London Forex Report: All Eyes On FOMC

London Forex Report: All Eyes On FOMC

London Forex Report: Consumer Price reports in the US and UK are showing signs of gradual upticks in inflation bolstered hopes that one more hurdle has been removed for the Fed to begin normalizing monetary policy today. As has been highlighted before, the Fed forward guidance on the subsequent pace of increase will be crucial in influencing market direction ahead. USD strengthened yesterday with the USD Index reversing a weak start to jump higher to 98.21, gaining 0.63% amid the better than expected US CPI data.

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

Fundamental: EUR retreated yesterday amid expectations that the Fed would raise interest rate for the first time in nine years as the data showed inflation pressure rose in United States. Opening weaker this morning at around 1.0930 levels due to the upbeat US CPI data.

Technical: While 1.09 caps intraday downside corrections expect a grind higher to retest last weeks high and onwards towards the pivotal 1.11. A failure at 1.0850 opens a retest of 1.0790 next.

Interbank Flows: Bids 1.09 stops below. Offers 1.11 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 CPI for November rose in line with market expectations at 0.1% YoY, back up above zero for the first time in four months. GBPUSD was little changed after the data release. Late in the day cable shed more than 100pips on signs that support is growing for Britain to leave the European Union according to a survey from The Daily Telegraph which reports that half of voters are backing Brexit.

Technical:  While 1.5020 supports intraday downside expect a drift higher to test offers at 1.51, while this area caps upside attempts expect 1.4950 next. A breach of 1.5150 opens 1.5230 again.

Interbank Flows: Bids 1.50 stops below. Offers 1.51 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: USDJPY pulled back to 121.50 handle from the trough of Monday’s low of 120.35.  Market is expected to be quiet before the Fed rate decision. JPY is expected to be traded sideways today.

Technical: While 121.30 supports downside reactions, expect a retest of 122.50. A failure at 121 opens a test of 119 support.

Interbank Flows: Bids 121 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: One percent rally on the S&P 500 and higher US treasury yields helped the cross back over 133.  The range in focus continues to be  resistance into 134.15 on the topside  and support into the 131.00 region where we based early last week. Post FOMC, BOJ on Friday, from which the market is expecting no monetary policy changes.

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: In its December meeting minutes, the RBA maintained its relatively neutral monetary policy tone, stating that the recent flow of domestic data had been generally positive while leaving some scope for further easing. AUDUSD climbed slightly higher after the release of meeting minutes. With markets again looking forward to a possible Fed rate hike following the release of upbeat US CPI figures, the Australian dollar traded weaker overnight and touched an intra-day low of o.7157 before slowly edging back to 0.72 US Cents ahead of FOMC meeting.

Technical: While .7150 supports intraday downside expect a test of .7230/50 ahead of .7320, while this area caps upside attempts pressure remains to the downside

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

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

Fundamental: Oil price had a rebound yesterday, rising for a second straight day. Since oil price failed to fall below the seven-year, oil price experienced a technical rebound. Brent crude settled up more than 1 percent while WTI futures rose nearly three percent. Bank of Canada addressed the problem that increasing housing vulnerabilities should be stabilized. They also said that higher household indebtedness and imbalances in the housing market should be remedied.

Technical: Bulls have the ball while 1.3450 supports intraday downside expect a grind higher to test stops above 1.3780. A close below 1.3389 would ease the near term bullish bias.

Interbank Flows: Bids 1.3450 stops below. Offers 1.3780 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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