Trading Themes: USD strengthened sharply on the release of the October FOMC statement only to concede gains following the lackluster 3Q GDP print which came in below expectations at 1.5% with PCE data similarly disappointing at 1.3% against expectations of 1.4%, capping a week of poor data flow for the US with consumer confidence falling below expectations also. Attention this week will be mainly on the unemployment rate and October NFP’s on Friday, marking the first of three jobs reports between now and the December FOMC with the USD trading outlook heavily data dependent, as ever.
- EUR: Draghi dials back dovish expectations suggesting December action remains an open decision
- GBP: Uptick in manufacturing data increases interest in Thursday BOE meeting and press conference
- JPY: BOJ in wait and see mode, doves disappointed
- CHF: SNB Euro loss soar again.
- CAD: CAD supported as oil prices post a near 5% intraday reversal last week
- AUD: Under pressure as market eyes potential RBA action this week
Let’s take a look at what the latest COT data is showing us from a trend and net change week over week perspective…
- EUR bearish, increased on the week
- GBP neutral, flat on the week
- CHF neutral, flat on the week
- JPY bearish, increased on the week
- AUD bearish, flat on the week
- CAD bearish, decreased on the week
EURUSD – Outlook Bearish
The single currency continued its post-ECB slide last week, driven lower by the market’s reaction to the October FOMC meeting. German unemployment rate remained unchanged this month at 6.4% whilst German CPI made its way out of negative territory to print 0% as did EuroZone CPI which was also bolstered by a beat in core CPI at 1.0% against expectations of 0.9%. USD weakness into the end of the week saw EUR recovering lost ground to end the week around the middle of its range. Lack of tier one domestic data this week will leave EUR trading mainly off USD flows.
- Strength active sell signal, ticks down from last week’s high
- Index active buy signal, retreats from highs
- Momentum active buy signal, retreats from highs
GBPUSD – Outlook Bullish
Sterling was weaker following the release of 3Q GDP which undershot expectations of 2.4% to print 2.3%. Data weakness extended throughout last week with Mortgage Approvals dropping sharply alongside CBI reported sales, though the UK currency was able to recover higher levels due to USD weakness. Attention this week will be on the BOE’s “Super-Thursday” with traders keen to hear the BOE’s latest economic assessment following the Fed’s recent October statement which markets saw as increasing the likelihood of a December lift-off.
- Strength active buy signal, ticks down towards convergence
- Index active buy signal, ticks down from recent highs
- Momentum active buy signal, continues to tick up
USDJPY – Outlook Bullish
Main focus last week was the BOJ’s October meeting which saw investor expectations heavily skewed towards further easing. The meeting however saw the BOJ refrain from further easing though growth forecasts were lowered alongside the pushing out of the Bank’s inflation target into the latter half of fiscal 2016. Main focus this week will be on the BOJ meeting minutes release for the October 6th-7th meeting
- Strength active buy signal, ticks up
- Index active sell signal, ticks up
- Momentum active buy signal, bullish cross from convergence levels. Has given a secondary buy signal, maintain existing long positions.
USDCHF – Outlook Bullish
Switzerland’s central bank posted a loss of 33.9 billion Swiss francs ($34.28 billion) on last Friday, as a third-quarter profit helped reduce its record first-half loss. The Swiss National Bank (SNB) shocked financial markets in January by abandoning its cap on the value of the franc versus the euro, which posted a loss of 50.1 billion francs for the first half of 2015.
- Strength active buy signal, ticks down
- Index active buy signal, exit short positions and enter long positions at Friday’s close or better
- Momentum active buy signal, ticks up
AUDUSD – Outlook Bearish
The Australian Dollar traded sharply lower last week with 3Q CPI accelerating the decline as the figure came in below expectations and previous of 0.7% at 0.5%, fuelling speculation of further RBA easing at their upcoming meeting on Tuesday. We also have Australian trade balance and retail sales figures.
- Strength active sell signal, ticks up
- Index active sell signal, ticks up towards convergence
- Momentum active sell signal, ticks down
USDCAD Outlook – Bullish
The Canadian Dollar managed to stem recent losses against the Dollar last week recovering amidst US data weakness. The mid-week USD spike was contained by weak US GDP though ultimately CAD itself was contained on Friday by the release of weaker than expected domestic GDP. Domestic focus this week will be on the release of Canadian unemployment on Friday
- Strength active buy signal, ticks down
- Index active sell signal, ticks down confirming the sell signal
- Momentum buy signal, ticks up confirming the buy signal