London Forex Report: USD Short Positioning Continues

London Forex Report: USD Short Positioning Continues

London Forex Report: Despite firmer UST yields and a warmer than expected December US core CPI readings (note December retail sales were mixed), the USD weakened across G10 (except against the NZD) space. On the CFTC front, investors accounts remain (almost) unanimously positioned against the dollar. Large non-commercial accounts jacked up their net implied dollar shorts in aggregate in the latest week. Leveraged accounts meanwhile pared their net implied dollar longs and net of JPY positioning, leveraged accounts also increased significantly, their net implied dollar shorts. Meanwhile, asset manager accounts also accumulated further net dollar shorts in the latest week.

NORTH AMERICA US data mostly slanted to the downside but offered hope. The gain in consumer prices eased in December, slowing to 0.1% MoM from 0.4% in November, and dipping to 2.1% YoY from 2.2%, casting doubts on the view of quicker Fed rate hikes in the near term. However, its impact was muted as core CPI quickened to 1.8% YoY and 0.3% MOM, signalling building price pressure in the system. Price pressure also received no boost from spending as retail sales growth moderated in Dec, rising 0.4% MoM after gaining 0.9% previously, missing the expected 0.5% increase. However, markets may still remain hopeful on tighter labour market lifting wages that could push prices higher; average hourly earnings growth picked up pace in Dec, rising 0.4% YoY after inching 0.2% higher in Nov, while average weekly earnings growth remains relatively stable, gaining 0.7% YoY in Dec after rising 0.8% in Nov.

EUROPE German leaders have emerged from Friday marathon talks with a possibility of a grand coalition deal, but main issues on refugees, climate goals, social security and the relationship with Europe, taxes and ability to pay for new programs remain. ECB’s Weidmann said imminent risk of a change in ECB rates is small for the moment and that full normalisation of monetary policy will be a long path.

ASIA Eco Watchers current condition index in Japan decreased to 53.9 in Dec from 55.1 in Nov. Meanwhile, the outlook index declined to 52.7 from 53.8 in Nov. Both indexes indicate that the Japanese are now less optimistic about the economy

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

Technical: 1-3 Day View – 1.2130 achieved as 1.2150 supports 1.2276 swing objective is the next upside objective anticipate some profit taking as we test this level

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): Bullish

Technical: 1-3 Day View – 1.3657 achieved as this level now acts as support expect a test of the pivotal 1.3836 next

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: 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 108.40 next, near term resistance is sited 111.20

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

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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