London FX: Signs Of Softer Global Growth
Littlefish FX | Feb 05, 2016 05:55AM ET
London Forex Report: More signs of a softer global growth backdrop, the slew of US data spanning from jobs to factories all disappointed. Both factory orders and durable goods orders deepened their falls in December, suggesting slower economic growth in 4Q. Factory orders fell at a faster pace of 2.9% MOM in Dec, while durable goods orders contracted more than expected by 5.0% MOM in Dec largely due to decline in machinery and transport equipment orders as businesses cut spending. Job market continues its steady recovery despite the 8K increase in initial jobless claims to 285K for the week ended 30-Jan. USD tumbled again USD Index fell 0.83% to 96.47 registering its biggest two-day loss since 2009, sliding further as confidence on the Fed to maintain a tightening trajectory continue to fade, on top of a set of soft overnight US data.
EUR/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: The ECB regular economic bulletin showed that global economic growth is under headwind due to the weakening emerging markets while the Euro-zone growth is slowing down due to flat inflation projections. Despite a dovish message by ECB’s chairman Draghi, the Euro climbed to an intraday high of 1.1238 after the speech. Markets are expected to be quiet this morning as the market is waiting for the non-farm payroll due this afternoon.
Technical: 1.1220 symmetry corrective objective achieved, while 1.1050 supports downside reactions 1.14 is the next bullish objective
Interbank Flows: Bids 1.1050 stops below. Offers 1.1250 Stops above.
Retail Sentiment: Bearish
Trading Take-away: Buy pullbacks to 1.1050 for 1.14
GBP/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: GBP surged to a one month high as BoE’S chairman Carney quashed the rate cut rumor. Carney said the next rate move of BoE will be rate hike instead of rate cut while his speech supported Sterling to its highs around 1.4668. According to the inflation report released yesterday, BoE cut its economic growth forecasts due to a gloomier global economy.
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Technical: A close over 1.46 opens 1.4860 next, expect a broader corrective phase to continue to develop while 1.4370 remains intact as support.
Interbank Flows: Bids 1.45 below. Offers 1.47 stops above
Retail Sentiment: Bearish
Trading Take-away: Buy pullbacks against 1.45 for 1.4860
USD/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: USD/JPY in near free fall since 2 February while it is now trading at around 116.90, just below the 117.00 handle. The chaos in stock markets and weakening USD has provided reasons for investors to get into short positions. USD/JPY is on track to post a weekly loss of around 3.5 percent.
Technical: While 119.50 contains upside reactions expect a grind lower to retest 115.90
Interbank Flows: Bids 116.50 stops below. Offers 119.50 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines
EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: EUR/JPY tested support into 130.50 yesterday and although we broke and cleaned out some advertised stops below we didn’t make it past 130 which has given the market cause to try to base out this morning and we find ourselves back within spitting distance of the 132.00 region which happens to be where the market broke down post Dec ECB and so this as a solid area of resistance for future runs above.
Technical: While 130.40 supports intraday downside reactions expects s retest of 132.30 offers and stops above, a close above 132 opens a test of 134 next.
Interbank Flows: Bids 130.50 stops below. Offers 132.50 stops above
Retail Sentiment: Bearish
Trading Take-away: Buy pullbacks against 130.30 for 134
AUD/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: AUD extended the gains against a broadly weaker USD on Thursday, breaking above the 0.72 handle for the first time in a month. Australia’s December retail sales (MoM) came at 0.0%, failed to meet expectations at 0.4%. According to the RBA’s quarterly Statement on Monetary Policy, the policymakers are still seeing reasonable prospects for continued growth in the economy, adding that there are no material changes to GDP or inflation forecasts.
Technical:.7200 upside objective achieved, while .7140 supports .7300 is the symmetry upside target. Only a closing breach of .71 eases immediate upside pressure.
Interbank Flows: Bids .71 stops below. Offers .73 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines
USD/CAD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Fundamental: CAD strengthened yesterday due to the rebound of oil prices. USD/CAD slipped to an intraday low of 1.3635. However, as oil prices retreated later, Lonnie went back to 1.3750 to start its Friday session. The Lonnie has strengthened 1.63% month-to-date while a strong positive correlation is exhibited between Lonnie and oil prices.
Technical: AB=CD corrective swing target at 1.3750 achieved, while 1.3630 supports expect a retest of 1.40 from below.
Interbank Flows: Bids 1.3650 stops below. Offers 1.3950 stops above
Retail Sentiment: Neutral
Trading Take-away: Sidelines
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