London Forex Report: FOMC Meeting Minutes Show Growth Concerns

London Forex Report: FOMC Meeting Minutes Show Growth Concerns

London Forex Report: FOMC meeting minutes reiterated growing concerns on global development and tighter financial conditions on the domestic front, suggesting that the Fed is likely to derail their Dec projection of four rate hikes this year. Tone of the minutes as well as Fed officials are turning increasingly dovish, affirming our view that next month’s meeting will be a non event. Dataflow from the US remained a mixed bag with pleasant surprises from industrial production due to increases in manufacturing and utilities production but housing starts unexpectedly fell, confirming still patchy growth in the US economy. USD edged higher with small gains after erasing early losses, buoyed by firmer US data coupled with extended weakness in European majors. The USD Index however, slipped 0.08% to 96.78, weighed down by a strong surge in the subcomponent currency CAD

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

Fundamental: The EUR retraced more of its recent gains to 1.1103 as expectations for additional ECB easing still weigh on the currency. Focus for the remainder of the week is the two-day European summit starting today, at which British Prime Minister David Cameron will try to secure more favourable terms for Britain’s membership of the EU.

Technical: While 1.1220/40 rejects intra-day upside reactions expect a test of pivotal support at 1.1050/30 as the next downside objective. A breach of 1.1260 opens 1.1350 offers.

Interbank Flows: Bids 1.11 stops below. Offers 1.1250 stops above

Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Fundamental: GBP hovered at a two-week low against the USD as a bounce in oil prices sharpened appetite for riskier currencies despite mixed figures released from Britain’s labour market. GBP has shed around six percent against the USD since mid-December 2015 as traders pushed back their bets on BoE rate rises and moved to price in the chance of a cut in rates over the next year.

Technical: While 1.4410 caps the upside expect a retest of bids towards 1.4230 en route to 1.4149 lows as the next downside objective. A breach of 1.4450 eases immediate downside pressure.

Interbank Flows: Bids 1.4230 stops below. Offers 1.44 stops above.

Retail Sentiment: Bullish
Trading Take-away: Short

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

Fundamental: USDJPY edged to the daily highs after US Producer Prices and Building Permits have both surpassed previous estimates for the month of January.The pair dropped on the FOMC minutes but then recovered gradually as there was no surprise from the minutes.

Technical: While 112.90/70 supports downside rotations expect a grind higher to retest the broken neckline resistance at 115.80/116 where fresh selling interest should emerge

Interbank Flows: Bids 113.40 offers below. Offers 116 stops above
Retail Sentiment: Bearish
Trading Take-away: Neutral

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

Fundamental: Mario Draghi faces a new dilemma with the pummelling of Eurozone Bank Stocks. The battering of European financial stocks is putting heat on the European Central Bank not to slash subzero interest rates even lower next month, but its policy makers say they are considering a further cut. Fears of more rate cuts have worsened the rout, according to the Wall Street Journal.

Technical: While 129 caps upside reactions expect a retest of year to date lows 125.77 a breach of this support opens a move down to 124 as the next downside objective. A close over 129.74 would ease immediate downside pressure and open a rotation higher yo test 132.30

Interbank Flows: Bids 126 stops below. Offers 128.50 stops above.
Retail Sentiment: Bullish
Trading Take-away: Short

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

Fundamental: Australian unemployment rate climbed up by 0.2ppt to 6.0% in Jan, the highest level in four months. Last month, 7.9k employees lost their jobs compared to 0.8k in Dec adding to signs of labour market softness, but on a brighter note, labour force participation rate remained at 65.2%.

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