New York Forex Report: Risk Rallies On China Stimulus Expectations

New York Forex Report: China growth data overnight demonstrated 2015 growth slowest since 1990, Q4 growth slowest since Q1 2009 due to the slowdown in property and stock markets negatively impacting growth. Oil slumped below $28 per barrel yesterday after sanctions on Iran were lifted, pushing stocks prices further south amid continuous sell off in the equity markets. The slowdown in China growth has actually fuelled an intensification of stimulus expectations which have supported equity markets over early European trading today  as risk-sentiment improves on these expectations.

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

Fundamental: EUR remained range-bound over the European morning. EuroZone Dec CPI printed in line with expectations.Markets are waiting for the ECB meeting due this Thursday although the ECB is not likely to take action for additional easing in this week’s meeting. However, the non-stop drop of oil price has put pressure on the Eurozone inflation and the press conference will be closely watched.

Technical: While offers at 1.0950 contain upside reactions expect rotation to retest bids at 1.08, a breach of 1.0990 trend resistance opens a broader 1.1240 symmetry corrective objective.

Interbank Flows: Bids 1.08 stops below. Offers 1.0950 Stops above.
Retail Sentiment: Neutral
Trading Take-away: Sidelines

eu191

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

Fundamental: GBP struggled to recover from a five and a half year low, with markets finding few reasons to buy the currency while risks, such as a possible “Brexit” from Europe, sliding oil prices and a weak economic outlook continue to weigh. The latest CPI data released today showed that inflation unexpectedly ticked up MoM in December and YoY on core but strength was faded.

Technical:  While 1.4370 caps upside reactions expect a grind lower to test bids at 1.42. Only over 1.45 eases immediate downside pressure.

Interbank Flows: Bids 1.42 stops below. Offers 1.44 stops above
Retail Sentiment: Bullish
Trading Take-away: Sell pullbacks to 1.4370 leaning against 1.45 to target 1.35

gu191

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

Fundamental: USDJPY surged from 116.88 to high of 117.44 as equity markets stabilized overnight, it further climbed above 117.60 handle in early Tuesday session. The Yen was traded in tandem with Euro in the past few weeks as they are both regarded as risk-off currencies.

Technical:  While 118.30 caps upside attempts expect a retest of 117.30 from above. Only above 119 eases immediate downside pressure.

Interbank Flows: Bids 117 stops below. Offers 118 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

uj191

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

Fundamental: Japan’s manufacturing and services sectors contracted in Nov, proving that the rebound in Oct was short lived. Japan Economy Minister Amari commented overnight that although stocks were down on external factors, economic fundamentals solid, excessive oil price falls leading some producers to sell Japanese assets.

Technical:  While 128.30 caps upside reactions, expect a grind lower to retest lows at 126.70’s a failure here opens a test of bids at 126. Only over 129 eases immediate downside pressure.

Interbank Flows: Bids 126.50 stops below. Offers 128.50 stops above
Retail Sentiment: Bullish to neutral
Trading Take-away: Sidelines

ey191

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

Fundamental: The rebound in risk-sentiment on the back of Chinese data overnight, and the subsequent rally in commodity prices has dragged AUD higher over early European trading today.

Technical: While .6950 caps intraday upside expect a grind lower to retest .6830’s lows. Only a breach of .7050 eases immediate downside pressure.

Interbank Flows: Bids .6800 stops below. Offers .6950 stops above
Retail Sentiment: Bullish
Trading Take-away: Sell pullbacks to .6950 against .7050 to target .6750 initially

au191

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

Fundamental: CAD strengthened against the US Dollar over the European morning as Oil prices staged a recovery in line with general risk-sentiment in the wake of the latest China data and subsequent increase in expectations of further stimulus for the world’s second largest economy.

Technical: Bulls have the ball while 1.4385 supports, expect a grind higher to test stops above 1.46. Only below 1.42 eases immediate bullish pressure

Interbank Flows: Bids 1.4350 stops below. Offers 1.4550 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

uc191