New York Forex Report: Trump Trudeau, Traders Track USDCAD

New York Forex Report: Trump Trudeau, Traders Track USDCAD

New York Forex Report: US President Trump embarked upon a series of face-to-face meetings with other world leaders. The first was with Japanese Prime Minister Shinzo Abe. The two men presented a united front, and agreed to pursue a new trade/investment deal following the US withdrawal from the Trans-Pacific Partnership (TPP). Next to visit the White House (today) is Canadian Prime Minister Justin Trudeau, so certainly some headline risk for the USD and CAD. Yet again, we have very little on the data calendar for today, but there are a number of key events to pay attention to through the rest of the week. Fed Chair Yellen’s semi-annual testimony to Congress (Tue/Wed) will provide us with a greater insight into the appetite of policymakers to tighten monetary conditions. Expectations have been scaled back in recent weeks, in part reflecting the disappointing wage growth figures but also greater scepticism over the reflationary impact of Trump’s fiscal agenda. However, given the three hikes presented in the ‘dot plot’ – with possible schedules for this including Mar/Jun/Dec and only a 30% chance currently ‘priced-in’ for March, an optimistic Yellen could be a trigger for meaningful USD upside.

FX Majors: EUR ECB’s policy board member Mersch said that the ECB should drop its reference to possible rates cuts from its policy communication. Mersch said “How much longer can we continue to talk about “even lower rates” as being a monetary policy option?” Mersch opined that the ECB cannot lower interest rates to an unlimited extent and that the prospects for economic growth in the Euro area are increasingly positive. GBP UK’s industrial production increased more than expected in December, boosted by recovery in the manufacturing sector amid a weak sterling. Production in mining & quarrying and oil & gas declined last month, capping headline IPI growth. Separately, the surge in exports led to a smaller trade deficits in December. Trade gap narrowed from £11.56 billion in November to £10.89 billion in December. Adding to firm IPI growth and smaller trade deficits, report from NIESR indicated that the UK economy grew 0.70% QOQ in the three month through January (+0.60% QOQ in the three months through December). JPY Japan’s Q4 2016 GDP which grew by 1.0%q/q SAAR, the fourth straight quarter of sequential expansion, (easing from 1.4% in 3Q and missing the forecast of 1.1% by a bit). Q4 growth was on the back of flat private consumption (0% in Q4 from 0.3% in Q3 as expected, the first no increase in 4 quarters) but a rebound in business spending (+0.9% in Q4 from -0.3% in Q3, but missing forecast of +1.2%). Exports was strong in Q4 2016, expanding 2.6%q/q, fastest since 4Q 2014 but housing investment growth slowed to 0.2%q/q, slowest since Q4 2015.

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

Technical: Near term support sited at 1.0670 removed and now becomes near term resistance a close back below 1.0580 resets near term bearish bias, opening a move to test symmetry swing support at 1.0515. Only over 1.0710 stabilises selling pressure.
Retail Sentiment: Bullish
Trading Take-away: Short

GBPUSD
Outlook: Short Term (1-3 Days): Bullish – 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): Neutral – 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.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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 eased on Friday following Trump’s upcoming “phenomenal” tax plan comments which saw a strong rebound in US stocks. This gold price decreased by US$0.70 to close at US$1,234.40. OIL prices extended their increases on Friday (10 Feb) after the International Energy Agency reported on 10 Feb that OPEC oil production fell by about 1 million barrels to 32.06 million b/d in January with a compliance record of 90%, a sign that OPEC is following through on its promise to reduce production. AUD Last week’s solid China trade data, less dovish RBA policy decision and an ongoing bid for US equities, have all helped to offset any negative Aussie flow on the US Dollar supportive revival of the Trump reflation bet. Another Aussie supportive development has been further gains in base metals, with copper up about 1.5% and iron ore futures also rallying. CAD got a large boost in the aftermath of the blowout headline print in the Canada employment report this past Friday. Indeed, while the past five months of jobs growth has been the best in nine years, upon closer glance, the fact that wage growth has come in softer and sits at record lows is something that should be more of a concern to the Bank of Canada.

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.
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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