London Forex Report: Tax Bill Bounce Muted By Mueller

London Forex Report: Tax Bill Bounce Muted By Mueller

London Forex Report: Washington’s one step closer to tax reforms while PBOC injected the most cash this week led market sentiment soaring. US House approved the tax overhaul (227-205) which included a broad package of tax cuts affecting businesses, individuals and families, the relief rally was hindered by news overnight that Special Counsel Mueller will be issuing subpoena’s fro President Trump campaign officals On central bank rhetoric, note that Fed’s Mester commented that inflation is poised to pick up, thus giving the US central bank more reason to hike rates, while Kaplan iterated that he is “actively thinking about” a possible rate hike at the FOMC’s next policy meeting. In Canada, BOE Carney hinted the need for another two more rate hikes in coming years if its economy “evolves broadly in line with our projections”.

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 Eurozone CPI moderated to 1.4% YoY in October as initially estimated while core CPI tapered off for the 2nd straight month to 0.9% YoY during the month, as a result of smaller gains in the prices of energy and services. This signals underlying inflation remains soft and there are still no concrete signs inflation is on a firm upward trajectory, implying ECB monetary policy normalisation will be gradual. UK retail sales rebounded slightly more than expected by 0.3% MoM in October, proving last month’s decline as just a blip and that consumers are still willing to spend. The increase in sales was largely broad-based, with non-food stores and non-specialised stores staging turnarounds from the declines a month ago. Household goods stores also continued to expand albeit at softer pace.

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 – 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

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

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): Neutral – 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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