London FX: Macro Data Keeps Focus On Downside Risks
Littlefish FX | Apr 11, 2016 06:15AM ET
London Forex Report: Global macro data continue to support concerns over downside risks to slowing global growth. US wholesale inventories fell at its fastest pace since May-13 as businesses seen scaling back on orders amid cautiousness taking cue from gloomier economic outlook. In sync with last week’s dovish FOMC minutes and Fed Chair Yellen’s stance, Fed Dudley cautioned that lingering external risks should warrant a more cautious and gradual approach in the Fed policy normalization. USD fell, the USD Index tumbled in early US trade to close 0.26% lower at 94.23 amid the rebound in risk appetite that lifted equities and commodities.
EUR/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Fundamental: EUR closed at 1.1399 against the USD, as some investors having lost faith in a tightening of US monetary policy. The pair recovered some ground lost after bottoming out 1.1347 and hit a high of 1.1419 last Friday. ECB president Draghi stressed that the central bank had no shortage of tools available to drive up stubbornly low inflation, and would continue to do “whatever is needed”.
Technical: Price continues to recoil and rotate below symmetry swing objective at 1.1420, printing a hight of 1.1438 before pulling back below the figure, price action appears to be coiling. While 1,1330 continues to support expect a test of offers towards 1.15 next.
Interbank Flows: Bids 1.1330 stops below. Offers 1.1450 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines
GBP/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Fundamental: GBP dropped back below 1.41 levels after a batch of data out of UK. Britain’s industrial output suffered at the fastest rate since Q4 2012 and the trade deficit ballooned to its widest in eight years, according to data released Friday, adding to worries of broader economic slowdown. Markets believed Britain’s economy faced risk amid slowing economic growth in China, falling commodity prices and whether stay in the European Union or not.
Technical: Price continues to finds bids at 1.4050 pivotal support within the broader 1.45/1.40 range. A failure to hold 1.40 opens a retest of year to date lows at 1.38 ahead of 1.37 weekly swing objective.
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Interbank Flows: Bids 1.40 stops below. Offers 1.4250 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
USD/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: JPY dipped across the board during the Asian trading session on Friday after posting gains in earlier times of last week, weighed by warnings overnight by the Japanese finance minister of possible intervention in the market to weaken the currency. The pair hit an intraday high at 109.09. Despite the Japanese finance minister warned on intervention, markets believed the central bank would not intervene to halt a rally ahead of a Group-of-Seven nations meeting next month.
Technical: The downside ratchet now targets 105.50 as the next major downside objective. Near term look for upside reaction to fail at 1.09 ahead of trend resistance at 110.50 for renewed weakness.
Interbank Flows: Bids 107.50 offers below. Offers 109 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: Japanese data painted the picture of a generally subdued growth environment. Barely budging from the 13-month low in Feb, consumer confidence index ticked only 1.6 points higher to 41.7 in March and outlook for the next few months remained gloomy. An outlook survey by Eco watchers edged lower to 46.7 in March (Feb: 48.2), the lowest in fifteen months.
Technical: Bears target a retest of 122.05 year to date lows, intraday resistance is sited at 124.50. Only a close over 126.80 eases immediate downside pressure.
Interbank Flows: Bids 122 stops below. Offers 124.50 stops above.
Retail Sentiment: Bullish
Trading Take-away: Short
AUD/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish
Fundamental: AUD managed to recover against the USD on Friday, as higher commodities’ price lifted overall market sentiment. However, the pair slipped around 2.36% in the past week.
Technical: Only a close below .7500 threatens the near term bullish bias, while this level supports intraday expect a grind higher to test .7770. A failure at .7500 opens pivotal .7450 support.
Interbank Flows: Bids .7500 stops below. Offers .7650 stops above.
Retail Sentiment: Bearish
Trading Take-away: Long
USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: USD/CAD plummeted below 1.3000 levels after better-than-expected employment data, which showed sharp rise in March. The pair hit an intraday low at 1.2948, wiping out earlier gains. Apart from stronger employment figures, the higher oil prices also helped the Loonie recovered. The oil prices soared above 6% to two-week highs, amid renewed hopes for output freeze.
Technical: The major hurdle to the upside remains the symmetry swing resistance sited at 1.3230, while this area continues to contain upside reactions anticipate a retest of 1.2830/50 level as we once again attempt to set a double bottom base to encourage a broader correction.
Interbank Flows: Bids 1.29 stops below. Offers 1.3250 stops above
Retail Sentiment: Bullish
Trading Take-away: Short
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