London Forex Report: Draghi On Deck

Markets were quieter with the US bond market and government offices out for Veteran Day holiday. Focus was once again on China data which came in mixed, reaffirming that further policy easing is still on the cards to fend off sharper slowdown in the China economy. Industrial production continued to taper off and grew at a slower pace of 5.6% YOY in October, as a result of still weak global demand while fixed asset investment growth softened amid slower business spending. On a more comforting note, retail sales accelerated to increase 11.0% YOY, painting a slightly rosier picture on domestic demand. USD fell against all G10’s while the USD Index eased from its intraday high to close lower at 99.01, down 0.28% amid an absence of buying support following closure of the US markets.

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

Fundamental: EUR drifted in slim ranges overnight in the US Veterans Day holiday which closed at 1.0743, rebounded from the low of 1.0673 recorded in this week. The euro zone’s economy is growing only modestly after the ECB’s scheme of quantitative easing (QE) and the central bank is urgently considering what more it can do to improve the economy. Traders will closely eye ECB President Draghi’s speech and Q&A session today on ECB policy.

Technical: While 1.0830/50 caps intraday upside corrections, bears target a test of 1.0560 next ahead of an assault on year to date lows. Only a close above 1.09 eases immediate downside pressure.

Interbank Flows: Bids 1.07 stops below. Offers 1.0830 Stops above.
Retail Sentiment: Bullish
Trading Take-away: Sell against 1.0830/50 resistance targeting 1.0560

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

Fundamental: GBP climbed as far as 1.5220, pulling further away from six-month lows of 1.5027 set on last Friday. Figures showed UK wages growing at a slower-than-expected pace in the third quarter while the jobless rate fell to its lowest since early 2008. The BoE said it is keeping a close eye on wage growth as it considers its first rate hike since 2007.

Technical:  While 1.5250 contains upside reactions expect a test of of bids at 1.50 as the next bearish objective. Only a close above 1.53 eases immediate bearish bias

Interbank Flows: Bids 1.50 stops below. Offers 1.5250 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines for now

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

Fundamental: USDJPY posted its third daily loss in a row, extending a pullback from a 2.5-month high of 123.59 that strengthened by a strong nonfarm payrolls report released by last Friday. The Bank of Japan needs to take no action to further ease now as the effects of low oil prices on inflation rates will dissipate eventually, BoJ’s board member Yutaka Harada commented.

Technical: While 122.50/30 supports downside reactions, market structure remains bullish to test 2015 highs next

Interbank Flows: Bids 122.50 stops below. Offers 124 stops above
Retail Sentiment: Bearish
Trading Take-away: Buy 122.30/50 stops below 121.50 target 125.50

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

Fundamental: ECB’s Hansson said no need for ECB to cut rates at the moment and Constancio warned that ECB has not made any decision before the next meeting on December 3rd. Pair remains anchored towards lower end of recent range.

Technical:  Bears now target equality corrective objective at 131.20, only a close above 133.50 eases immediate bearish pressure.

Interbank Flows: Bids 131.00 stops below. Offers 133.50 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines for now

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

Fundamental: AUD lifted the most in five weeks after figures showed that the unemployment rate unexpectedly fell in October. AUDUSD gained for a second day as the Bureau of Statistics said employers added 58,600 new positions in October, while the jobless rate down to 5.9 percent, from 6.2 percent in September.

Technical: While .7170 caps corrective upside reactions expect a retest and breach of Friday’s lows as bearish momentum builds for a retest of year to date lows. A close above .7200 eases bearish pressure

Interbank Flows: Bids .7000 stops below. Offers .7170 stops above
Retail Sentiment: Bullish
Trading Take-away: Squared shorts into .7030 target, sidelines for now

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

Fundamental: CAD was flat against the USD following two days of small gains. The currency pair had little incentive to move with US and Canadian public holidays. US crude prices settled down 2.9 percent at $42.93 a barrel, while Brent crude LCOc1 lost 3.4 percent to $45.85.

Technical: Offers just above 1.33 stall the upside ratchet, bulls have the ball while 1.3220 supports intraday downside. However a close below 1.3220 today would suggest a false upside break and a bull trap sustained weakness below 1.3220 confirms.

Interbank Flows: Bids 1.3250 stops below. Offers 1.3350 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines for now

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