New York Forex Report: Risk Remains Weak Ahead Of FOMC Minutes Release

New York Forex Report: Data flow was scarce yesterday, the less than expected 0.2% YOY increase in CPI in the Eurozone reaffirmed the case of still very benign price pressure, and that chances of inflation moving back closer to the ECB’s “close to but below 2% target” remains far-fetched. Ahead of tonight’s FOMC minutes the USD remained in demand, closing firmer as safe haven flows continue to reign amid lacklustre sentiment in equities and commodities with rising geopolitical tensions.

Risk sentiment was weaker over the European session so far today as concerns surrounding economic China in weakness pervaded equity markets whilst USD remains bid ahead of the December FOMC minutes release later today. Ahead of the FOMC minutes traders will be focusing on US ISM Non-Manufacturing data at 1300GMT expected to improve to 56 from 55.9.

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

Fundamental: EUR recovered from European session lows, aided by a raft of positive PMI data sets and comments by ECB’s Praet that the ECB has no “plan B” when it comes to tackling inflation and will maintain its current course, dampening expectations of further easing.

Technical: While offers at and just above 1.08 contain upside attempts expect rotation south to test bids at 1.07, failure at 1.07 opens 1.0660 as next downside objective.

Interbank Flows: Bids 1.07 stops below. Offers 1.08 Stops above.
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: The latest UK services PMI for December missed expectations printing 55.5 vs 55.6, leading Cable lower over the session.

Technical:  While 1.4730 caps intraday upside expect a drift lower to retest bids at 1.4565 the 2015 lows. Above 1.4750 opens 1.4850.

Interbank Flows: Bids 1.46 stops below. Offers 1.47 stops above
Retail Sentiment: Bullish
Trading Take-away: Short from 1.48 for 1.45

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

Fundamental: The risk off market sentiment drove USDJPY down yesterday.  Traders continue to seek risk adverse positions due to anxiety about slowing global growth, crumbling Chinese stock market and the tense relation between Iran and Saudi Arabia, compounded overnight by a missile test by North Korea. JPY retains its safe haven bid over early European trading today.

Technical:  While 119.50 caps intraday upside attempts expect a sustained break of 118.50 to test bids at and just below the 118 figure. Only a breach of 119.70 eases immediate downside pressure.

Interbank Flows: Bids 118 stops below. Offers 119.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental:  Kuroda has been on the wires the past 24 hours, reinforcing the theme that they are prepared to add stimulus if needed, although seemingly putting the onus to further fuel growth to companies by raising wages, citing current policy is enough to reach their inflation goal. And with this backdrop of Japan content to stand pat for now, external developments have been the most significant factor in EURJPY’s weakness to begin the year.

Technical:  While 128.20 caps intraday upside reactions, expect a grind lower to retest 2015 lows at 126.50’s as the next downside objective. Only a breach of 129.50 eases immediate downside pressure.

Interbank Flows: Bids 126.50 stops below. Offers 129.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: AUD remained under pressure over early European trading as the global selloff in equities this week sparked a run to safety.The theme of selling risk on rallies remains whilst stocks continue their downward pressure. AUDUSD will likely find resistance back to 0.7160/70 now.

Technical: While .7160 caps intraday upside expect a test of .7080 ahead of pivotal.7000. A breach of .72 opens a move back to test offers at the range highs of.7340

Interbank Flows: Bids .7050 stops below. Offers .7150 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: CAD hit its weakest point against USD since mid-2003, as oil prices fell and traders remain concerned about the pace of growth in China. The loonie lost 16 percent of its value in 2015 as the Bank of Canada cut rates twice to offset the negative impact of low prices for oil.

Technical: Bulls have the ball while 1.37 supports, expect a grind higher to test stops above 1.41 while 1.3940 caps intraday downside. A close below 1.37 would ease the near term bullish bias. The next key technical levels to the upside are 1.4189 (23 July 2003 high) and 1.4509 (76.4% Fibo retracement of 1.6193 to 0.9058)

Interbank Flows: Bids 1.3950 stops below. Offers 1.41 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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