London Forex Report: FED Puts December 2015 Back In Play

FOMC’s October meeting statement hogged the headlines overnight. The Fed maintained interest rate at 0.25% but the tone of the statement was less dovish. Concern regarding global development which had delayed a hike in the last meeting have somewhat receded, leaving room for the central bank to increase rates in December. USD rallied strongly to end higher against nine of its G10 counterparts, while the USD Index surged post-FOMC announcement following a more hawkish than expected policy statement that put Dec rate hike back in view. The USD Index closed at 12-week highs of 97.78.

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

Fundamental: EUR hit the 2-month lows, trading below the 1.09 handle as the Fed decided to leave policy unchanged with a hawkish statement, advising the conditions that would be appropriate for a December rate hike. The conditions for FOMC to raise rate require maximum employment and inflation reaching the 2% target, while the outlook for Eurozone and ECB who are concerned about China and EM giving a bearish case for the pair.

Technical: Trades to a our near term objective of 1.09 and tests stops just below where profit taking emerged. Today while 1.10 caps intraday upside reactions anticipate a retest of the post FOMC lows, with a daily symmetry objective at 1.086 as the next downside objective.

Interbank Flows: Bids 1.0850 stops below. Offers 1.10 Stops above.
Retail Sentiment: Neutral
Trading Take-away: 1.09 target achieved, sidelines for now

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

Fundamental: GBP tested back below the 1.53 mark and hit the 2-week lows of 1.5245 following Fed’s unchanged policy statement. The statement removed comments that the global developments were hindering growth, so this has been less dovish compared to the previous statement from the last meeting.

Technical:  While 1.5300 caps intraday upside reactions expect bearish pressure to persist targeting stops sub 1.52 as the next downside objective. A close above 1.53 resets bullish expectations of a test of 1.56.

Interbank Flows: Bids 1.52 stops below. Offers 1.5350 stops above
Retail Sentiment: Neutral to bearish
Trading Take-away: Venture long back through 1.5330 targeting 1.56

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

Fundamental: Despite Fed left the rate unchanged, they posed rather bullish views and kept December rate hike on agenda. As a result, the dollar stood near two and a half month high against a basket of currencies. JPY weakened against a broadly strong USD, which rose to 121.25 from Wednesday’s low of 120.23. Focus for JPY will be the BoJ’s policy meeting on Friday as markets have unusual high divergences on whether BoJ will expand its stimulus or not.

Technical: Bulls target a sustained break of 121 to target range highs at 121.85 an intraday failure at 120.00 would suggest return to range.

Interbank Flows: Bids 119.50/30 stops below. Offers 121.50 stops above
Retail Sentiment: Bearish
Trading Take-away: Buy pullbacks against 120.50 targeting upside range break

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

Fundamental: Japanese Industrial production in Japan rose unexpectedly, spurring hope that the economy did not contract for a second consecutive quarter in the July-September period. Industrial production rose 1.0% m/m, following a 1.2% decline in August. This was much stronger than the 0.6% decline expected, and the latest rebound could mean that economic production might have been strong enough last quarter. The cross continues to be weighed by negative EUR flows but has stabilsed overnight as equity markets regain post FOMC losses.

Technical:  Bears now target equality corrective objective at 131.20 while 132.90 caps upside reactions, only a close above 133.50 eases immediate bearish pressure.

Interbank Flows: Bids 131.00 stops below. Offers 133.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Sell pullback against 134,50 targeting 131.20

ey2015-10-29 07_41_06-NetDania - NetStation

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

Fundamental: AUD  was hit by a double whammy, losing a cent against the USD, after weaker-than-expected domestic CPI data and the Fed putting a December rate hike on the table. In the absence of domestic data, markets will look to Q3 GDP data and unemployment claims today from the US for further trading signals .

Technical: The breach of .7140 concerns near term bullish bias and suggests a retest of pivotal .7030/50 next, failure here firmly re-establishes the bearish tone and opens a retest of 2015 lows and potential broader bearish trend continuation move.

Interbank Flows: Bids .7100 stops below. Offers .7250 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines for now

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

Fundamental: CAD  ended stronger against USD on a surge in crude oil prices while some gains were offset by the US Federal Reserve’s note that a December interest rate hike was still on the agenda. The commodity-linked currency had gained ahead of the Fed as a bump in oil prices provided support, US crude prices settled up 6.3 percent at $45.94 a barrel and Brent added 5.18 percent to to $49.19

Technical:1.3260 provides decent resistance as anticipated as this area contains upside potential for another leg of corrective downside. A close above 1.3280 eases bearish pressure and resets focus on the 2015 highs and stops above.

Interbank Flows: Bids 1.3090 stops below. Offers 1.3260 stops above
Retail Sentiment: Bearish
Trading Take-away: Sell a double top test and hold against 1.3280 for another leg lower

uc2015-10-29 08_11_55-NetDania - NetStation