London Forex Report: Position Paring Persists

London Forex Report: Position Paring Persists

London Forex Report: Traders continue to pare positioning as we head into Wednesday’s FOMC, leaving the dollar vulnerable to further pullbacks. US Treasury yields edged up ahead of the two-day Federal Reserve policy meeting, where the US central bank is expected to raise interest rates. While, the USD dipped amid market concerns about the Fed’s suggesting in the policy statement that the greenback’s gains were more than policymakers’ expectations. Elsewhere, crude prices may also continue to lend a hand to the commodity FX complex. Not much on the data front in the absence of releases from the majors. USD fell against all G10FX peers, retracing Friday’s rally. The USD Index overturned Friday’s gains, sliding 0.55% to 101.03

FX Majors: EUR After touching a one-week low against the USD last week after the ECB rate decision meeting, the euro gathered steam and firmed against the greenback hitting a high of 1.0651 overnight. The rally was supported mainly by a jump in oil prices as traders took the view that higher oil prices will help reflate the euro-zone economy . GBP release of UK inflation figures with an expected higher CPI reading 1.1% YoY. This could potentially see the Monetary Policy Committee move away from their easing cycle as inflationary pressures start to mount. JPY Japan’s machine orders grew 4.10% MOM in October, marking its quickest pace of increase in 3 months after a 3.30% MOM decline in September. Increased demand for machines reflected a pick up in the goods producing sector, mirroring quicker expansion in the services sector. A second report showed that the tertiary industry index, a gauge of services sector performance, climbed 0.20% MOM in October (September: -0.30% MOM).

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

Technical: Sharp rejection from 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. The subsequent break back below 1.0650 opens retest of bids back towards 1.05 near term resistance is sited at 1.0650, as this area caps bears target 1.0424 symmetry swing objective.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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 1.24.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 115.59 upside objective representing the 61.8% retracement of the 2015/16 decline achieved, near term support is sited at the 115.60, as this area supports bulls target 116.33. A breach of 114.68 would suggest a broader correction to the advance opening a move back to test symmetry swing support at 109.60
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: As 120 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 has suffered quite a blow over the past several days, with the yellow metal unable to ignore the intense rotation into the USD. OIL Agreement by non-OPEC producers to cut oil production for the first time in 15 years in a meeting last Saturday by 558k bpd, about half of the 1.2m bpd announced by OPEC recently, as well as indication from Saudi Arabia of possibility of it cutting output by more than initially announced, further drove global oil prices up. Both Brent crude and WTI rallied further by approximately 2.5% to US$56 and US$53/ barrel respectively as at yesterday’s close. While this development is a positive, we are wary crude oil prices may not have much legs up given anticipated increased production from US shale oil producers and are therefore maintaining the market view that oil prices may average US$50-60/barrel next year. AUD Australian businesses expressed more confidence in the economy last month, a survey by National Australia Bank showed. Despite the deterioration in actual business conditions in November, as reflected in the decline in NAB business conditions index (November: 5 vs October: 7), sentiments amongst firms remained positive. The business confidence index rose from 4 to 5 but business leaders may have little basis for such optimism given signs of underlying weaknesses in economic momentum. Separately, house price index indicated that price growth slowed to 3.50% YOY in 3Q (2Q: +4.10% YOY). CAD strengthened to a fresh seven-week high against the USD as oil surged. The loonie rebounded more than 3% from an eight-month low of 1.3588 in mid-November

AUDUSD
Outlook: Short Term (1-3 Days): Neutral – 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: Neutral
Trading Take-away: Neutral

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

Technical: Price rotating lower to test pivotal symmetry support at 1.3098 ahead of longer term 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 near term resistance is sited at 1165. 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): Bullish

Technical: The breach of 52.40 opens 55.19 equidistant swing target as the next upside objective. Near term support is sited at 51.69 symmetry swing support, a close below 47.00 would concern the bullish thesis.
Retail Sentiment: Bearish
Trading Take-away: Long

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