its quantitative easing programme, whereas there is uncertainty over whether the size of the monthly asset purchases will be kept steady or scaled back, and over whether a formal signal on the eventual end of the asset-purchase programme will be sent. GBP UK industrial production unexpectedly fell 1.1% YOY, dragged by declines in oil & gas output as well as a 0.4% YOY contraction in manufacturing production. The decline in mining was mainly attributed to a shutdown of Buzzard, one of UK’s biggest fields according to the Office of National Statistics. MOM, industrial production also staged a surprised decline of 1.3%, its worst monthly drop since 2012, as manufacturing output fell 0.9% MOM vs expectations for a 0.2% increase. On a more positive note, Halifax house prices grew at a faster pace of 6.0% YOY in the three months to November while NIESR showed GDP estimate sustained a 0.4% growth in November. JPY Japan’s leading index climbed higher to 101.0 for the month of October but missed estimates for a 101.4 reading. Japan revised third-quarter economic growth to an annualised 1.3%, compared with a preliminary reading that showed 2.2% expansion. The revision was driven by drops in capital spending and in private inventories. Measured quarter on quarter, GDP rose 0.3% in the three months through September which was lower than the initial estimates of 0.5%.

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

Technical: Break of 1.0740 targets medium term resistance at 1.0850 this is a key upside hurdle which will need to be captured on a closing basis to stabilise the pair and sets corrective sites on the symmetry swing resistance at 1.0950. Below 1.0650 opens retest of bids back towards 1.05
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: The close over 1.2670 suggests further upside momentum to target the key structural resistance sited at 1.28, near term support is sited at 1.26 a failure below 1.25 reopens symmetry swing objective at 1.2270.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 115.59 is the next upside objective representing the 61.8% retracement of the 2015/16 decline, near term support is sited at the symmetry swing level of 112.27 A breach of 111.07 would suggest a broader correction to the advance opening a move back to test symmetry swing support at 109.60
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 121.82 achieved as 119 supports scope for a test of offers above 123.50 as the next upside objective ahead of the pivotal symmetry swing resistance sited at 124.42. A break back below 119 opens 118.45 opens ahead of pivotal bullish trend support at 116.20
Retail Sentiment: Bearish
Trading Take-away: Long

Commodities FX: GOLD extended its rise, rebounding from this week’s 10- month low as the dollar eased against the euro ahead of a ECB meeting and on the view that a US rate rise next week was already reflected in prices. OIL eased on the back of continuous doubts over whether a planned production cut led by OPEC and Russia would be deep enough to end global oversupply which has dogged markets for two years. AUD After yesterday’s disappointing Australian GDP figure, this morning’s domestic trade balance fell short of market expectations again. A trade deficit of AUD$1.5B was recorded for the month of October against AUD$0.7B expected. CAD BoC remained rates unchanged at 0.5% at its rate decision meeting last night. Strong third-quarter domestic growth and positive signs in the global economy are keeping the central bank on the sidelines, said the Governor Poloz. With Governor Poloz adopting a rather neutral tone compared to less than two months ago when he hinted at a possible rate cut.

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

Technical: .7092 AB=CD remains the downside objective. Near term resistance sited at .7440 has been eroded the correction should now challenge pivotal 7530/50 as this levels contains the upside reaction there is potential for resumption of downside pressure.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: Price rotating lower testing and eroding pivotal 1.3250 the failure here concerns the bullish bias and opens a retest of channel support sited at 1.3050. Over 1.34 stabilises the pair and suggest a return to focus on upside objectives
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: As equidistant swing objective sited at 1202 contains upside reactions bears target 1149 as the next downside objective. A close over 1220 suggest broader correction to the recent decline.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: The breach of 49.20 provided the anticipated quick test of offers above 50.00 and critically the equidistant swing objective sited at 51.79 as this level halts advance there remains an opportunity for a move to the downside targeting symmetry swing objective at 39.78. Over 52.40 opens 55.000 as the next upside objective
Retail Sentiment: Bearish
Trading Take-away: Long

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