London Forex Report: Trump Talk Overshadowed By FED Hawks

London Forex Report: Trump Talk Overshadowed By FED Hawks

London Forex Report: Anxiety ahead of President Trump address to the Congress proved somewhat unfounded Trump repeated many campaign promises, but provided few details on the specifics of policy changes.Tax reform and infrastructure spending, in particular, were mentioned only briefly; with limited market impact. Some details on Obamacare and immigration reform, but no direct proposals for legislation. On the data front the second GDP estimate confirmed that the US economy expanded by 1.9% QoQ in 4Q (3Q: +3.5%), unchanged from the preliminary estimate, as weaknesses in investment and government spending offset the quicker than expected 3.0% increase in consumer spending. Consumer sentiments rose to a near 16-year high of 114.8 in February. Reports also showed manufacturing activities picked up steam in Chicago and Richmond districts, to a 24-month and 11-month high respectively. House prices in 20 cities as tracked by S&P CaseShiller also picked up more than expected to increase 5.58% YoY in December, adding to signs the US economy is seeing rather broad-based recovery.

Speeches by Fed Presidents continued to spur optimism over a near term Fed rate hike outlook, with market pricing of a March rate hike rising further to 52%. Fed Williams said that an interest rate hike “is on the table for serious consideration” at the upcoming FOMC meeting in March. Meanwhile, Fed Dudley said “the case for monetary policy tightening has become a lot more compelling” and Fed Harker reiterated his expectations for three Fed rate hikes this year provided that the economy continues to recover as expected. USD strengthened against 80% of its G10 peers as refuge demand intensifies amid softer equities and commodities, while hawkish comments from Fed officials continue to support a near-term Fed rate hike. The Dollar Index rallied strongly in US afternoon to narrow early losses but nonetheless end just marginally lower at 101.12 compared to 101.13 a day before

FX Majors: EUR Italy’s HICP rose a stronger-than expected 0.2% MoM, lifting annual inflation to 1.6% YoY from 1.0% YoY previously. Separately in Spain, mortgage approvals rose 6.9% YoY in December. Manufacturing PMIs are due today in Europe, though the final manufacturing number for the Eurozone not expected to differ from the flash. Germany will see inflation data where we expect 0.6% m/m and 2.1% YoY for both CPI and HICP. GBP In the midst of Brexit talks, GfK consumer confidence indicator slid further into negative territory in February. The index was down to -6 last month after a reading of -5 in January. JPY Japan’s housing starts staged a surprised 12.80% YOY increase in January after a 3.90% YOY growth in December, rising by the quickest pace in three months. On the other hand, construction orders decelerated to 1.10% YoY in January (December: +7.10% YoY) and small business confidence was also a tad softer at 47.7 in February.

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

Technical: Expected retest of 1.0521 base plays out forming interim double bottom, a closing breach opens a move to 1.0450 next, only over 1.0650 arrests near term bearish bias.
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Range trade persists with price testing range support, equidistant swing objective at 1.2679 capping corrective advance. Near term support sited at 1.2345 with range resistance sited at 1.2580
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Only a 112 sustained breach will open 110.70 symmetry swing support underpinned by 109.90 50% retracement of the move from August 2016 lows. Near term resistance sited at 113.80, a close over 114.50 reasserts upside targets primarily at 115.50
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 118.70 downside objective achieved as near term resistance sited at 120.50 caps corrections bears target 117.69 next, only a close over 121.50 stems near term selling pressure.
Retail Sentiment: Bearish
Trading Take-away: Long

Commodities FX: GOLD fell for a second day, by 0.34% to 1,248.44 per ounce as traders trimmed long positions ahead of Trump’s speech. OIL settled down 4 cents to $54.01 on concerns that demand growth may not be sufficient to soak up U.S. crude inventories that have been rising for the past seven weeks, and is forecasted to increase another 2.9 million barrels for the last week in a report to be released later today. AUD Australia GDP reading surprised on the upside, rising 1.10% QoQ in 4Q after a contraction of 0.50% QoQ in 3Q and avoided a technical recession. Household consumption rose 2.60% QoQ last quarter, overturning the 2.70% QoQ contraction in 3Q. Exports growth doubled to 2.20% QoQ (3Q: +1.00% QoQ) while capital investment rose 1.60% QoQ in 4Q (3Q: -1.10% QoQ), contributing to upturn in the headline GDP number. In addition, performance of manufacturing index surged to the highest since 2002 to 59.3 in February (January: 51.2 CAD The major risk event this week for CAD is the Bank of Canada rate decision is coming today, unchanged policy is the consensus. Overall, the market consensus for Canadian rate hikes is at a miniscule 2 bps over the next 12 months according to the OIS.

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

Technical: The next upside objective is sited at .7750 as price continues to consolidate at elevated levels. Near term support is sited at symmetry swing level .7600 ahead of pivotal .7449
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: Breach of 1.3210 opens anticipated move back to test 1.3370.Price action remains erratic as price attempts to base above pivotal 1.30. Near term support is sited at 1.32.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: As 1225 acts as support bulls target symmetry swing resistance sited at 1299, only a close below 1200 concerns near term bullish bias.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: Rejection from equality objective area at 55.30, a close below symmetry support at 50.68 confirms a medium term high and opens a retest of pivotal 49.00. Near term resistance is sited at 54.50.
Retail Sentiment: Bearish
Trading Take-away: Long

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