London FX: FOMC In Focus
Littlefish FX | Mar 16, 2016 07:54AM ET
London Forex Report: Oil prices tumbled for the second day in a row to USD 38.7/barrel amid ongoing concerns over supply glut. Market will now shift its attention to the FOMC meeting decision due tonight. While the central bank is largely expected to keep rates unchanged, the dot plot and economic projection accompanying the policy statement will be closely scrutinized for cues on future policy direction. US retail sales extended its fall, raising concerns on sluggishness in consumption in spite of the low inflationary pressure. USD strengthened on continued risk aversion in the markets as well as slightly firmer US data. The USD Index ended 0.01% higher at 96.63 after rebounding from a sharp drop in US session.
EUR/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Fundamental: Yesterday was a quiet day for the EUR. EUR/USD remained steady around 1.1100 as traders await the FOMC meeting due tonight. Markets widely expect FOMC will take no action at the meeting tonight, but traders will be sensitive to any guidance delivered by Yellen and her colleagues. The fourth quarter Euro Zone employment rose 1.2% YoY, better than the previous value 1.1%.
Technical: Intraday support is sited at 1.1060/40 while this survives expect a further grind higher to test pivotal resistance at 1.1370. Failure at 1.10 suggests false break and opens retest of bids towards 1.0820
Interbank Flows: Bids 1.1050 stops below. Offers 1.13 stops above.
Retail Sentiment: Neutral
Trading Take-away: Neutral
GBP/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: GBP retreated further from a one-month high against the USD on Tuesday, after a new poll suggested more and more people agreed Britain should leave the European Union. Cable has continued losing ground for the second straight day atrades heavy as London comes in this morning.
Technical: The failure at 1.42 opens a retest of bids towards 1.41/1.4080 as we retest the base of the advance, below 1.4030 opens a full retest of year to date lows at 1.3828, Only over 1.43 eases immediate downside pressure
Interbank Flows: Bids 1.4050 stops below. Offers 1.4250 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
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USD/JPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Fundamental: As anticipated, the BOJ has chosen to keep its extra-loose policy unchanged, but not before some heightened volatility in the USD/JPY market pre-announcement. The pair prints a high of 114.17 before tracking towards the initial support level of 113.30 (at the time of writing), after which at 112.70/80.
Technical: 112.30/10 continues to support expect a further leg of corrective gains, to retest the broken neckline support at 115/116. Failure at 112 open 11 again.
Interbank Flows: Bids 112 offers below. Offers 114.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines
EUR/JPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Fundamental: BOJ paused in its MPC meeting yesterday, holding its recently introduced QQE with negative interest rate at -0.1% by a 7-2 majority vote. Asset purchase will be maintained at 80 trillion yen per annum. Tone of the MPC statement was dovish, leaving rooms for BOJ to “take additional easing measures if it is judged necessary for achieving the price stability target”.
Technical: While 125 acts as support for the current advance expect a test of symmetry resistance at 128.15 as the immediate corrective objective. Failure at 124.50 suggest false upside break and opens retest of 123.
Interbank Flows: Bids 125 stops below. Offers 127.50 stops above.
Retail Sentiment: Bearish
Trading Take-away: Sidelines
AUD/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Fundamental: Aussie took a breather on Tuesday as oil prices and other commodity prices pulled back. AUD/USD edged lower to 0.7440 on Tuesday while the pair recovered some of its loss at Wednesday’s Asian session . Aussie is expected to be quiet today as markets will wait for the signals from FOMC meeting due tonight.
Technical: While .7400 supports intraday expect further upside pressure targeting .7672 next. Only a failure at.7300 support threatens near term bullish bias.
Interbank Flows: Bids .7400 stops below. Offers .7600 stops above.
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: CAD weakened against the USD, hitting a nearly one-week low as crude oil prices fell and investors waiting for the policy decision from the US Federal Reserve. US crude prices settled down 84 cents at $36.34 a barrel while the global risk aversion added to the headwinds for the commodity-related currency .
Technical: While 1.3400 contains the recovery, downside pressure remains the driver with bears focusing on a AB=CD ultimate downside objective at 1.2966. Only a close over 1.3650 negates the bearish bias
Interbank Flows: Bids 1.3150 stops below. Offers 1.3350 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines
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