London Forex Report: WTI Crude Seven Year Lows

London Forex Report: WTI Crude Seven Year Lows

With hurdles cleared for an interest rate hike, all eyes will be on the two day FOMC meeting this week. While the central bank looks set to tighten rates, communication on how gradually the pace of hike will be for next year remains crucial to avoid surprising the market. Commodity declines continues with new WTI Crude seven year lows, USD Index closed 0.38% Friday, lower at 97.56 after sliding through European session before tumbling lower on weaker than expected US data.

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

Fundamental: After tight range day for the euro, EURUSD hovered in a very tight range ahead of FOMC meeting and is now trading around 1.09 levels after testing 1.10 handle. A series of Eurozone PMI data on deck this week. But the main focus still lies on Thursday’s FOMC meeting, and a rate increase is widely expected as markets have seen a further improvement in the job market.

Technical: While 1.09 caps intraday downside corrections expect a grind higher to retest last weeks high. A failure at 1.0850 opens a retest of 1.0790 next

Interbank Flows: Bids 1.09 stops below. Offers 1.1050 Stops above.
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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

Fundamental: UK construction output rose 0.2% in October, well below market expectations for a 1.0% rise. Despite that, GBPUSD edged higher and reached intra-day high of 1.5238 as markets took profits on long USD position before the FOMC meeting this Thursday. Apart from the FOMC meeting, a series of tier-1 data from the UK, including CPI figures due tomorrow and jobs figures due this Wednesday, will be closely watched.

Technical:  While 1.5150 supports intraday downside corrections expect a move to test symmetry resistance at 1.5297. A failure at 1.5140 opens a retest of pivotal 1.5050.

Interbank Flows: Bids 1.5150 stops below. Offers 1.5250 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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

Fundamental: With weaker stocks and pressure on commodities, JPY picked up some safe‐haven support. The currency traded stronger last Friday against the USD, slipping below 121 major psychological level. Along with the FOMC meeting, BoJ is also scheduled to hold its last rate decision meeting of the year. The central bank is expected to keep monetary policy unchanged, and Governor Kuroda’s presser will likely be the focus.

Technical: While 120.50 supports downside reactions, expect a retest of 122.50. A failure at 120 opens a test of 119 support.

Interbank Flows: Bids 120.50 stops below. Offers 122 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: Downside pressure has continued into this week, cross edging lower below the 133 figure. The two percent drop in the Nikkei this morning together with the positive Tankan results for 4Q is weighing on the pair.

Technical:  While 132.50 caps intraday downside reactions, expect a grind higher to test upside symmetry objective at 134.86, a failure at 132 opens a test of pivotal 131 next.

Interbank Flows: Bids 132 stops below. Offers 133.50 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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

Fundamental: Iron ore prices continued to drop last Friday to reach a record low of $38.30, exposing further weakness on the Australian dollar. AUDUSD was again trading below 72 US Cents, reaching day close of 0.7186. The focus for the Australian dollar includes RBA’s monetary policy meeting minutes, in which markets expect very little surprise as Governor Stevens told markets to chill out over Christmas.

Technical: While .7150 supports intraday downside expect a test of .7230/50, while this area caps upside attempts overnight lows remain vulnerable for a retest

Interbank Flows: Bids .7150 stops below. Offers .7250 stops above
Retail Sentiment: Neutral
Trading Take-away: Sidelines

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

Fundamental: Crude oil prices continued to soften, helping drive the Canadian dollar to new lows again versus the US dollar last Friday. With OPEC ramping up production in the face of WTI Crude falling to a seven year lows, crude oil prices are poised to remain weak. Additional upward pressure on USDCAD is coming from the incremental widening in short‐term US-Canada yield spreads. Under the lack of domestic data this week, focus will shift to Thursday’s FOMC meeting.

Technical: Bulls have the ball while 1.3450 supports intraday downside expect a grind higher to test stops above 1.3750. A close below 1.3389 would ease the near term bullish bias and suggest a correction is underway.

Interbank Flows: Bids 1.3450 stops below. Offers 1.3750 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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