London Forex Report: Shutdown Doesn’t Stall Risk Appetite

London Forex Report: Shutdown Doesn’t Stall Risk Appetite

London Forex Report: With the partial US government shutdown impasse likely to drag over from the weekend and US president Trump’s attendance at Davos for the annual World Economic Forum potentially jeopardised, global risk appetite may tread a more cautious path at this start of this week, albeit investors may be eager to buy on dips ahead of an expected resolution. In contrast, Germany’s Social Democrats have backed formal coalition talks with Chancellor Merkel. Elsewhere, OPEC and Russia have reaffirmed their alliance on production cuts till year-end. On the CFTC front, large non-commercial as well as asset manager accounts in aggregate increased their implied net short dollar bias in the latest week. Meanwhile, leveraged accounts pared their net implied long dollar bias and excluding JPY positioning, also increased their net implied short dollar bias

NORTH AMERICA The University of Michigan’s consumer sentiment index for the US dropped to 94.4 in Jan from 95.9 in previous reading and below expectation of 97.0. It was the lowest figure in six months, showing that the current economic conditions are viewed less favourably by consumers, due to continued downsides from uncertainties of the tax reforms.

EUROPE Eurozone current account numbers last Friday revealed a wider account surplus in November compared to the previous month. Higher exports from the region helped the adjusted surplus to grow to 32.5bn from 30.3bn in Oct. UK’s retail sales Inc auto fuel declined 1.50% MoM in Dec, down from the 1.00% MoM gain in previous month and slowed to 1.40% in Dec in YoY terms from previous reading of 1.50%. Both readings are lower than market expectation. The slowdown is likely due consumers shopping ahead of the festive season in Nov in tandem with promotions such as Black Friday and Cyber Monday, thereby denting sales in Dec.

ASIA The Bank of Japan (BoJ) on Tuesday is expected to maintain the status quo with its policy rate and 10-year yield target at -0.10% and around 0.0% respectively. Despite a slight uptick in inflation and recent upbeat data releases, price momentum is still below the 2% target rate.

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

Technical: 1-3 Day View – 1.2276 swing objective achieved anticipate profit taking and consolidation on a test above 1.23 as 1.21 survives on a closing basis, 1.2635 descending trendline from all time highs becomes the upside magnet

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 1.16 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): Bullish

Technical: 1-3 Day View – Expected test of 1.3836 achieved while above 1.38, a test of 1.40 become the next upside objective a daily close above here opens 1.45

1-3 Week View – 1.3836 achieved as 1.35 supports 1.45 becomes the next upside objective, only a close back below 1.30 would jeopardise the bullish advance.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – Anticipated retest of pivotal 110.80/60 underway a failure here opens a move to 109.85 next, near term resistance is sited 111.50

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

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

Technical: 1-3 Day View – 136 the primary upside objective is achieved expect 136.70/137 to cap advance on initial test, pivotal 133.30 support test survives as it does there is potential for a platform to develop to test 141, a failure to recapture current cycle highs in the next couple of sessions may see a broader correction before higher

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: Bearish
Trading Take-away: Long

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