New York Forex Report: Sterlings Skids Sales Slump

New York Forex Report: Sterlings Skids Sales Slump

New York Forex Report: January UK retail sales data fell short of expectations -0.3% m/m, +1.5% y/y vs previous -2.1%/+4.1% revised. 0.7%/3.4% expected, demonstrating signs that UK consumer spending is faltering. December’s retail sales data saw the first sign of weakness in post-referendum consumer activity, with volumes sinking by 1.9% m/m. While small shifts in seasonal patterns of spending around Christmas can have out sized effects, data from the CBI, BRC and weekly John Lewis sales returns confirmed weakness for the January print, as such the Sterlin slide has continued. Yesterday saw the USD and particularly the US yield curve drop again, seeing a move from range resistance levels to the mid-points of recent ranges as we head into a low data and event week. In a reflection of broader sentiment, the mining company Vale released its latest figures showing a large increase in base metal material production and exporting, particularly to China. While the AUD is this week’s out performer in the G10 space, it is struggling to maintain momentum as it reaches its one year range highs, suggesting it may be fully priced for now.

FX Majors: EUR The ECB account of the latest monetary policy meeting suggested that the European central bank has little interest in pulling back stimulus for now. In its minutes, the ECB said it needed to maintain ‘steady hand’ approach. There were broad agreements to look through oil price driven inflation surge and the ECB noted that there is no second-round inflation effect from higher oil prices so far and any second-round effects would unfold “rather slowly”. There was wide agreement on confirming forward guidance and that asset purchases below deposit rate should be kept to a minimum. GBP According to a Bloomberg report (16 Feb) citing two unnamed government officials involved in Brexit planning, UK Prime Minister Theresa May intends to trigger UK’s withdrawal from the European Union (Article 50) as close as possible to the EU summit taking place on 9-10 March. May cannot act before Parliament passes a bill giving her permission to do so, and that bill is up for debate in the upper house next week and the timetable is for a final vote in the House of Lords on 7 March while the UK budget comes out a day after, on 8 March. JPY In the absence of major releases from Japan for the remainder of this week, risk sentiment and the USD’s outlook will likely be key for the pair.

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

Technical: Near term support sited at 1.0670 removed and now becomes near term resistance, the close back below 1.0580 sees the move to test symmetry swing support at 1.0515 which prompts a sharp reversal. Only over 1.0710 stabilises selling pressure.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: Equidistant swing objective at 1.2679 capping advance for now. Near term support sited at 1.2345 survives on a closing basis prompting sharp reversal suggesting a retest of recent cycle highs, a close below 1.2330 opens 1.2236 symmetry swing support. Near term resistance is sited at 1.2580
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Only a 112 sustained breach will open 110.70 symmetry swing support underpinned by 109.90 50% retracement of the move from August 2016 lows. Near term resistance sited at 113.30 removed and now becomes near term support, a close over 114.50 reasserts upside targets primarily at 115.50
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Symmetry swing support at 120.40 removed, the failure below 120.40 opens 118.70 as the next downside objective. Near term resistance sited at 121.50 a close over 122.10 resets attention on upside targets.
Retail Sentiment: Neutral
Trading Take-away: Neutral

Commodities FX: GOLD price climbed higher for the second straight session on Thursday on the back of a broadly weaker US dollar and ebbing risk appetite. This gold price increased by US$8.30 to close at three-month high of US$1,240 on Thursday OIL prices edged higher on Thursday (16 Feb) despite the growing US crude inventory which was outweighed by a Reuters report that OPEC could consider extending the six month deal to cut supply or make more severe cuts. AUD Australia’s unemployment rate edged down by 0.10 ppt to 5.70% in January largely driven by the drop in labour force participation rate instead of quicker job gains. Job losses in New South Wales and Victoria led to softer employment gain last month (13.5k vs December: revised to 16.3k) CAD no major data releases today. As it’s a slow day on the data front, look towards OIL prices and the USD for a sense of direction for USDCAD.

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

Technical: The next upside objective is sited at .7750. Near term support is sited at symmetry swing level .7600 ahead of pivotal .7449
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1.3150 resistance eroded, over 1.32 opens a move back to test 1.3370.Price action remains erratic as price attempts to base above pivotal 1.30. Near term support is sited at 1.3050, failure here opens a retest of 1.2967
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: The 1225 upside breach confirmed the anticipated move to 1245 as 1218 supports expect a retest of last weeks highs, a failure below 1206 opens a retest of 1180.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

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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