New York Forex Report: Better China Data Stems Risk-Off

London Forex Report: Yesterday’s US data was upbeat, suggesting that sentiments have improved in the US amid current economic headwinds although it remains to be seen if optimism is able to hold up going forward if the current equities and oil turmoil continues to deepen. Small businesses confidence surprised on the upside and economic optimism index came in better than the previous reading, reaffirming somewhat resilient economic conditions. Similarly, consumer sentiments in Japan surged to the highest level since Nov 2013 and a separate survey showed that household and businesses assessments on current economic conditions also improved. On the contrary, industrial output print from UK indicated that production fell the most in nearly three years, dragged by the manufacturing, mining and utilities sectors.

Chinese trade data overnight came in better than expected, stemming some of the risk-off flow of recent days, allowing equity markets to hold on to recent recovery gains. US Dollar remains mildly bullish over early European trading today and a light data slate for the US session will leave the focus on Fed’s Evans who is speaking on the economy and monetary policy later today in Iowa (1730GMT) followed by the release of the Fed’s beige book & monthly budget statement at 1900GMT.

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

Fundamental: Yesterday ECB’s Villeroy said that QE by the ECB will add half a percentage point to 2016 growth. He added that there are limits on how low rates can go. Expect range trade ahead of tomorrow’s ECB minutes. Latest EZ Industrial production figures printed below expectations at 1.1% YoY vs 1.3% expected and -0.7% MoM vs -0.3% expected.

Technical: While offers at 1.0930 contain upside reactions expect rotation to retest bids at 1.08, a breach of 1.0930 opens a retest of 1.0990 trend resistance.

Interbank Flows: Bids 1.08 stops below. Offers 1.0950 Stops above.
Retail Sentiment: Neutral
Trading Take-away: Sidelines

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

Fundamental: GBP extended its decline to print five year lows following reports that showed UK manufacturing and industrial production in November both came in way short of market expectations. The pair dropped through major psychological levels at 1.4400s before slowly crawling back to 1.4450s. BoE rate decision meeting tomorrow, markets generally expect the central bank to keep current monetary policy on hold amid subdued inflation levels. But any comments regarding future rate hikes will be closely watched.

Technical:  While 1.45 caps upside reactions expect a grind lower to retest yesterday’s lows en route to 1.43. Only over 1.46 eases immediate downside pressure.

Interbank Flows: Bids 1.4350 stops below. Offers 1.45 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: The surge of US and European stock markets yesterday may put further pressure on JPY. BoJ’s governor Kuroda said Japan inflation is improving in a steady manner due to a strengthening domestic labor market. He also underlined that the current easing monetary policy will succeed in the near future though BoJ is only halfway to its two percent inflation target

Technical:  While 118.30 caps intraday upside attempts expect a grind lower en route to test 116.35 as the next downside objective. Only above 119.30 eases immediate downside pressure.

Interbank Flows: Bids 116.50 stops below. Offers 118.50 stops above
Retail Sentiment: Bullish to neutral
Trading Take-away: Sidelines

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

Fundamental: Japan’s BoP current account for Nov came in better than estimates with a surplus of 1143.5b Yen (est: 895.0b), maintaining the record of monthly surpluses for 2015.

Technical:  While 129.10 caps intraday upside reactions, expect a grind lower to retest Thursdays lows at 126.70’s a failure here opens a test of bids at 126. Only over 130 eases immediate downside pressure.

Interbank Flows: Bids 126.50 stops below. Offers 128.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: A recovery in risk sentiment over recent days has seen AUD correcting higher against the US Dollar with improved Chiese trade data overnight adding to gains.

Technical: While .7050 caps intraday upside expect a grind lower to test 2015 lows. Only a breach of .7150 eases immediate downside pressure.

Interbank Flows: Bids .69 stops below. Offers .7050 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: USDCAD climbed above the 1.4300 handle yesterday, reaching a fresh 13-year high of 1.4314. The loonie came under renewed pressure during the American session as the oil prices resumed the fall after a short-lived bounce, with WTI sliding towards $30.00 a barrel . A subsequent recovery in Oil price over early European trading today has seen USDCAD correcting lower.

Technical: Bulls have the ball while 1.4160 supports, expect a grind higher to test stops above 1.4314. Only below 1.40 eases immediate bullish pressure

Interbank Flows: Bids 1.41 stops below. Offers 1.43 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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