London Forex Report: Risk Recovering But Sentiment Remains Defensive

h2>London Forex Report: Risk Recovering But Sentiment Remains Defensive

London Forex Report: Global risk-off sentiments continued to cast a shadow over financial markets yesterday. US’ CPI inflation rose a tepid 0.1% MoM, dragged down by energy prices, but core CPI rose 0.2% mom which should provide some support for the FOMC to push for a third hike in December. Shorts profit taking developed overnight with markets recovering losses, for today, expect markets to remain on the defensive, although the intensity of risk aversion may moderate somewhat.

NORTH AMERICA US retail sales beat estimate for a stagnant month to increase 0.2% MoM in October, while September’s gain was revised higher to 1.9% MoM. Even though the latest print marked a deceleration from September as a result of slower increases in sales of cars and gasoline, this first back-to-back increase in sales since April 17 suggests consumer demand is holding up, bolstering hope that consumer spending will continue to drive growth in 4Q. CPI continued to increase albeit at a softer pace of 2.0% YoY in October as expected but core CPI ticked a notch up to 1.8% YoY, adding to signs of sustained price pressure that could reinforce the case for the Fed to raise rates.

EUROPE EU continued to demonstrate brighter macro conditions. Trade surplus unexpectedly widened to €25.0bn in September, on the back of faster growth in exports (+1.1% MoM) riding on increase in global demand and decline in imports (-1.2% MoM). UK job reports came in mixed, pointing to a subdued labour market. Jobless claims change were lower at 1.1k in October but the job market lost 14k jobs in September, down from the 94k jobs added a month ago and missed estimate for a 52k gain. Average weekly wage growth was relatively steady, sustaining a 2.2% YoY increase in September (Aug: +2.3% revised) and unemployment rate was unchanged at 4.3%

ASIA Final print of industrial production confirmed a decline in Japanese output in September, though the final print was a tad better than initially estimated at 1.0% MoM. The decline was broad-based spanning across manufacturing and mining production, contrary to Nikkei PMI that showed sustained expansion.

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

Technical: 1-3 Day View – The daily close north of 1.1750 reasserts upside objectives opening 1.1880, 1.1750 now becomes support a daily close over 1.19 leaves 1.2092 cycle high vulnerable to retest, near term upside hurdle sited at 1.1810

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: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – Retest of 1.3330 sees a sharp reversal and price now testing broader range support at 1.3030 a failure here opens 1.2750 as the next downside objective, near term resistance is sited at 1.3185 ahead of pivotal 1.3230

1-3 Week View – As 1.32 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): Bearish – Medium Term (1-3 Weeks): Neutral

Technical: 1-3 Day View – A closing breach of 113 concerns the bullish bias and opens 111.65 ahead of pivotal 110.85, near term resistance sited at 113.30

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): Bullish – Medium Term (1-3 Weeks): Bullish

Technical: 1-3 Day View – As 133 now acts as support bulls target a retest of prior cycle highs and offers above 134.50, only a close below 132.48 would suggest a false upside break and encourage a retest and break of range lows

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, a closing breach of 131 concerns the bullish basis.
Retail Sentiment: Bearish
Trading Take-away: Long

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