New York Forex Report: All Eyes On The ECB

Yesterday’s raft of Fed speakers reinforced the case for a December rate hike. Fed Chair Yellen testimony to the Economic Club of Washington cautioning too long a delay in rate hike may inadvertently push the economy into recession is a clear signal of a December rate liftoff. While the Fed Chair said she expects continuous moderate growth in the US economy to be fast enough to boost both employment and inflation, below target inflation appears to be the main concern holding back the pace of tightening. This further reaffirms expectations that subsequent hikes after the initial liftoff will be very gradual.

Markets today are focused solely on the ECB meeting as investors prepare to learn what measures the central bank will take to boost inflation. Consensus is falling around a 10-15bps deposit rate reduction and a 10-15bln per month increase in QE. Follow our live rolling coverage of the meeting here including a raft of investment Bank views ahead ofthe meeting. 

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

Fundamental: EUR dropped steadily over the European morning as markets brace for the December ECB meeting at 1245 GMT, expected to see the ECB announce further easing measures. Markets will be looking for ECB to deliver above consensus, failure to do so may see shorts squeezed as some players take profits.

Technical: While 1.0680 caps intraday upside corrections, bears target a test of 1.05 next ahead of an assault on year to date lows. Only a close above 1.07 eases immediate downside pressure.

Interbank Flows: Bids 1.0550 stops below. Offers 1.07 Stops above.
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: GBP remains range-bound at yesterday’s lows as the weakness seen on recent data misses paused today with UK services PMI printing better than expected.

Technical:  While 1.50 caps intraday upside bears target a test of 1.4840 as the next downside objective, only above 1.5150 eases immediate downside pressure.

Interbank Flows: Bids 1.49 stops below. Offers 1.5080 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

gu2015-12-03 07_31_07-NetDania - NetStation

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

Fundamental: Yellen’s comments yesterday have seen renewed USD strength leading USDJPY higher overnight and over the European morning today. US ISM manufacturing data and further testimony from Fed chair Yellen will be key focus over the US session.

Technical: While 122.50/30 supports downside reactions, market structure remains bullish to test 2015 highs next. A failure at 122 opens a test of 121.40 support next ahead of pivotal 120.

Interbank Flows: Bids 122 stops below. Offers 124 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

uj2015-12-03 07_31_39-NetDania - NetStation

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

Fundamental: EURJPY was weaker over the European morning following yesterday’s lower than expected European core CPI, USD strength and mounting expectation of ECB to move today. ECB meets later today; expectations are running high for ECB to do more.

Technical:  While 131.30 caps upside reactions expect a sustained break below 130 to confirm a retest of 2015 lows. Only a close above 132.50 eases immediate bearish pressure.

Interbank Flows: Bids 129.50 stops below. Offers 131.00 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: AUD held near seven-week highs yesterday after GDP figures showed solid economic growth last quarter, supporting views that interest rates will not be cut in the near term. The Australia’s economy grew a brisk 0.9 percent in the third quarter, marking a remarkable 24th year without a recession while the annual growth of 2.5 percent exceeded most developed nations and beat forecasts of 2.4 percent. AUD remains strong over early European trading despite USD strength.

Technical: While .7170/50 remains the bid zone expect grind higher to test .7350 area next, only a close below .7150 concerns near term bullish bias.

Interbank Flows: Bids .7150 stops below. Offers .7350 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

au2015-12-03 07_32_21-NetDania - NetStation

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

Fundamental: CAD rose against the USD yesterday after the Bank of Canada held interest rates steady but used less dovish language in its policy statement than expected. However, the currency had weakened as crude oil prices retreated after a rise in US inventories added to the global surplus and investors worried that OPEC would not cut output in this week’s meeting . USDCAD is stronger again today over the European morning as Oil pulls back from initial strength on the session and the USD firms.

Technical: Bulls have the ball while 1.3280/60 supports intraday downside. A close below 1.3220 would ease the near term bullish bias and suggest a broader correction is underway.

Interbank Flows: Bids 1.3250 stops below. Offers 1.34 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

UC2015-12-03 07_43_52-NetDania - NetStation

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