London Forex Report: Better Than Expected US Retail Sales

London Forex Report: Better Than Expected US Retail Sales

London Forex Report: Better than expected retail sales in the US overshadowed a softer print in consumer sentiments, bolstering expectations the Fed would be able to continue raising rates this year. In line with this, Fed Dudley said it is premature to talk about adopting negative interest rates as he sees domestic momentum that will help offset external weaknesses. Sentiments were also lifted by a rebound in oil prices on news OPEC might finally agree on production cut to counter oversupply.

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

Fundamental: EUR continued to pull back Friday, after printing three month highs of 1.1375, due to a less than doveish testimony from Fed Chair Yellen, the EUR came under renewed weakness from better than expected US retail sales data. The EUR has risen by more than four point five percent against the USD since the beginning of February. Traders are starting to believe that this strength will increase the probability that the ECB will increase easing measures.

Technical: While 1.12 remains intact as support expect rotation towards initial resistance at 1.13. A failure at 1.12 opens a retest of pivotal 1.1050

Interbank Flows: Bids 1.12 stops below. Offers 1.13 stops above

Retail Sentiment: Bearish
Trading Take-away: Sidelines

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

Fundamental: GBPUSD conceded intraday gains, as better-than-expected US retail sales data weighed on the pair. UK construction output rebounded to increase 0.5% YOY and 1.5% MOM in December. Over the fourth quarter, output in the sector fell 0.4%, a steeper decline than the 0.1% used in the estimate of fourth-quarter U.K. GDP growth, which came in at 0.5%.. Still, since construction accounts for only about 6% of the economy, the quarter’s data will have only a negligible impact on the overall pace of growth.

Technical: Failure at 1.4350 suggests false upside break and resets bearish trend to attack and break 1.40 as the primary downside objective. Over 1.46 re- establishes bullish bias and targets a retest of early February highs en route to 1.4860

Interbank Flows: Bids 1.4430/50 stops below. Offers 1.46 stops above.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Fundamental: USDJPY printed a 15-month low at 110.98 last week, the pair rebounded around 0.75 percent to 113.58 during New York trade Friday, arresting a four-day decline. Bank of Japan Nakaso commented regarding more easing measures, stating he ‘has become more and more determined to overcome deflation’. Japan released Q4 GDP data overnight which was negative 0.4 percent, revised downward 0.3 percent.

Technical: USDJPY has confirmed break of major neckline support again from its extended consolidation pattern. While 114.30/50 caps intraday upside reactions expects a grind lower to test psychological 110 as the next major downside objective. Over 117 eases immediate downside pressure

Interbank Flows: Bids 110 offers below. Offers 114.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Short

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

Fundamental: Japan’s economy contracted further for the final quarter of 2015, after GDP shrank 1.4% (annualized). Weakness in private consumption was the biggest contributor to the contraction. Against a backdrop of a soft Japanese economy, possible extended negative interest rate environment may persist to help revive business and lending activities.

Technical: While 129.10 caps upside reactions expect a retest of year to date lows, only over 130.50 eases immediate downside pressure.

Interbank Flows: Bids 125.50 stops below. Offers 128.50 stops above.
Retail Sentiment: Bullish
Trading Take-away: Short

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

Fundamental: AUD has recovered from Friday’s US Retail sales inspired declines. Gold prices eased last Friday after rising five percent in the previous day as US and European shares rebounded. Traders believe that the AUD could benefit if the gold price continues to rise as Australia is one of the largest gold producing countries.

Technical: A close over .7150 eases immediate downside pressure as bulls target a test of .7240 as the next upside objective. A failure at .7050 support would target a retest of .6950 support zone.

Interbank Flows: Bids .6950 stops below. Offers .72 stops above.

Retail Sentiment: Bearish
Trading Take-away: Neutral

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

Fundamental: CAD weakened against the USD on Friday after a solid US retail sales data, but gained against safe-haven currencies as oil prices and stocks rebounded. Oil prices popped around 12 percent last Friday, amid rumours of OPEC might cut production to reduce the world supply glut. Stock markets will be closed today throughout Canada for Family Day

Technical: While 1.39 contains upside reactions potential for bearish bias to resume, however while 1.38 supports there remains potential for a broader corrective phase with 1.4160 the next upside pivot.

Interbank Flows: Bids 1.3750 stops below. Offers 1.40 stops above
Retail Sentiment: Bullish
Trading Take-away: Short

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