New York Forex Report: Markets Mute As Oil Falls Back

New York Forex Report: Despite registering its biggest daily two day gain in seven years last week, Oil has begun the week with sharp losses as once again attention shifts back to the surging supply glut, with Iran announcing record-high Oil production. Equities and metals are mixed as markets start the week with a cautious tone. Main focus this week is on the January FOMC rate decision and whilst no further increase is expected at this meeting, traders will be paying close attention to the statement for clues as to the proximity of any further increases. US Q4 GDP follows on Thursday with PCE on Friday adding the risk of further event-driven volatility in the latter part of the week.

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

Fundamental: EURUSD reversed initial European session gains as the latest German IFO data showed business sentiment has fallen to its lowest point since Feb 2015. This data comes after Friday’s weak German PMI data sets.

Technical: Expected rotation to retest bids at 1.08, a sustained breach of 1.08 bids opens 1.07 range lows. A breach of 1.0990 trend resistance opens a broader 1.1240 symmetry corrective objective.

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

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

Fundamental: Sterling weakened over the European morning, extending the reversal of Friday’s bullish moves which seem to have been driven by a short term positioning squeeze rather than a change in market sentiment. UK GDP tomorrow is key domestic data focus

Technical: While 1.4230/10 caps downside reactions expect a retest of Fridays 1.4360’s high. Over 1.44 eases immediate downside pressure and sets up a broader correction.

Interbank Flows: Bids 1.42 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: Bank of Japan Governor Haruhiko Kuroda said there is further room for the BOJ to expand its quantitative easing program if inflation continues to diminish. JPY strengthened over the European morning as safe-haven demand kicked in again.Overnight, Latest Japanese Trade Balance data printed above expectations, driven by cheaper import costs due to lower Oil prices.

Technical: While 117.90 caps downside attempts expect a retest of 119 offers. Only above 119.30 eases immediate downside pressure.

Interbank Flows: Bids 117.50 stops below. Offers 119 stops above
Retail Sentiment: Neutral
Trading Take-away: Long

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

Fundamental: BOJ meets this week and the recent run-up in the EURJPY, last seen above 128, is likely no coincidence. There could be some expectations for the central bank to act, uncertainties on their next move could keep EURJPY in broader range. The press conference by Governor Kuroda will be eyed along with data releases that day including CPI and industrial production.

Technical: Bids 127 stops below. Offers 128.50 stops above

Interbank Flows: Bids 127 stops below. Offers 128.50 stops above
Retail Sentiment: Bearish
Trading Take-away: Long

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

Fundamental: BOJ meets this week and the recent run-up in the EURJPY, last seen above 128, is likely no coincidence. There could be some expectations for the central bank to act, uncertainties on their next move could keep EURJPY in broader range. The press conference by Governor Kuroda will be eyed along with data releases that day including CPI and industrial production.

Technical: While 128.50 caps upside reactions, expect a retest of bids at 127.50. Only over 129.50 eases immediate downside pressure.

Interbank Flows: Bids 127 stops below. Offers 128.50 stops above
Retail Sentiment: Bearish
Trading Take-away: Long

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

Fundamental: Last week CAD rallied against the USD, extending gains after the Bank of Canada’s steady rate decision while the crude oil prices rose as a cold snap boosted demand for heating oil across the United States and Europe. The resumption of selling in Oil this week, driven by over-supply concerns, once again puts CAD under pressure though BOC rate-cut expectations are significantly reduced in the wake of last week;s BOC meeting.

Technical: While 1.4310/30 caps upside reactions expect a broader corrective phase to test 1.40 support. Only above 1.44 eases immediate downside pressure and opens a retest of 2016 highs.

Interbank Flows: Bids 1.4050 stops below. Offers 1.4350 stops above
Retail Sentiment: Bullish
Trading Take-away: Short