New York Forex Report: Sterling Stabilises Ahead of Speakers

New York Forex Report: Sterling Stabilises Ahead of Speakers

New York Forex Report: The week opens with the GBP back under pressure as political woes mount against the Prime Minister. The Sunday Times reports that up to 40 MPs are ready to sign a no confidence letter, almost enough to trigger a leadership contest (48 are required). This comes after two cabinet members recently being forced to resign, with Johnson and Green remaining under pressure too. This may well overshadow this week’s important inflation, unemployment and earnings data. The market is looking for the data to justify the recent rate hike, but also provide clues on when the next hike may come. At the moment, expectations are for end-2018 / early 2019, but strong data should bring that pricing nearer. General sentiment remains buoyant but nervous, with US equity markets holding near their highs. Most markets remain in choppy ranges into a data heavy week. Expectations remain high for a Fed hike of 25bps in December – this week’s US inflation, retail trade and industrial production data will be key in supporting that confidence. We have a plethora of Fed speakers too. The risks are clearly more to the downside if the data disappoints. Elsewhere, we get preliminary GDP growth for Japan and Germany; China factory output, retail sales and fixed investment. However, perhaps one of the most important events this week will be tomorrow’s meeting between Carney, Yellen, Draghi and Kuroda. They speak in Frankfurt tomorrow, but we may not know the real outcome from this meeting for a few weeks.

NORTH AMERICA US University Michigan consumer sentiments defied expectations for a rise and fell 2.9 points to 97.8 in November, remaining near its highest in 13 years nevertheless. This month’s pullback form a 13- year high was dented by softer confidence over both current conditions and future expectations as consumers were weighed down by higher inflation and prospects of further increase in interest rates. Delay in Trump’s tax plan could further dampen consumer optimism in our view, keeping a lid on consumer spending going forward.

EUROPE ECB’s Nowotny reaffirmed the view that QE should end next September, if the economy allows, notes guidance does not allow for a rate increase before 2019. French (stronger) and Italian (weaker) industrial production data had little impact on spot. UK data was mixed end of last week. Industrial production grew at a faster than expected pace of 2.5% YoY in September, supported by sustained gains in manufacturing and rebounds in mining & quarrying, electricity and oil & gas. On the contrary, construction output decelerated more than expected to increase only 1.1% YoY in September, its smallest gain in three months and fell the most in 18 months on a MoM basis, by tracking weakness in the housing market. Visible trade deficit narrowed to £11.3bn in September, as exports rose at a faster pace of 4.5% MoM vs the 0.4% MoM increase in imports. The bigger deficit in 3Q implied exports would be a drag on overall economic growth but NIESR GDP estimate showed growth in the UK economy is quickening in October.

ASIA US President Trump’s trip to Asia winds down this week with him attending the East-Asia Summit and US-Asean meetings in Philippines on Monday and Tuesday. Thus far, the trip has been a largely controlled showing from Trump, with some positive outcomes from trade deals. On the data front Japan tertiary industry index extended its decline in September, falling 0.2% MoM led by declines in activities of wholesale trade, medical & healthcare, and information & services, suggesting a still soft services sector and domestic consumption.

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

Technical: 1-3 Day View –Second leg of broader correction underway targeting 1.1471 near term expect 1.1685 to act as resistance, only a move north of 1.1750 reasserts upside objectives.

1-3 Week View – 1.2130 the next upside objective. Weekly close below 1.16 neutralises bullish objectives opening a test of 1.14
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – Retest of 1.3330 sees a sharp reversal and price now testing broader range support at 1.3030 a failure here opens 1.2750 as the next downside objective, near term resistance is sited at 1.3185

1-3 Week View – 1.3263 achieved as this acts as support 1.3836 is the next upside objective only a close back below 1.30 would jeopardise the bullish advance.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – 114.50 achieved as pivotal support at 113.30/10 caps corrective downside expect a test of 115, a closing breach of 113 concerns the bullish bias

1-3 Week View – As 108.40 equidistant swing support survives on a weekly closing basis bulls will look for a grind higher to retest 115, a close below 108 negates the broader bullish theme and opens the psychological 100 magnet
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – The breach of range support at 132 concerns the broader bullish bias, however without sustained daily closes below this level the risk remains a return to middle of the 134.50 /131.50 range, below 131.50 opens 130.66

1-3 Week View – 136.10 is the principle upside objective as this area caps the current advance expect a retest of 131.50 to set a base for the next leg higher, a closing breach of 131 concerns the bullish basissis.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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