London Forex Report: Super Mario Sparks Risk Rebound

London Forex Report: Super Mario Sparks Risk Rebound

London Forex Report: ECB maintained interest rate at 0.05% but comments from its president Mario Draghi renewed hopes that the central bank will expand easing measures as early as March due to heightening downside risks. Compounding impact of the bloc’s low inflationary pressure was drag from the slowdown in China. In line with ECB’s dovish stance, a gauge on consumer confidence in Jan slumped from -5.7 in Dec to -6.3 in Jan. USD weakened after returning early gains as refuge demand eased. The Dollar Index that jumped sharply on a dovish-toned ECB President tumbled as markets were rejuvenated by prospects of more stimulus, easing 0.04% to 99.05.

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

Fundamental: European Central Bank left interest rates unchanged as widely expected, holding the rates at record lows to support the inflation and economy. Mario Draghi, the chairman of ECB, expressed that the fading growth and inflation prospects have provided a reason for ECB to review its policy in March, implying that more easing could be done within months.

Technical: While offers at 1.0950 contain upside reactions expect rotation to retest bids at 1.08, a sustained breach of 1.08 bids opens 1.0720 test next. A breach of 1.0990 trend resistance opens a broader 1.1240 symmetry corrective objective.

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

eu221

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

Fundamental: Despite data showing the UK unemployment rate in December fell to its lowest level since 2006 at 5.1%, the markets were disappointed by the slower than expected average earnings growth. Wage growth in the UK rose by 2%, slowing from the prior data of 2.4% and further delaying a BoE rate hike. As mentioned by BoE Governor Carney, he would like to see wage growth at or above 3% before considering a rate hike.

Technical:  While 1.4250 caps upside reactions expect a grind lower to test bids at 1.40. Only over 1.44 eases immediate downside pressure.

Interbank Flows: Bids 1.4050 stops below. Offers 1.43 stops above
Retail Sentiment: Neutral
Trading Take-away: Risk Free Short From 1.4340 target 1.35

gu221

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

Fundamental: USDJPY climbed above 118.00 handle overnight as risk sentiment rebounded driven by a recovery in oil prices and the potential of more ECB easing.

Technical:  While 118.30/50 caps upside attempts expect a retest of 117 bids. Only above 119 eases immediate downside pressure.

Interbank Flows: Bids 117 stops below. Offers 118.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

uj221

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

Fundamental: Industry activity index fell 1.0% MOM in Nov (Oct: 0.9% MOM) dragged most by the services sector. Industrial and construction outputs were also on the decline. Separately in Hong Kong, CPI inched up a notch to 2.5% YOY in Dec (Nov: +2.4% YOY) but overall price pressure remained soft.

Technical:  While 128.50 caps upside reactions, expect a retest of bids at 127. Only over 129.50 eases immediate downside pressure.

Interbank Flows: Bids 127 stops below. Offers 128.50 stops above
Retail Sentiment: Neutral
Trading Take-away: Sidelines

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

Fundamental: AUDUSD edged up to 0.7000 levels in New York session from 0.6900s in Asian session as oil extended an overnight rally and Chinese vice-president Li’s promised China would keep intervening in stock market to stabilize it. Under the lack of domestic data today, external data and general risk sentiment will drive the Aussie.

Technical: While .7050 caps intraday upside expect a grind lower to retest .6830’s lows en-route to .6750. Only a breach of .7150 eases immediate downside pressure.

Interbank Flows: Bids .6800 stops below. Offers .6950 stops above
Retail Sentiment: Neutral
Trading Take-away: Sidelines

au221

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

Fundamental: With a rate cut broadly expected in an environment of poor domestic data and subdued oil prices, BoC surprised  markets with an unchanged policy rate and a somewhat neutral statement. The weaker Canadian dollar might help pull up inflation rate in Canada, acting as a shock absorber to buffer effects of lower oil prices. On the domestic front, CPI figures due Friday will be closely watched.

Technical: Bulls have the ball while 1.44 supports, expect a grind higher to test 1.47. Only below 1.4350 eases immediate bullish pressure

Interbank Flows: Bids 1.4450 stops below. Offers 1.4650 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

uc221

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