Morning Report: USD Correction Continues

KEY DATA RELEASES TODAY (BST) :

09:30 GBP Unemployment Rate 5.6% v 5.7% 09:30 GBP Claimant Count Change -29.1K v -31.0K 09:30 GBP Average Earnings Index 3m/y 1.8% v 1.8% 10:00 EUR Final CPI y/y -0.1% v -0.1% 13:30 USD CPI m/m 0.2% v 0.2% 13:30 USD Core CPI m/m 0.2% v 0.2% 15:00 USD Prelim UoM Consumer Sentiment 93.8 v 91.2 17:00 EUR ECB President Draghi Speaks

OVERNIGHT:

Participants appear be taking a step back following an extremely volatile day yesterday, which resulted in the EUR/USD rallying from a 1.0626 low to a 1.0818 high. Tricky to determine direction from here as we remain in the middle of range and would expect players to await the key US CPI data event later in the day as the catalyst for fresh USD sentiment into the early part of next week. For now look towards 1.0820 for initial topside resistance with a move back through 1.0680/90 required to provide additional downside momentum with 1.0620 now key support.

The USD takes another leg lower overnight, but bears are somewhat disappointed with the sticky nature of USD/JPY in spite of the pair testing pivotal levels. The presence of real money demand persists in dips and we expect markets to continue to range trade. Todays US CPI could be the catalyst of either a continuation of the USD selloff (possibly towards 118.40/00 next) or a rebound back toward 119.50/80

Another day, another big figure for GBP… The pair now rests above 1.49 and is nearing the psychological 1.5000 resistance level. Weak US data and a doveish bias from various Fed speakers continue to put pressure on USD positions, but at these heightened levels, and with the lingering risks from the elections in a few weeks, market is moving towards a neutral outlook on cable, leaning on 1.5000 especially on a closing basis

PRICE ACTION OVERVIEW:

EUR: Above 1.0810 refocuses on fourth 1.10 test, 1.0620 key supportGBP: Daily close above 1.50 energises bulls, while this area caps expect consolidationJPY: While 118.70/90 contains downside target 121.00 en route to retest of year to date highs, only below 118.30 concerns bullish viewCAD: 123.50 former support now becomes key resistance second close below here forewarns further downsideAUD: While .7860/80 contains upside anticipate third test of key .7550 failure here opens the bearish target of .72, above .7880 alleviates downside pressure

ANALYSIS:

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

  • 1.0810 corrective target caps on first test, expect further corrective consolidation while 1.0620 supports on the downside. Intraday above 1.07 keeps bias to te upside with potential for a fourth test of 1.10.
  • Order Flow indicators; OBV off lows, Linear Regression and Psychology bullish
  • Monitor price action and Order Flow for shorts positions targeting 1.0460 initially and 1.0240 in extension

Euro

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

  • This weeks double bottom has prompted a a sharp correction off the lows 1.50 is the key near term hurdle on a closing basis, a close above 1.51 would suggest a medium term reversal. Intraday 1.4880 is the initial intraday support, below 1.48 revives bearish pressure
  • Order Flow indicators; OBV consolidating above recent lows, Linear Regression and Psychology rotate at midpoint
  • Monitoring price action and Order Flow for shorts targeting 1.45 initially and 1.42 in extension

Sterling

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

  • 118.70/90 holds to maintain near term upside pressure targeting a 121, only below 118.30 concerns immediate bullish bias.
  • Order Flow indicators; OBV ticking down, Linear Regression and Psychology bearish
  • Monitoring price action and Order Flow indicators for longs targeting 124

Yen

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

  • 123 gives way suggesting a broader corrective phase only a snap back above 124.50 would reinvigorate the bullish case, while 124 acts as resistance, further downside ahead.
  • Daily Order Flow indicators; OBV consolidates off highs, Linear Regression and Psychology bearish
  • Monitoring price action and Order Flow indicators to reset long positions targeting 1.30

Loonie

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

  • .7550 is now key support bulls set to challenge the .79 which has defined range resistance since February a break here target .8050 next.
  • Order Flow indicators; OBV continues ticking up, Linear Regression and Psychology bullish.
  • Monitoring price action and Order Flow indicators to set shorts targeting .72 against .8050

Aussie

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