New York Forex Report: Sterling Hits The Skids

New York Forex Report: Sterling Hits The Skids

New York Forex Report: GBP is under performing and Cable is trading at its lowest since mid January. UK PMI data weakened unexpectedly, weighing on GBP sentiment, with services activity dropping to 53.3 in Feb, from 54.6 in Jan. Markets expected a shallower deceleration to 54.1. The big downside miss reflected weaker consumer spending on services, the ISM reported, suggesting that higher prices are compromising consumer activity. The USD is mixed versus its major currency peers on the day so far but seems destined to close out the week with a fourth consecutive weekly gain in the USD Index under its belt as markets factor in a near certain March 15th policy tightening from the Fed. US short term yields continue to nudge marginally higher (US 2Y yield at 1.32%, a new cycle high) and key rate differentials remains firmly in the USD’s favour. Speeches from Fed Vice Chair Fischer and Chair Yellen are awaited for final confirmation that March 15th is indeed a “go” for a hike; rebutting the build-up of market expectations, which has been underpinned by hawkish Fed commentary this week, would be extraordinary even if the precise reason for the very sudden shift in market sentiment is hard to pin down, caution is counselled as the Yellen speech comes after the London close as such short term price moves could be exacerbated.

FX Majors: EUR consumer prices increased 2.00% YoY in February after an increase of 1.80% YoY in January. Tracking higher price acceleration, producers’ prices grew 3.50% YoY in January (December: +1.60% YoY). On the other hand, unemployment rate was unchanged at 9.60% YoY in January. GBP UK Markit/CIPS construction PMI was a tad higher at 52.5 in February (January: 52.2) as resilient economic backdrop despite Brexit talks and stabilization on client confidence since EU referendum continued to drive growth. JPY Japan’s household spending declined 1.20% YoY in January, contracting at a quicker pace than the 0.30% YoY fall in December. Separately, inflationary pressure picked up to rise 0.40% YoY in January, quickening from the 0.30% YoY in December but still nowhere near the central bank’s goal of 2.00% YoY. On the other hand, jobless rate was down by 0.10% at 3.00% in January.

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

Technical: Expected retest of 1.0521 base plays out interim double bottom retested, a closing breach opens a move to 1.0450 next, only over 1.0650 arrests near term bearish bias.
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Price has broken recent range support as 1.24 caps upside corrections a test of 1.22 becomes the next downside objective, only over 1.25 suggest false downside break and return to recent range
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Near term resistance sited at 113.80 removed and now becomes near term support, a close over 114.50 reasserts upside targets primarily at 115.50
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: Near term resistance sited at 120.50 under pressure, only a close over 121.50 stems near term selling pressure and resets focus on upside objective. Near term support is sited at 119.60
Retail Sentiment: Bearish
Trading Take-away: Long

Commodities FX: GOLD dropped the most since mid-December, by 1.23% to 1,234.25, pressured by a strong dollar and increasing prospects of a March rate hike. OIL still weighed by record U.S crude inventories and also technical factors now that WTI has settled below the 50-day moving average for the first time since late November. AUD Economic indicators from Australia were turning increasingly downbeat in February as growth driven by the non-mining sector wasn’t making up for the slowdown in the mining sector. AiG performance of services index tumbled from 54.5 in January to 49.0 in February, marking its first contraction in five months. CAD Bank of Canada held rates at 0.5% and kept its overall dovish tone, although the statement was shorter than normal. While the BOC did acknowledge that growth, employment, and inflation were better than expected, they were prepared to “look through” the recent increases citing the rebounds as temporary (inflation) or at high risk due to continued labour market slack, trade policy uncertainty, and weak non-energy exports.

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

Technical: Breach of primary support pivot at .7600 suggest potential for broader correction to play out especially as .7610 caps near term upside, .7500 becomes the next downside objective
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Breach of 1.3210 opens anticipated move back to test 1.3370 as 1.32 supports bulls target the symmetry swing objective sited at 1.3480.Price action remains erratic as price attempts to base above pivotal 1.30.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: As 1225 acts as support bulls target symmetry swing resistance sited at 1299, only a close below 1215 concerns near term bullish bias.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Rejection from equality objective area at 55.30, a close below symmetry support at 50.68 confirms a medium term high and opens a retest of pivotal 49.00. Near term resistance is sited at 54.50.
Retail Sentiment: Bearish
Trading Take-away: Long

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