New York Forex Report: Sterling Testing Range Lows

New York Forex Report: Sterling Testing Range Lows

New York Forex Report: Despite a strong set of figures yesterday, and from Germany this morning, the EUR remains under pressure. German industrial production was much stronger, as were exports and imports earlier this morning. The region’s jobless rate has declined steadily since peaking in the aftermath of the sovereign debt crisis at just above 12% in 2013. Despite that, wage growth has so far remained subdued, suggesting that some slack in the labour market remains. In turn, this supports the ECB’s gradual reduction in policy stimulus this year, even though some more-hawkish members are pushing for an explicit end date to the bond-buying programme. So far, the GBP has shrugged off the negative media attention around PM May’s cabinet reshuffle, which continues to weigh on GBP volatility as current ranges persist althought we are probing rage lows as the New York session gets underway.

NORTH AMERICA In the absence of US data, focus was on Fed Bostic’s speech where he commented that the Fed may only need to raise rates two times this year in lieu of soft inflation outlook. Separately, Fed Williams also said the Fed should keep rates lower for longer to ensure pick-up in average inflation. We are still keeping to our view for two Fed rate hikes this year, against the Fed dot plot which maintained its projection for three hikes.

EUROPE Data suggests conditions continue to improve in the Eurozone, with more upbeat consumer, economic and investor sentiment, along with firmer business climate and rebound in spending. The Sentix investor confidence index climbed to 32.9 in Jan from 31.1, while economic confidence index rose to 116.0 in Dec, up from 114.6. Consumer confidence index unrevised at 0.5 in Dec final report, up from 0.0 in Nov. The business climate indicator edged higher to 1.66 in Dec, up from 1.49 previously. Retail sales rebounded to increase 1.5% MoM in Dec from a 1.1% decline in Nov; annually, sales growth picked up pace to 2.8% YoY from 0.2%. Halifax’s survey on house prices in the UK showed a slight decline of 0.6% MoM in Dec, down from a mild increase of 0.3% in Nov. In the 3 months that ended Dec, prices rose 2.7% YoY, easing from 3.9% in the 3 months ended Nov. UK PM May’s planned cabinet reshuffle is said to be now askew as Health Secretary Jeremy Hunt successfully argued to stay on while former education secretary Justine Greening quit rather than accept the job as work and pensions secretary

ASIA Reports this morning BoJ cutting its purchases of JGBs. The central bank reduced the purchases of 10-25Y JGBsto JPY190bn(prev.JPY200bn).Longer-term bond purchases were cut to JPY80bn (prev. JPY90bn).Even though the latest development comes as a surprise, economists note that yield curve control rather than the pace of monetary base expansion represents the BoJ’s monetary policy stance. While real normalisation of monetary policy remains far away the latest development may still be taken as an indication of the central bank moving closer to such a stance and such prospects may increase the risk of further position squaring-related upside in the JPY

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

Technical: 1-3 Day View – 1.1910 the next downside objective,as 1.20 caps intraday corrections markets focus shifts to a test of 1.1846, failure below here concerns the bullish bias and opens a more sustained downside move. Over 1.20 reestablishes upside momentum and and a 1.2130 test

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

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

Technical: 1-3 Day View – Prior cycle highs of 1.3545 achieved as 1.3490 supports expect a test of 1.3657, only below 1.34 concerns the near term bullish bias

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: Bearish
Trading Take-away: Sidelines

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

Technical: 1-3 Day View – Anticipated 113.30/60 resistance capped the advance a breach of 112 will open a retest of pivotal 110.80/60, near term price action is consolidating in 113.60/112 range.

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: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – 136 the primary upside objective is achieved expect 136.70/137 to cap advance on initial test, near term support is sited at 134.60/40. As 135 survives on a closing basis 141 becomes the next upside magnet.

1-3 Week View – 136.10 is the principle upside objective , rotation within the broader range persists breach of 132.20 sets a retest of 131.50, a closing breach of 131 concerns the bullish consolidation bias.
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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