London Forex Report: Yellen Flip Flop Dents Dollar

London Forex Report: Yellen Flip Flop Dents Dollar

London Forex Report: All eyes on president elect Donald Trump’s inauguration today and market mostly shrugged off the barrage of data released overnight. US housing starts rose more than expected, climbing 11.30% to annualised pace of 1226k in December (November: -16.50% MOM) amid the rebound in new construction of multifamily buildings. On the other hand, building permits slipped for two straight months. Approvals fell 0.20% MOM in December followed a 3.80% MOM decline in November, showing signs of weakening momentum amid the rise in interest rates. On a brighter note, Philadelphia fed business outlook index climbed from 19.7 in December to 23.6 in January, the highest level since November 2014. FOMC Chair Yellen walked back on yesterday’s more hawkish tone, commenting that it is unwise and risky to allow economy to run persistently hot, prudent to adjust policy gradually, that the are Fed not behind curve, policy stance remains modestly accommodative, fiscal policy may affect outlook, data impact on policy decisions limited and that she remains in favour of Fed dual mandate and independence. USD closed lower against 80% of its G10 peers, reversing early gains as markets turned cautious ahead of US President inauguration. The Dollar Index that jumped strongly after ECB press conference gradually pared gains but nonetheless ended 0.22% higher at 101.15.

FX Majors: EUR In its monetary policy meeting, ECB kept main refinancing rate at zero, marginal lending rate at 0.25% and deposit rate at -0.40% yesterday while reaffirming its December decision that asset purchases will be slashed by €20 billion to €60 billion starting end April 2017. Euro zone’s current account surplus rose by €7.90 billion to €40.50 billion in November amid the surge in investment income (€5.40 billion) and net trade surplus (€2.40 billion). President Draghi also called for patient with regards to policy tightening even though he acknowledged surprisingly upbeat economic indicators recently. GBP advanced against the USD amid upbeat remarks on Thursday by the UK PM on plans for international trade deals, · Moreover, a narrowing spread between the UK’s 2-year Gilt yield and the US’s 2-year Treasury yield likely added support to sterling. JPY A final report from Machine Tool Builders’ Association affirmed that Japan’s machine order rose 4.40% YOY in December. Domestic demand grew at a solid pace of 8.00% YOY while foreign demand rose 2.00% YOY. December’s figure marked the first positive growth since July 2015, posting signs that demand is gradually picking up as headwinds dwindle

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

Technical: Test of pivotal 1.0708 larger symmetry resistance underway. Anticipate sellers/profit taking to emerge at the initial test of this level, as this band of resistance caps upside bears target retest of 1.0338 lows. Near term support sited at 1.0550 failure here suggests early reversal to trend.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: New monthly lows with gap lower at the Asian open Sunday sub 1.20 before profit taking prompts sharp reversal, this reversal has gathered significant momentum and is now threatening a reversal in sentiment, confirmation of a more bullish bias will be achieved on a close above symmetry swing resistance sited at 1.2458, near term support is sited at 1.2250
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Price erodes pivotal 114.70 trend support the close below this level concerns near term bullish thesis and suggests broader corrective phase to test 112 is now underway, a breach here will open 110.70 symmetry swing support underpinned by 109.90 50% retracement of the move from August 2016 lows. Near term resistance is sited at 115.10 only over 116.20 reasserts upside
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Close below 121.60 concerns bullish bias, expected test of symmetry swing support at 120.40 bulls defended this level to set sights on, 124.42 symmetry swing resistance. Near term resistance is sited at 122.76. A failure below 120.40 opens 118.70
Retail Sentiment: Bearish
Trading Take-away: Long

Commodities FX: GOLD pared earlier losses to finish little changed at $1,204.85 per ounce after the dollar fell in the NY afternoon. OIL settled up 29 cents at $51.37 per barrel, supported by the 1.27 million barrels drop in supplies at Cushing, Oklahoma, the weekly data from EIA showed. AUD climbed against the USD amid a rise in Australia’s 2-year government bond yield, Australia new home sales increased 6.10% MOM in November followed a 8.50% MOM decline in October. CAD has weakened significantly as USDCAD rose over 200pips after the BOC decision and Fed Chair Yellen’s speech provided weakness to the loonie and strength to the dollar. The BOC kept rates on hold and slightly revised their projections for growth upward (+0.1% GDP in 2018), but the statement and press conference was dominated by the elevated uncertainty of their forecasts due to the risks to the economy.

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

Technical: Price erodes symmetry swing resistance sited at .7494 the close above .7525 resets bullish attention on range highs towards .7800. Near term support is sited at symmetry swing level .7490 ahead of pivotal .7440
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: Recapture of corrective channel opens a test of 1.3370, as 1.3190 supports potential to build a base for next leg higher. Only below 1.3140 reestablishes a more bearish tone
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1220 symmetry swing trend resistance test underway anticipate profit taking/sellers to emerge on the initial test of this level. Near tern support is sited at 1190, failure here opens 1153
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Sharp 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

Posted in Forex Analysis, London Forex Report, tagged with on