London Forex Report: Stimulus Supports Sentiment

London Forex Report: Stimulus Supports Sentiment

London Forex Report: Markets rebounded Friday with the Dow and S&P500 jumping 1.6% and 1.7% respectively while European equities also ended in the green, likely fuelled by increased liquidity from the ECB. Oil was mixed; the WTI benchmark rose 1.7% $38.5/barrel but Brent ended unchanged at $40.4/barrel after sliding in US morning to erase early gains. USD weakened following a rebound in risk appetite, but the USD Index was pushed slightly higher by 0.11% to 96.17 at closing amid the retreat of major components EUR and JPY.

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

Fundamental: EUR turned to be relatively steady against the USD on Friday after the previous day’s big move, trading between 1.1100 and 1.1180. The euro came under pressure in early European session following stock markets opened on a positive note. EURUSD then managed to stage a strong rebound in early New York session after bottoming out at the 1.1080 handle.

Technical: Intraday support is sited at 1.1060/40 while this survives expect a further grind higher to test pivotal resistance at 1.1370. Failure at 1.10 suggests false break and opens retest of bids towards 1,0820

Interbank Flows: Bids 1.1050 stops below. Offers 1.13 stops above.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Fundamental: GBP strengthened the most in more than a month against the euro amid the European Central Bank’s expansion of monetary stimulus moved its policy further from that of the Bank of England. Sterling advanced even though Britain’s construction output unexpectedly declining in January, adding to signs the economy is losing momentum.The construction output came in at a drop of 0.2%, worse than the expectations of rising 0.2%.

Technical: 1.4424 corrective objective achieved, Profit taking pull back should find renewed buying interest towards 1.4280 setting a platform to challenge 1,4570 offers as the next upside objective . A failure at 1.42 opens a retest of bids towards 1.41

Interbank Flows: Bids 1.4280 stops below. Offers 1.4450 stops above.
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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

Fundamental: USDJPY resumed its upside last Friday, pushing the pair to test 114.00 handle, after bottoming out in the 112.60 region following the ECB meeting on Thursday. The risk appetite trends had been the main drivers for the pair’s price action throughout last week, while near-term risk is limited ahead of this week’s FOMC and BoJ policy decisions.

Technical: 112.30/10 continues to support expect a further leg of corrective gains, to retest the broken neckline support at 115/116. Failure at 112 open 11 again.

Interbank Flows: Bids 112 offers below. Offers 114 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: Japanese machine orders surged 15.0% MoM in Jan, up sharply from 4.2% in Dec. Annually, orders climbed 8.4% YoY, rebounding from a 3.6% decline previously.

Technical: While 125.60/40 acts as support for the current advance expect a test of symmetry resistance at 128.15 as the immediate corrective objective. Failure at 124.50 suggest false upside break and opens retest of 123.

Interbank Flows: Bids 125 stops below. Offers 128 stops above
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Fundamental: AUD continued its recent strong run last Friday, jumping to an eight-month high against the dollar overnight, amid markets’ appetite for risk on. The Aussie has been steadily climbing over the past few weeks on the back of a rebound in the prices of commodities, and continued its upward surge, benefiting from easing moves by the European Central Bank and the People’s Bank of China.

Technical: While .7400 supports intraday expect further upside pressure targeting .7672 next. Only a failure at.7300 support threatens near term bullish bias.

Interbank Flows: Bids .7400 stops below. Offers .7600 stops above.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Fundamental: CAD remained buoyant Friday as oil regained bid tone, pushing the USDCAD to a fresh three-month low of 1.3164. Crude oil prices kept the rally alive on Friday, pushing the barrel of West Texas Intermediate to the boundaries of the $39.00 handle. A continuation of the risk on sentiment plus comments by Paris-based IEA that oil markets could have bottomed out were sustaining Friday’s upbeat mood.

Technical: While 1.3400 contains the recovery, downside pressure remains the driver with bears focusing on a AB=CD ultimate downside objective at 1.2966. Only a close over 1.3650 negates the bearish bias.

Interbank Flows: Bids 1.3150 stops below. Offers 1.3350 stops above
Retail Sentiment: Bullish
Trading Take-away: Short

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