New York Forex Report: Markets Muted Ahead of FOMC

New York Forex Report: Markets Muted Ahead of FOMC

New York Forex Report: USD is mostly lower in narrow ranges ahead of the Fed decision. European stocks and US futures are lower, prompting a bid for developed markets fixed income. Commodities, ex-precious metals, are weaker. There is a fair bit of data from the US out over the course of the morning to keep the markets somewhat engaged ahead of the main event. US retail sales are expected to rise modestly in November, after strong gains in October, while PPI is expected to be up mildly last month and Industrial Production is called lower. The FOMC meeting’s conclusion and Chair Yellen’s press conference is clearly the focus for traders, however, 25bps rate hike is widely expected and factored in. Changes in the characterisation of the outlook, the official forecasts and the dot plot (which currently implies two rate hikes in 2017) will be key drivers of the USD’s reaction function.

FX Majors: EUR As the economy gathered steam in this quarter, the gauge of economic optimism in the Euro area climbed to 18.1 in December from 15.8 in November. The index was at its six-month high amid anticipation of quicker GDP growth in 4Q. GBP The slew of price indicators affirmed that inflationary pressure was building up in the UK. Following Britain’s vote to leave EU, Sterling’s depreciation continued to boost price pressure, pushing up CPI by 0.30 ppt to 1.20% YOY in November. It was the quickest pace of increase since October 2014.In tandem, retail and producers’ prices also rose at faster pace. Separately, house price index moderated slightly but managed a 6.90% YOY increase in October. JPY Two separate surveys showed that Japanese firms remained optimistic about the economy in 4Q. Tankan large manufacturing outlook index rose from 6 in 3Q to 8 in 4Q, signaling rising confidence that the economy is recovering from the slowdown in 3Q. Meanwhile, Tankan large non manufacturing outlook index was unchanged at 16 this quarter, affirming sustained momentum in the services sector.

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

Technical: Sharp rejection from medium term resistance at 1.0850 this is a key upside hurdle which will need to be captured on a closing basis to stabilise the pair. The subsequent break back below 1.0650 opens retest of bids back towards 1.05 near term resistance is sited at 1.0650, as this area caps bears target 1.0424 symmetry swing objective.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: The close over 1.2670 suggests further upside momentum to target the key structural resistance sited at 1.28, near term support is sited at 1.26 a failure below 1.25 reopens symmetry swing objective at 1.24.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Bulls target 116.33. Near term support is sited at the symmetry swing objective of 114.45, a close below here would suggest a broader correction to the advance opening a move back to test symmetry swing support at 109.60
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: As 120 supports scope for a test of offers above 123.50 as the next upside objective ahead of the pivotal symmetry swing resistance sited at 124.42. A break back below 119 opens 118.45 opens ahead of pivotal bullish trend support at 116.20
Retail Sentiment: Bearish
Trading Take-away: Long

Commodities FX: GOLD has suffered quite a blow over the past several days, with the yellow metal unable to ignore the intense rotation into the USD. OIL prices edged off earlier gains as the support from a plan by the Organisation of the Petroleum Exporting Countries to limit production were undercut by the report of an assessment on how much those nations are currently producing. AUD gained support from growing commodity prices, particularly iron ore and bumped up to 0.7523, from Monday’s low of 0.7422, moved closer to a one-month peak of 0.7523 CAD ended flat against the USD after reaching a near eight-week high, as traders pared positions ahead of the meeting of US Federal Reserve and its future monetary policy

AUDUSD
Outlook: Short Term (1-3 Days): Neutral – 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: Neutral
Trading Take-away: Neutral

USDCAD
Outlook: Short Term (1-3 Days): Bearish – 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: Bullish
Trading Take-away: Short

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

Technical: As equidistant swing objective sited at 1202 contains upside reactions bears target 1149 as the next downside objective near term resistance is sited at 1165. A close over 1220 suggest broader correction to the recent decline.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: The breach of 52.40 opens 55.19 equidistant swing target as the next upside objective. Near term support is sited at 51.69 symmetry swing support, a close below 47.00 would concern the bullish thesis.
Retail Sentiment: Bearish
Trading Take-away: Long