London Forex Report: Risk Sentiment Rattled

London Forex Report: Risk Sentiment Rattled

London Forex Report: Global risk appetite retracted amid concerns about the US tax bill prospects as the Senate plans to push through a different proposal (with a one year delay to 2019 for the corporate tax cut to 20%) from the House. VIX saw its biggest surge since August. Meanwhile, President Trump wrapped up his Beijing trip again with little to show on new trade concessions and North Korea apart from rhetoric.

NORTH AMERICA A Reuters poll, taken Nov 3-8 on 60 FX strategists revealed a consensus view (80%) that the U.S tax reform would boost the USD although many are not convinced that it will pass Congress. Over 75% say risks to USD unchanged since appointment of Jerome Powell as Fed chief. US jobless claims increased by 10k to 239k in the week ended Nov 4, up from the 229k in the week before. Wholesale inventories increased 0.3% MoM in September, unchanged from early estimates and dipping from a 0.8% increase in August.

EUROPE The European Commission upwardly revised Eurozone 2017 growth forecast to 2.2% from 1.7%, and expects the quicker pace of growth to sustain through 2018 (revised to 2.1% from 1.8%) before easing to 1.9% in 2019. Touching on unemployment, it is expected to extend a downtrend to 8.5% in 2018 and 7.9%, though such levels suggest much slack remains. Meanwhile, price pressure is expected to remain subdued despite core inflation heading higher; headline inflation is expected to average at 1.5% this year, dipping to 1.4% in 2018 before climbing to 1.6% in 2019. ECB’s economic bulletin revealed that the latest macro data are “consistent with a continued robust growth pattern in the second half of 2017”, a sign of confidence that economic expansion will extend going forward. The bulletin also states that “private consumption is underpinned by rising employment” while rising business investments remains supported by “favourable financing conditions”.

ASIA Eco Watchers surveys revealed firmer sentiment in Japan, suggesting continued upside momentum in tandem with recent upticks in data. The current conditions index increased from 51.3 to 52.2 in October, highest since March 2014, driven by firmer sentiment in businesses, manufacturers, non-manufacturers and employment, though the downside was that sentiment of households deteriorated. Outlook also improved, lifting the outlook index from 51.0 to 54.9 in October, highest since December 2013 amid improved expectations in all categories surveyed.

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

Technical: 1-3 Day View –Second leg of broader correction underway targeting 1.1471 near term expect 1.1630/60 to act as resistance, only a move north of 1.1750 reasserts upside objectives.

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: Neutral
Trading Take-away: Neutral

Outlook: Short Term (1-3 Days): Neutral – 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 1.3150/70

1-3 Week View – 1.3263 achieved as this 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

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

Technical: 1-3 Day View – 114.50 achieved as pivotal support at 113.30/10 caps corrective downside expect a test of 115, only a closing breach of 113 concerns the bullish bias

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: Bearish
Trading Take-away: Sidelines

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

Technical: 1-3 Day View – The breach of range support at 132 concerns the broader bullish bias, however without sustained daily closes below this level the risk remains a return to middle of the 134.50 /131.50 range, below 131.50 opens 130.66

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: Neutral
Trading Take-away: Neutral

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