New York Forex Report: Sterling Sinking Ahead Of BOE

New York Forex Report: Markets remain jittery, seeing another round of selloff in Chinese equities and another big leg down in crude oil prices. Crude oil prices plunged 6% and are now pushing lower towards $30/ barrel. Fed’s Lockhart sounded cautious, saying there may not be enough fresh data on inflation to support a second Fed rate hike in 1Q16. The President, who is a non-voter this year, said he remains “mildly optimistic” on US growth prospects this year although a slowing China economy and persistently low oil prices are key risks to US growth.  USD strengthened in response to the comments and has continued to trade higher levels over the European session thus far.

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

Fundamental: A rebound in equity markets over early European trading today as seen EUR weaken, further pressured by USD strength.

Technical: While offers at 1.0930 contain upside reactions expect rotation to retest bids at 1.08, a breach of 1.0930 opens a retest of 1.0990 trend resistance.

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

eu121

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

Fundamental: GBP continued to crater over the European morning with a dismal set of Industrial and Manufacturing production figures the catalyst for the latest slide. Market heavily short going into BOE on Thursday. No changes are expected from BOE as the domestic inflation rate has stayed low due to depressed oil prices. BOE Governor Carney speaks in Paris at 1415GMT followed by a GDP estimate at 1500GMT.

Technical:  While 1.4630 caps upside reactions expect a grind lower to retest Friday’s lows en route to 1.4470 and ultimately the weekly symmetry objective of 1.4379.

Interbank Flows: Bids 1.4450 stops below. Offers 1.46 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Fundamental: The Japanese Yen is pulling back from recent highs as a rebound in Equity markets lessens the safe-haven demand that has been driving Yen strength this year.

Technical:  While 118.20 caps intraday upside attempts expect a grind lower en route to test 116.35 as the next downside objective. Only above 119.30 eases immediate downside pressure.

Interbank Flows: Bids 116.50 stops below. Offers 118.50 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: Japan’s current account surplus shrank from JPY1.46tn in October to JPY1.14tn a month later, coming in stronger than expectations of a JPY895bn surplus in November. Exports dropped 6.3% y/y in November to JPY5.92tn, whilst imports grew from JPY6.13tn in October to JPY6.19tn in November.

Technical:  While 129.10 caps intraday upside reactions, expect a grind lower to retest Thursdays lows at 126.70’s a failure here opens a test of bids at 126. Only over 130 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): Bearish – Medium Term (1-3 Weeks): Bearish

Fundamental: AUD rebounded over the European morning driven by an improved risk sentiment and subsequent correction higher in commodities. CNY imports, exports and trade balance data eyed next.

Technical: While .7050 caps intraday upside expect a grind lower to test 2015 lows. Only a breach of .72 eases immediate downside pressure.

Interbank Flows: Bids .69 stops below. Offers .7050 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

au121

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

Fundamental: CAD dropped to a fresh 12-year low against USD, pressured by a fall in crude oil prices and evidence that Canadian business sentiment deteriorated. The combination of negative factors may add pressure on the Bank of Canada to take further action after cut interest rates twice in 2015. The Bank of Canada’s quarterly Business Outlook Survey reported that the negative effects of lower oil and commodity prices caused business sentiment to deteriorate over the last three months.

Technical: Bulls have the ball while 1.4160 supports, expect a grind higher to test stops above 1.43. Only below 1.40 eases immediate bullish pressure

Interbank Flows: Bids 1.41 stops below. Offers 1.43 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

uc121