FOREX: UK CPI Pressures GBP Ahead of BOE Decision, DXY Extends Bounce
Dec-17 10:28
- The US dollar trades with a much more constructive tone on Wednesday, prompting a near 0.8% recovery for the DXY from the post-NFP lows. It appears the limited market shift in rates expectations has frustrated the weakening dollar trend into the release, with short-term positions potentially getting squeezed ahead of tomorrow’s US CPI release.
- Lower-than-expected UK CPI has weighed on GBP, pressuring cable down to 1.1312 session lows. It’s not pricing for tomorrow's BoE decision that’s shifting spot markets, but policy differentials further down the curve. With tomorrow’s BOE rate cut well priced, the vote split will be in focus. Today’s inflation print could potentially tilt that to 6-3 – a dovish signal that could usher in easier pricing still for next year as the committee would look more proactive on downside inflation surprises.
- For GBPUSD, support sits at 1.3290, the 50-day EMA. A breach of this EMA would highlight a bearish development and signal a possible reversal. To the upside, attention is on 1.3452 (pierced), a Fibonacci retracement. In EURGBP, 0.8802-10 could provide intraday resistance, but a close above this mark today would open gains toward November’s 0.8865 high.
- USDJPY stands a notable 110 pips above yesterday’s lows at 155.50. Spot traded to within 5 pips of the Dec 05 lows of 154.35 yesterday, bolstering the significance of this area of support ahead of the US data and the BOJ on Friday. Furthermore, the 50-day EMA has also held, intersecting just above the 154.00 handle. A clear breach of this average is required to undermine the bull theme and signal scope for a deeper corrective pullback.
- Weekly MBA mortgage applications and September housing starts highlight the US data calendar before focus turns to tomorrow's central banks, with the Riskbank, Norges Bank, BOE and ECB decisions all due.
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EURIBOR OPTIONS: Strangle vs Straddle Spread
Nov-17 10:27
- 0RH6 98.00^ bought in 4k vs 0RH6 96.68/98.18^^ sold in 6k.
Paid 13.25 and 13.5 for the Straddle.
FOREX: USDJPY Price Action Points Towards Renewed Test of 155.00
Nov-17 10:26
- The first session of the week provides some consolidation following Friday's volatility. The US dollar advanced against most others in G10 and SEK outperforms again, while the Euro and the likes of NZD and AUD weaken amid headline drivers remaining light.
- Amid reports on a fiscal easing package, price action in USDJPY points towards a renewed challenge to the 155.00 handle. The pair saw three highs around there recently ahead of Friday's temporary dip. Renewed upside would put sights on 155.53, a Fibonacci projection. Initial support to watch is 153.30, the 20-day EMA. Remember that Japanese authorities have recently stepped up their rhetoric on JPY valuations but stopped short of phrases historically associated with intervention for now.
- The extension of downward momentum in EURSEK is helping narrow the gap to an important support zone around 10.9000. A clear break of this level would expose 10.8000, which aligns closely with the April 4 low (10.7941). The case for continued SEK outperformance is largely tied to the growth differential channel. Recent domestic data have supported these arguments, with Swedish activity being supported by stimulative monetary policy, incoming fiscal stimulus and lower trade policy uncertainty.
- EURCHF closed last week at 0.9227, above a mid-term resistance zone after piercing 0.9200 for the first time since the withdrawal of the 1.20 floor in 2015. With today's price action lacking impetus following the weaker-than-expected Q3 Swiss flash GDP print, a few short-term signals suggest there may be scope for a bounce near-term for the cross.
- The trend is in oversold territory, and Friday's price pattern is a hammer candle - a potential short-term reversal signal. If the cross does recover, scope would be for a climb towards 0.9275, the 20-day EMA and 0.9298, the 50-day EMA. Key support lies at 0.9180, Friday's low and the bear trigger.
- Canada CPI, US empire manufacturing and construction spending highlight the data calendar for today alongside a set of Fed, ECB and BoE speakers.
MNI EXCLUSIVE: MNI discusses the BOJ's policy rate strategy
Nov-17 10:24
MNI discusses the BOJ's policy rate strategy - On MNI Policy MainWire now, for more details please contact sales@marketnews.com
