London FX: USD Pressured By Trade Deficit Data
Littlefish FX | Oct 07, 2015 06:08AM ET
EUR/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: EUR jumped as high as 1.1280 as the soft USD eclipsed the disturbingly weak German August industrial orders. As if the shocking unexpected 1.8% m/m plunge was not bad enough, when the consensus forecast was for a 0.5% increase, we then received news on top of that of a downward revision to the already weak July figure, to –2.2% m/m, from a previous print of –1.4%. Today, we will receive industrial production reports in Germany and Spain; as well as trade data in France
Technical: Whipsaw within the contracting range testing descending trendline resistance at 1.1280 an upside breach targets stops above 1.13 next. While 1.13 contains the upside expect a retest of range lows towards 1.11
- Interbank Flows: Bids 1.1130/50 stops below. Offers 1.13 Stops above.
- Retail Sentiment: Neutral to bearish
- Trading Take-away: Sidelines for now
GBP/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: Despite its less steady start to the week, GBP has followed the EUR higher as USD weakness upstaged a report from the Halifax, which showed UK house prices unexpectedly contracted m/m in September, slowing the y/y rate. Today, industrial production is due, a modest 0.3% m/m gain set to take the y/y to 1.2%, whilst manufacturing should manage a 0.3% m/m gain (-0.2% y/y from -0.5%). Anything close to expectations should help to underpin the currency after some less impressive data of late
Technical: Offers towards 1.5250 are being pressured and stops above are targeted. While 1.53 stems the advance on a closing basis next downside objective is a test of 1.50 psychological support. A close above 1.53 opens 1.54 as the next upside objective.
- Interbank Flows: Bids 1.5080/60 stops below. Offers 1.5250-1.53 stops above
- Retail Sentiment: Bullish
- Trading Take-away: Sidelines for now
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USD/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: No change in policy from the BOJ, with the next meeting at the end of this month viewed as a more likely time for action given that the central bank will have reviewed its forecasts for that meeting. Although the MoF continues to pledge not to interfere in monetary policy, the pressure for some further form of easing is only going to increase as the prospect of hitting 2% inflation continues to recede into the distance. Meanwhile, the IMF warned that the BoJ should seriously consider further easing. The IMF also trimmed Japanese growth forecasts for this and the next year to 0.6% and 1.0% growth respectively. That compares with previous projections that had called for an expansion of 0.8% and 1.2% respectively
Technical: Bids towards 118.50 hold strong once again, now trading back to the midpoint of the recent range and holding support at 119.50 area. For now play range 121.50 the offer and 118.50 the bid until broken.
- Interbank Flows: Bids 118.50/30 stops below. Offers 121.50 stops above
- Retail Sentiment: Bearish
- Trading Take-away: Sidelines for now
EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: IMF advised Japan to ease monetary policy further so as to speed up the inflation towards its 2 percent target. Among all easing policies, IMF particularly suggested Japan to buy government bonds with long tenor. Markets will focus on the Kuroda’s Press Conference which is being held at the time of writing
Technical: 134 intraday support to watch a failure here targets a retest of 133 bid. While 134 survives on a closing basis expect renewed upside pressure on 135.60 interim resistance. A close above 136 opens a retest of upper end of the recent range and a retest of offers at 137 next.
- Interbank Flows: Bids 134 stops below. Offers 136 stops above
- Retail Sentiment: Neutral to bearish
- Trading Take-away: Sidelines for now
AUD/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: AUD/USD edged higher as the RBA decided to keep rates unchanged. In its statement, Governor Stevens suggested that the available information implied an ongoing moderate expansion in the Australian economy, putting further easing policies off the table. However, near term AUD/USD risk is elevated following the IMF’s downward revision on global economic growth from 3.5% to 3.1%, in which low commodity prices and the economic slowdown in China remain the top concerns
Technical: While .71 supports intraday downside reactions expect renewed upside pressure to target stops above .72 enroute to equality corrective objective at .73.
- Interbank Flows: Bids .6850 stops below. Offers .72 stops above
- Retail Sentiment: Neutral to bearish
- Trading Take-away: Sidelines for now
USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
Fundamental: The CAD rallied against the US dollar for the fifth-straight session, boosted by a surge in crude oil prices that offset earlier losses on figures showed Canada’s trade deficit widened in August as exports slumped. The price of crude, a significant Canadian export, surged on the signs that the world’s biggest crude producers may act jointly to support prices.
Technical: Testing downside symmetry objective at 1.30 pivotal for trend continuation, a failure below 1.30 suggests the potential for a more significant trend reversal.
- Interbank Flows: Bids 1.30 stops below. Offers 1.33 stops above
- Retail Sentiment: Bullish
- Trading Take-away: Sidelines for now
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