U.S. Data Weakness Dampens Rate Move Expectations Again

Market optimism over a December Fed rate hike was once again dampened by the slew of weaker than expected US data that showed softer gains in personal income and spending while core PCE failed to pick up. Market expects similar rapid shift in hike-no hike expectations to continue until the Fed finally act, if at all. Despite mounting talks of a possible increase in BOJ’s asset purchases, BOJ refrained from adding QE at last Friday’s meeting but policy bias remains clearly titled towards easing amid softer growth and price outlook. China’s PMI prints also added on to the case of a bleak growth picture, as manufacturing index contracted for a third straight month and services index grew at a slower pace. The USD Index closed 0.35% lower at 96.94 Friday.

EUR/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Fundamental: EUR was up modestly against the USD, supported by an unexpected improvement in euro zone economic sentiment and signs of faster-than-expected inflation in Germany. After the release of relatively weak US figures in the US session, EUR/USD popped higher to a new 1.1072 intraday peak in response

Technical: Today while 1.0950 caps intraday downside reactions anticipate a broader corrective pattern targeting 1.1130. Failure at 1.0950 sets up a retest of last weeks lows en route to 1.0860

Interbank Flows: Bids 1.0950 stops below. Offers 1.11 Stops above.
Retail Sentiment: Neutral to bullish
Trading Take-away: Long against 1.0950 targeting 1.1130

GBP/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Fundamental: GBP rose on bets the Bank of England could raise interest rates earlier than before expected in the third quarter of 2016. Attention will now be on the BoE’s Quarterly Inflation Report due Thursday along with a rate decision and the minutes from the latest monetary policy committee (MPC) meeting.

Technical: The upside rotation back through 1.53 resets bullish expectations for a test of 1.56. Another failure at 1.53 targets stops sub 1.52 next.

Interbank Flows: Bids 1.52 stops below. Offers 1.55 stops above
Retail Sentiment: Neutral to bearish
Trading Take-away: Venture long back through 1.5330 targeting 1.56

USD/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Fundamental: JPY generally outperformed against the US dollar following Bank of Japan’s decision to hold, short-lived weakness on the back of dovish comments from Governor Kuroda and steady gains following the release of optimistic outlook from BoJ.

Technical: Bulls target a sustained break of 121 to target range highs at 121.85 an intraday failure at 120.00 would suggest return to range.

Interbank Flows: Bids 119.50/30 stops below. Offers 121.50 stops above
Retail Sentiment: Neutral
Trading Take-away: Buy pullbacks against 120.50 targeting upside range break

EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish

Fundamental: BOJ Governor Kuroda remained confident that the 2% inflation target would be achieved on the back of wage increases and a global oil price rebound, though the deadline was pushed back to 2H FY2016 instead of 1H FY2016. The BOJ in its semi-annual economic outlook also expects the economy to recover moderately with growth likely to exceed potential in FY15 and FY16. 3Q15 due on 15 Nov and the two remaining scheduled BOJ meetings for 18-19 Nov and 17-18 Dec will be watched closely as a result.

Technical: Bears now target equality corrective objective at 131.20, only a close above 133.50 eases immediate bearish pressure.

Interbank Flows: Bids 131.00 stops below. Offers 133.50 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines for now

AUD/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Fundamental: A rise in oil and other commodities prices lifted the AUD which recorded the close at 0.7137. However, speculations that the Reserve Bank of Australia (RBA) might cut interest rates at its policy meeting this week weighed on the currency

Technical: Buyers emerge at retest of pivotal .7030/50 next, failure here firmly re-establishes the bearish tone and opens a retest of 2015 lows and potential broader bearish trend continuation move.

Interbank Flows: Bids .7050 stops below. Offers .7210 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines for now

USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish

Fundamental: CAD strengthened sharply against a weaker USD, touching its strongest level in a week. The loonie gained steadily over the last few days in part on crude oil price gains. The US crude prices settled up 1.15 percent at $46.59 a barrel and Brent added 1.35 percent to $49.46 .

Technical:1.3260 provides decent resistance as anticipated as this area contains upside potential for another leg of corrective downside. A close above 1.3280 eases bearish pressure and resets focus on the 2015 highs and stops above.

Interbank Flows: Bids 1.3090 stops below. Offers 1.3260 stops above
Retail Sentiment: Bearish
Trading Take-away: Sell a double top test and hold against 1.3280 for another leg lower