London Forex Report: Oil Weighs On Commodity FX

London Forex Report: Oil Weighs On Commodity FX

London Forex Report: Markets turned their attentions to the lingering weakness in oil prices after the Fed rate hike decision yesterday largely eliminated policy uncertainties although speculation on when the Fed will next raise rates is now emerging. The slew of data in the US continued to point to a firming job market while the manufacturing sector remained soft. UK data was also more positive, notably a quicker than rebound in retail sales which were likely boosted by year end festive spending. Construction output in the Eurozone also staged a rebound, adding to signs recovery in the Eurozone remains forthcoming. USD rallied for a second day on expectation of tighter policy in a quicker timeframe, USD Index advanced steadily in European trade and jumped after US mid-day but pared gains towards closing to settle at 99.27, up 1.43% for the day.

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

Fundamental: EUR was back at 1.0834, retreating from its weekly peak of 1.1060. European Central Bank said the Euro Zone economy will continue to grow moderately in the near term before gaining some strength. However, they also said that there are downside risks to the outlook.

Technical: Grinding lower to retest pivotal 1.o8 support. A failure at 1.08 opens a retest of 1.0725 next. While 1.08 survives expect a retest of 1.09 from below

Interbank Flows: Bids 1.08 stops below. Offers 1.0950 Stops above.
Retail Sentiment: Bearish
Trading Take-away: Sidelines

eu18

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

Fundamental: GBP sank along with other major currencies against the USD with short-lived rebound after a surge in pre-Christmas retail sales in November underlined a still robust British economic outlook. The pound had been knocked for weeks by a combination of worries over the ‘Brexit’ debate and dying beliefs that the Bank of England would follow the US Federal Reserve’s lead to raise interest rates next year.

Technical:  While 1.50 caps intraday upside expect a drift lower to test bids at 1.4840, a  breach of 1.5050 opens 1.5120 again.

Interbank Flows: Bids 1.49 stops below. Offers 1.51 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

gu18

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

Fundamental: BOJ said Friday it would buy more exchange-traded funds quickly turned to disappointment at the size of the program: at 300 billion yen ($2.5 billion), it’s just a 10th of the size of the bank’s current ETF efforts. Not only that, it’s intended to offset the market impact as the central bank resumes selling stocks it purchased from financial institutions from April.

Technical:  While 121.60 caps intraday downside attempts expect a sustained break of 123.50

Interbank Flows: Bids 121.50 stops below. Offers 123.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

uj18

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

Fundamental:  BoJ leaves monetary policy steady, to up monetary base at annual Y80trln pace, economic assessment left unchanged, vote to maintain monetary base target 8-1, new asset purchase guidelines 6-3, Kiuchi dissents in former vote, Ishida/Sato/Kiuchi in second. 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.

Technical:  While 132 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

ey18

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

Fundamental: Commodity currencies were hit hard overnight as the firmer USD after the Fed rate hike took a toll on commodity prices. AUDUSD briefly touched one-month lows at 0.7091 before slowly edging back to 0.7120. Markets generally expect range trades and thin liquidity ahead of Christmas holiday next week, offering very little stimulus to AUDUSD.

Technical: While .7050 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 .7050 stops below. Offers .7250 stops above
Retail Sentiment: Neutral to bearish
Trading Take-away: Sidelines

au18

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

Fundamental: CAD continued its weakness against USD, at one point nearing the 1.40 level it last broke for a single day in 2004. The loonie was hunted by a broadly higher greenback, after the Federal Reserve hiked interest rates and by further declines in the price of crude oil, a major Canadian export. Canada’s prime minister said yesterday the new Liberal government recognized the challenges a cheap currency poses and would work to ensure the country takes advantage.

Technical: Bulls have the ball while 1.3450 supports, expect a grind higher to test stops above 1.40 while 1.3840 caps intraday downside. 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

uc18

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