OUTLOOK: Price Signal Summary - USDJPY Trend Set-Up Remains Bullish
Dec-17 11:35
- In FX, a bull cycle in EURUSD remains intact, however, a short-term reversal signal has appeared on the daily chart. Tuesday’s candle pattern is a shooting star candle formation. If correct, this suggests scope for a pullback near-term. A correction would allow an overbought trend condition to unwind. The first important support lies at 1.1658, the 20-day EMA. Key short-term resistance has been defined at 1.1804, the Dec 16 high.
- A bull cycle in GBPUSD remains intact and for now, today’s sell-off is considered corrective. A fresh cycle high on Tuesday reinforces the bull theme. Attention is on 1.3452 (pierced), 61.8% of the Sep 17 - Nov 4 bear leg. A clear break of this hurdle would strengthen a bull theme and open 1.3527, the Oct 1 high. Initial firm support is 1.3290, the 50-day EMA. A breach of this EMA would highlight a possible reversal.
- The latest pullback in USDJPY appears corrective. The trend condition remains bullish and this is highlighted by moving average studies that are in a bull-mode position. Support to watch lies at 154.03, the 50-day EMA. A clear breach of this average would undermine the bull theme and signal scope for a deeper corrective pullback. For bulls, a resumption of gains would open 158.00.
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LOOK AHEAD: Monday Data Calendar: Empire Mfg, Const Spend, Fed Speak, Tsy Bills
Nov-17 11:34
- US Data/Speaker Calendar (prior, estimate)
- 11/17 0830 Empire Manufacturing (10.7, 5.8)
- 11/17 0900 NY Fed Williams welcome remarks (no Q&A)
- 11/17 0930 Fed VC Jefferson moderated discussion outlook/policy (text, Q&A)
- 11/17 1000 Construction Spending (-0.1%, -0.1%)
- 11/17 1130 US Tsy $86B 13W & $77B 26W bill auctions
- 11/17 1300 MN Fed Kashkari moderates discussion
- 11/17 1535 Fed Gov Waller economic outlook, SPE annual dinner
- Source: Bloomberg Finance L.P. / MNI
ECB: Makhlouf Realigns With Median Governing Council Member
Nov-17 11:34
Headlines crossing from Irish Central Bank Governor Makhlouf via Bloomberg:
- "*MAKHLOUF: EXAGGERATION TO SAY HE’S WORRIED ON PRICE TRAJECTORY"
- "*ECB IS IN A GOOD PLACE AT THE MOMENT, MAKHLOUF SAYS"
- "*ECB'S MAKHLOUF: NO NEED TO GET `TOO OBSESSED' WITH ETS2 DELAY"
Note that on October 15, Makhlouf somewhat surprisingly said that he was "more worried that we’re going to be over than under 2%.” Comments today suggest he is more aligned with the median Governing Council member view than those mid-October remarks implied.
CROSS ASSET: UBS Wary Of CTAs Shedding Equity Exposure In Weeks Ahead
Nov-17 11:29
Following Friday’s market swings UBS note that the “first signs of turbulence are emerging in equities, but so far, CTAs have held on to their position. That resilience may not last long, as we are getting closer to the inflection points where we see them selling in size”.
- They note that “over the next two weeks, we expect CTAs to start reducing risk, cutting 20% of their current equity exposure ($20/30bln). That amount could easily triple in a scenario where global indices go down by 5% or more”.
- Meanwhile, in rates, they suggest that CTAs have halved their duration exposure over the past couple of weeks. UBS “anticipate more selling ($60/70mln Dv01), but noticed that their reaction function has become more balanced. Price actions in equities, and 'risk-off' indicators in general, will be important to monitor, as they will likely impact CTAs’ next course of action in bonds”.
- Finally for FX, UBS think that “CTAs continued to buy USD in the last two weeks (~$50bln), mostly against G10 FX & CNH. Flows should stabilize from here or even reverse a little bit for some currencies (CNH, EUR & CHF). Overall positioning is neutral USD, positive on EMEA, CEE & Latam FX, negative on Asia FX”.
