London Forex Report: OECD Cuts World Growth Forecast

London Forex Report: OECD Cuts World Growth Forecast

London Forex Report: OECD cuts world growth forecast by 0.3ppt to 3.0% and 3.3% for 2016 and 2017 respectively, saying global growth outlook is “elusive” and requires urgent policy response. The reduction in growth outlook stemmed from broad-based downgrades across most of its member nations apart from China, where its growth forecasts were maintained at 6.5% and 6.2% for this and next year. The US economy is expected to expand at a slower pace of 2.0% (-0.5ppt) and 2.2% (-0.2ppt) in 2016 and 2017 while growth in the Euro area is trimmed by 0.4ppt to 1.4% for 2016 and 0.2ppt to 1.7% for 2017. Forecasts for the UK economy were slashed by 0.3ppt each for this and next year to 2.1% and 2.0% respectively. USD edged higher again, lifted by slightly better US data as well as demand on losses in US equities. The USD Index lost traction towards close to end 0.18% stronger at 96.95..

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

Fundamental: ECB minutes released yesterday showed that at least one policy maker said that it would be “logical” to overshoot inflation at just under 2%” after almost three years of falling short of the threshold. The minutes leave rooms for ECB to further expand its monetary policy at next month’s meeting.

Technical: Initial test toward pivotal support at 1.1050/30 attract profit taking bounce. While 1.1220 caps upside sellers have the ball targeting stops sub 1.10. A breach of 1.1250 suggests consolidation and potential return to test offers over 1.13 ahead of 1.1376 highs.

Interbank Flows: Bids 1.1050 stops below. Offers 1.1250 stops above
Retail Sentiment: Bearish
Trading Take-away: Long

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

Fundamental: GBP surged to an intraday high of 1.4393, just below the strong resistance level 1.4400. It has pulled further away from the Wednesday’s low of 1.4235. Some tentative signs show that Britain has been being offered more favourable terms for its stay in EU membership. With a lack of domestic macroeconomic data, the outcome of the EU leaders’ Summit will be the main focus for traders.

Technical: Retest of bids towards 1.4230 attracts buyers, an intraday failure at 1.43 suggest false upside break and bears back in control to target 1.42 bids next. A breach of 1.44 eases bearish bias.

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): Bearish – Medium Term (1-3 Weeks): Bearish

Fundamental: The JPY strengthened overnight, owing to a fresh demand for safe-haven Japanese currency as US stocks snapped a three-day rally. USDJPY dropped towards 113.00, but was still some way off a 15-month low near 111.00 set last week.

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: Bullish
Trading Take-away: Short

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

Fundamental: Japanese trade deficits widened to 645.9 billion yen in Jan (Dec: 140.3 billion yen) the most in a year amid a monthly decline in exports coupled with increase in imports. On an annual basis, exports fell 6.6% YOY in Jan, the quickest pace of decline since Oct 2009, underscoring weakness in global demand..

Technical: While 126.50 caps upside reactions expect further fresh two and a half year lows for a move down to 124 as the next downside objective. A close over 128.20 would ease immediate downside pressure.

Interbank Flows: Bids 125 stops below. Offers 126.50 stops above.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Fundamental: The AUD tested recent resistance again and recovered from a short-lived wobble in the wake of soft jobs figures. The AUDUSD initially dipped half a US cent as figures showed a net 7,900 jobs were lost in January against forecasts of a rise of 15,000, while the jobless rate surprised with an increase to six percent.

Technical: While AUD continues to trade above the pivotal .7100/.7070 expect a retest of offers above .7240 en-route to .7310. Another failure at .7050 would suggest further weakness to retest year to date lows at .6820’s

Interbank Flows: Bids .6950 stops below. Offers .7250 stops above
Retail Sentiment: Bullish
Trading Take-away: Neutral

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

Fundamental: CAD weakened against the USD, pulling back from a two-week high earlier in the session as rising US oil inventories moderated a rally in crude oil prices.The rally in oil was pared after a US government report showed a rise in crude stocks, opposing optimism over the deal by oil producers to freeze output. US crude prices settled at $30.77 a barrel, up 0.36 percent

Technical: While USDCAD trades sub 1.38 downside pressure remains the driver with bears fully focused on a retest of 1.3630 bids ahead of 1.3530. A close over 1.3850 suggests a retest of 1.40 offers in broader range trade

Interbank Flows: Bids 1.3630 stops below. Offers 1.40 stops above
Retail Sentiment: Bullish
Trading Take-away: Short

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