London Forex Report: Geopolitical Risk Rises Post Paris Attacks

Friday’s terrorism attacks in Paris hogged headlines and will set the stage for risk-off trading today. Already, major global equity indices were sold off and safe haven US treasuries saw flight to safety bids on rising geopolitical risks that could potentially prompt the Fed to think twice on rate normalization come December FOMC meeting. US data disappointed again. Retail sales gained some traction but growth in headline and core sales were weaker than expected at 0.1% and 0.2% MOM respectively in October. Even though consumer confidence improved somewhat, it may turn softer again as geopolitical tension comes to the fore going forward. The USD Index rallied to an intraday high of 99.21 on retreat in risks before giving back some gains to close 0.35% up at 99.00.

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

Fundamental: EUR  dropped 0.85 percent to put it on track to end the week barely lower against the USD. The euro zone economy grew by a quarterly rate of 0.3 percent in the June-September period, down from 0.4 percent the previous quarter.

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: Short 1.0830 targeting 1.0560

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

Fundamental: GBP slipped against the USD on comments from the BoE chief economist Andy Haldane that an interest rate hike by the Federal Reserve would not automatically lead to a response in Britain. He also said that Britain does not need a rate hike in the near future because wage growth has fizzled and the outlook for the global economy is uncertain.

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: Sell 1.5280 stops above 1.5350 Target 1.50

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

Fundamental: USDJPY slipped to new lows for the day and the week down at 122.43, on the back of weaker than expected readings from US retail sales and PPI. Japanese Economics Minister Akira Amari said that he is not considering compiling an extra budget to stimulate growth even though figures show the economy fell into a technical recession.

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

Interbank Flows: Bids 122 stops below. Offers 124 stops above
Retail Sentiment: Bearish
Trading Take-away: Long 122.50 stops below 122 target 125.50

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

Fundamental: Japan’s preliminary 3Q GDP released fell 0.2% q/q, slipped back into its second recession since Shinzo Abe took office in Dec 2012

Technical:  Equality corrective objective at 131.20 achieved, only a close above 133.50 eases immediate bearish pressure, while 132.50 caps upside reactions expect retest of 130.50 lows

Interbank Flows: Bids 130.50 stops below. Offers 132.50 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 held firm at 0.71 after a strong jobs report led markets to widen the odds of an interest rate cut. AUDUSD was on track to post a 1 percent weekly gain, showing remarkable resilience amid a commodity tumble and increasing speculation of a Federal Reserve interest rate hike next month.

Technical: While .7170 caps corrective upside reactions expect a retest and breach of .7010 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: Sidelines for now

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

Fundamental: CAD fell to a new six-week low against the USD, pressured by a fresh
2-1/2-month low for crude oil and broader gains for the US dollar despite softer than anticipated US retail sales figures. The International Energy Agency reported that stockpiles are at a record 3 billion barrels, adding to concerns about oversupply in the oil market .

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 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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