London Forex Report: China Halted Again, Crude Crushed

London Forex Report: China Halted Again, Crude Crushed

London Forex Report: Chinese trading halted for the second time this week as the share plummet 7% in the first 30 minutes of trade. Minutes of the December FOMC meeting revealed policy makers’ decision to raise rates for the first time since 2006 at last month’s meeting was a “close call”. As expected, deliberation was skewed towards the Fed’s expectations on inflationary outlook in arriving at the decision amid not much concern from rather steady improvement in the labour market. Policymakers were seen debating the downside risks to inflation according to minutes, with some officials addressing that they were reasonably confident that inflation may reach the targeted level in the medium term. USD advanced as markets remained risk-off but saw most gains erased post-FOMC minutes release. The USD Index closed 0.22% lower at 99.18 after sliding on signs of concern from the FOMC regarding continued shortfall in inflation from the Fed’s target.

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

Fundamental: The minutes released by FOMC yesterday indicated that several members viewed last month’s lift-off as a “close call” and they would need “greater confirmation” that inflation is moving toward the Fed’s objective of 2% before they approve the next rate hike. EUR rose to New York Session high against USD, up nearly 0.5 percent at 1.0799 and currently trades above 1.08 inot the close of Asian trade.

Technical: While offers at 1.0850 contain upside attempts expect rotation south to test bids at 1.07 en route to a symmetry objective at 1.0660 as next downside objective.

Interbank Flows: Bids 1.07 stops below. Offers 1.0850 Stops above.
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: GBP dropped to its weakest since April against USD yesterday due to the worse than expected British Services PMI figures leaving the market with the view of Bank of England will not raise interest rates soon. The upcoming ballot of Britain’s membership of European Union provides uncertainty and volatility for GBP in coming months. British inflation is expected to stay flat due to the continuing weakening oil price.

Technical:  While 1.4660 caps intraday upside expect a drift lower to retest bids at 1.4565 the 2015 lows. Above 1.47 opens 1.48.

Interbank Flows: Bids 1.4550 stops below. Offers 1.47 stops above
Retail Sentiment: Bullish
Trading Take-away: Short from 1.48 for 1.45, risk free position.

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

Fundamental: JPY  hit a three month highs against the USD on Wednesday as more weak Chinese economic data and North Koran nuclear test encouraged safe haven buying.

Technical:  While 118.70 caps intraday upside attempts expect a sustained breach of 117.50 en route to test 116.35 as the next downside objective.

Interbank Flows: Bids 117.50 stops below. Offers 118.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: EUR fell further against JPY after European markets opened yesterday to print a nine month of 127.05. All eyes remain focused on the China markets, and another weaker than expected fixing sparked another messy selloff in asset markets causing the second halt in trading this week.

Technical:  While 128.20 caps intraday upside reactions, expect a grind lower to retest 2015 lows at 126.50’s as the next downside objective. Only a breach of 129.50 eases immediate downside pressure.

Interbank Flows: Bids 126.50 stops below. Offers 129.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: AUD slipped to multi-week lows against USD in the face of Chinese growth worries and descending commodity prices. The latest shock came after China’s central bank fixed its yuan currency lower than many expected while the global selloff in equities sparked a rush into safe-haven assets also hurt the Aussie. Another burden was the unexpected halt of a rally in iron ore, Australia’s top export earner. Prices of the mineral skidded again in this week, dropped 60 percent in the past 12 months

Technical: While .71 caps intraday upside expect a test of pivotal.7000 failure here opens .6930 next. Only a breach of .72 eases immediate downside pressure.

Interbank Flows: Bids .70 stops below. Offers .71 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: CAD set a fresh 12-year low against USD as oil prices tumbled. Traders sought safety from rising geopolitical tensions while China fueled fears about its economy by allowing the yuan to weaken. The broader concerns overshadowed improvement in Canada’s trade deficit, at one point pushing the currency pair above 1.41 level, a level last hit in August 2003.

Technical: Bulls have the ball while 1.38 supports, expect a grind higher to test stops above 1.42 while 1.40 caps intraday downside. The next key technical levels to the upside are 1.4189 (23 July 2003 high) and 1.4509 (76.4% Fibo retracement of 1.6193 to 0.9058)

Interbank Flows: Bids 1.409 stops below. Offers 1.42 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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