London Forex Report: USD Prints 14 Year Highs

London Forex Report: USD Prints 14 Year Highs

London Forex Report: US consumer inflation picked up steam to 1.70% YOY in November (October: +1.60% YOY), marking its fastest pace of growth since October 2014 and reflecting a pick-up in the economy in the final quarter of the year. Manufacturing and housing market data were also upbeat. Philadelphia fed business outlook staged a surprisingly strong jump to 21.5 in December (November: 7.6) while Markit manufacturing PMI rose to 54.2 in December (November: 54.1), both pointing to quicker pace of expansion in the manufacturing landscape. In addition, NAHB housing market index surged to 70 in December (November: 63) as home builders confidence advanced to an eleven year high. USD rallied for a thrid straight day and strengthened against all G10FX peers. The USD Index jumped 1.24% to 103.02, its highest in 14 years, on hawkish Fed rate outlook.

FX Majors: EUR Data bag from the Eurozone was mixed as stronger growth in the manufacturing sector was offset by softer growth in the services sector. Markit manufacturing PMI climbed to a record high of 54.9 in December (November: 53.7), contrasting the decline in services PMI in the same time period (December: 53.1 vs November: 53.8). GBP BOE officials voted unanimously to keep benchmark rate at 0.25%, government bond purchases at £435 billion and corporate bond purchases at up to £ 10 billion at yesterday’s MPC meeting. After cutting rate by 25 bps to the current record low level in August, policy can now “respond in either direction” depending on the change in economic conditions. However, the recent appreciation in Sterling ‘would result in a slightly lower path for inflation than envisaged in the November Inflation Report, though it is still likely to overshoot the target later in 2017 and through 2018’. Inflation is expected to rise to the targeted 2.00% within 6 months. On the data front, retail sales unexpectedly rose 0.20% MOM in November (October: revised to +1.80% MOM) as consumers splurged on electronics and household goods ahead of the festive seasons. JPY Japan’s machine tool orders plunged 5.60% YOY in November. Despite softening from the 8.90% YOY drop in October, details indicated that foreign demand continue to weighed heavily on total orders, underscoring weak recovery in global capital spending growth.

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

Technical: 1.0424 symmetry swing objective achieved as 1.05 now acts as resistance bears target 1.03 as the next downside objective. A close over 1.0880 is required to curb bearish spirits

Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Symmetry swing objective at 1.24 achieved. As 1.2550 caps upside reactions bears target 1.23 as the next downside objective. Only a close over 1.2730 resets attention on upside objectives
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Near term support is sited at the 116 as this area supports bulls target 120 as the next upside objective.Only a close below 112.50 would suggest a broader correction.

Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: As 121.50 supports scope for a test of pivotal symmetry swing resistance sited at 124.42. Only below 120 concerns bullish thesis.
Retail Sentiment: Bearish
Trading Take-away: Long

Commodities FX: GOLD Setbacks in this market have been extreme over the past few weeks, with the weakness potentially compromising any possibility for a longer term base OIL OPEC has singnalled larger 2017 oil supplys unless cuts are implemented. AUD found little help against the USD after the better-than-expected Australian jobs report. Australian employment rose a net 39,100 in November, versus forecasts of a 20,000 gain. CAD weakened to a two-week low against the USD before paring some losses, stressed by broader gains for the USD and weaker-than-expected domestic manufacturing figures.The Bank of Canada which is widely expected to hold rates steady throughout 2017, with the risk of a sharp correction in Canada’s housing market and financial stress on households increasing in the last six months

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

Technical: .7092 AB=CD remains the downside objective. Near term resistance sited at .7440 has been eroded the correction should now challenge pivotal 7530/50 as this levels contains the upside reaction there is potential for resumption of downside pressure
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Price rotating lower to test pivotal symmetry support at 1.3098 ahead of longer term channel support sited at 1.3050. Over 1.34 stabilises the pair and suggest a return to focus on upside objectives
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1149 achieved as 1155 caps upside reactions bear set sights on 1113 symmetry swing objective.. A close over 1200 suggests broader correction to the recent decline
Retail Sentiment: Bullish
Trading Take-away: Short

USOIL
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish

Technical: Near term support sited at 51.69 removed correction now targets symmetry swing support at 50.00, a close below 47.00 would concern the bulls.
Retail Sentiment: Bearish
Trading Take-away: Sidelines

Posted in Forex Analysis, London Forex Report, tagged with on