New York Forex Report: EUR Rallies As Risk Markets Reel

New York Forex Report: Chinese trading halted for the second time this week as the share plummet 7% in the first 30 minutes of trade. Minutes of the December FOMC meeting revealed policy makers’ decision to raise rates for the first time since 2006 at last month’s meeting was a “close call”. As expected, deliberation was skewed towards the Fed’s expectations on inflationary outlook in arriving at the decision amid not much concern from rather steady improvement in the labour market. Policymakers were seen debating the downside risks to inflation according to minutes, with some officials addressing that they were reasonably confident that inflation may reach the targeted level in the medium term. USD advanced as markets remained risk-off but saw most gains erased post-FOMC minutes release. USD continues to weaken over early European trading as safe-haven flows see CHF & JPY strongly bid. Equity markets also heavily lower amidst the broad risk-off sentiment.

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

Fundamental: EURUSD traded higher over the European morning as the Euro’s inverse correlation with risk keeps price supported as Equity markets sink. EZ Retail Sales disappointed YoY in November printing 1.4% against an expected 2%.  Absence of key economic data for today;s US session leaves focus on Fed’s Evans & Lacker who will both speak today.

Technical: While offers at 1.0850 contain upside attempts expect rotation south to test bids at 1.07 en route to a symmetry objective at 1.0660 as next downside objective.

Interbank Flows: Bids 1.07 stops below. Offers 1.0850 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 continued to trade lower over early European trading today following on worse than expected British Services PMI figures releases yesterday, leaving the market with the view that the Bank of England will not raise interest rates soon. The upcoming ballot of Britain’s membership of European Union provides uncertainty and volatility for GBP in coming months. British inflation is expected to stay flat due to the continuing weakening oil price.

Technical:  While 1.4660 caps intraday upside expect a drift lower to retest bids at 1.4565 the 2015 lows. Above 1.47 opens 1.48.

Interbank Flows: Bids 1.4550 stops below. Offers 1.47 stops above
Retail Sentiment: Bullish
Trading Take-away: Short from 1.48 for 1.45, risk free position.

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

Fundamental: JPY  hit a three month highs against the USD on Wednesday and continues to strengthen today as more weak Chinese economic data and North Koran nuclear test encourage safe haven buying.

Technical:  While 118.70 caps intraday upside attempts expect a sustained breach of 117.50 en route to test 116.35 as the next downside objective.

Interbank Flows: Bids 117.50 stops below. Offers 118.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: Despite the heavily bid safe-haven JPY, EUR was able to rally over European trading today as the currency’s inverse correlation with risk keep price supported as Equity markets sink.

Technical:  While 128.20 caps intraday upside reactions, expect a grind lower to retest 2015 lows at 126.50’s as the next downside objective. Only a breach of 129.50 eases immediate downside pressure.

Interbank Flows: Bids 126.50 stops below. Offers 129.50 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 slipped to multi-week lows against USD in the face of Chinese growth worries and descending commodity prices. The latest shock came after China’s central bank fixed its yuan currency lower than many expected while the global selloff in equities sparked a rush into safe-haven assets also hurt the Aussie. Another burden was the unexpected halt of a rally in iron ore, Australia’s top export earner. Prices of the mineral skidded again this week, dropped 60 percent in the past 12 months

Technical: While .71 caps intraday upside expect a test of pivotal.7000 failure here opens .6930 next. Only a breach of .72 eases immediate downside pressure.

Interbank Flows: Bids .70 stops below. Offers .71 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 remained firmly range-bound over European trading today as Oil rebounded off lows on news that Saudi war planes had attacked the Iranian embassy in Yemen. Traders will be listening to BOC Governor Poloz who speaks today at 1300GMT.

Technical: Bulls have the ball while 1.38 supports, expect a grind higher to test stops above 1.42 while 1.40 caps intraday downside. The next key technical levels to the upside are 1.4189 (23 July 2003 high) and 1.4509 (76.4% Fibo retracement of 1.6193 to 0.9058)

Interbank Flows: Bids 1.409 stops below. Offers 1.42 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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