Financial Market Research and Analysis

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Euro: Little reaction to weak CPI
EURUSD trades in between the 50-day moving average (1.0950) and the 200-day moving average (1.1048). The Eurozone consumer prices dropped 1.4% during the month of January. Deflation was expected and the euro barely reacted to news. The key support zone is seen at 1.0971/55 (area including the 50 and 100-dma and Fib 38.2% retrace on Aug-Dec’15 decline), breaking below this zone, we could see a further decline toward 1.0815/10 (Feb lows). As the negative momentum gains strength, a stronger resistance is now eyed at the 1.1050 (200dma) before 1.1160, Fib 38.2% retrace on Jan 29 – Feb11 rise. Only a break above would signal an improvement in sentiment for a recovery to 1.1243 (minor 23.6% retrace) and 1.1376 (Feb 11 peak).

USDJPY has extended losses to 111.04, just a stone’s throw higher than the February dip of 110.99. Trend and momentum indicators remain comfortably negative, suggesting that the next bearish wave could well break the 110.99 and extend toward the 110. Mark. On the upside, resistance is seen at 113.16 (200hma) then at 113.50/113.75 (minor 23.6% retrace on Jan 29 – Feb 11 slide). The major 38.2% retrace, 115.08, is there to distinguish between the current downtrend and a potential reversal in yen’s appreciation. Only surpassing 115.08 could signal a potentially sustainable recovery to 116.34 and 117.60 (Fib 50% and 61.8% retrace).
The pound tanked to 1.3879 yesterday on Brexit risks. The 4Q GDP data will be in focus this morning. Even a positive surprise may not give enough momentum to clear resistance building at 1.40 mark against the US dollar. Against the euro, it is really just a matter of time before the 0.80 level last seen on December 2014 is reached.

At this point, the RSI (301.75%) shows that GBPUSD will soon hit the ‘oversold’ region, any upside attempt is expected to remain capped at 1.4000/4020 (short-term pivot), then at 1.4260 (this week’s high).

Even a better-than-expected private capex figures failed to gather momentum for a stronger Australian dollar. AUDUSD weakened to 100dma (0.7157), the top of short-term support area at 0.7160/0.7100 (including the 100 and 50 day moving averages and the minor 23.6% retrace on May’15 – Jan’16 slide. Resistance is eyed at 0.7268 (200dma) before 0.7340/85 (major 38.2% on May’15 – Jan’16 slide / Dec’14 high).

Gold extended gains to $1253 yesterday as insecure investors increased their holdings in precious metal. The $1200/1218 (pivot) zone is expected to continue lending support to the current bullish development. Surpassing the 1263 (Feb 11 peak), ad advance to $1270/1280 is considered before $1300.

WTI is above the 4-month downtrend channel and is testing the 50-dma ($32.44) before a potential attempt toward the $33.45 (Feb 23rd high). If surpassed we could consider a further rise toward the $34.50/35.50, mid-term resistance zone. On the downside, support is eyed at $31 (downtrend channel top and 200-hma) before a re-test of the $30 mark.