Financial Market Research and Analysis

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Euro resists to bears
EURUSD consolidates losses above 1.1120 (Fib 50% on Aug-Dec decline). Interestingly, the euro-traders did not lend the market into bears’ hands after the ECB President Draghi said he will ‘not hesitate to act’ to give a boost to the Eurozone economy. The pair is testing the 1.1160, Fib 38.2% retrace on Jan 29 – Feb11 rise, and a break above should signal an improvement in sentiment and pave the way for a further correction to 1.1218 (200-hma) before 1.1243 (minor 23.6% retrace) and 1.1376 (Feb 11 peak). Breaking 1.1120/10 (Fib 50% / daily pivot), we could expect a further fall to 1.1093 (Fib 50%) before 1.1054 (200-day moving average).

USDJPY faced solid resistance at 200-hour moving average (114.41) and slid to 113.51 (minor 23.6% and 100-hour moving average) as expected. Softer US yields is expected to continue weighing on the pair, the next critical level stands at 110.99 (Feb 11 dip). There is a critical short-term resistance at 115.08 (Fib 38.2% retrace off Jan 29 high 121.69). This level is backed up with option barriers today. Decent vanilla puts abound at 115.50/115.00. A break above 115.08 will bring in play the intermediate resistances at 116.34 and 117.60 (Fib 50% and 61.8% retrace).

Mixed labour data triggered a swing in the pound in London. The unemployment rate remained unchanged at 5.1% yet the average wage growth slightly slowed to 1.9% y/y. At this point, it is not only about the size but also about the quality of jobs added that matters. The wages growth is a solid indicator of inflation and inflation expectations. Nowadays the wages growth in the UK falls short of the Bank of England’s objective, giving them little reason to consider any hike in interest rates in 2016. Both bulls and bears stay on the sidelines before Feb 17-18 summit which should give some clarification on the Brexit vote. GBPUSD consolidates losses in the bearish consolidation zone. Offers are eyed at to 1.4354 (minor 23.6% retrace on Dec-Jan fall). The 1.4523 (major 38.2%) should distinguish between a re-test of 1.4080 (Jan dip) and a further correction to 1.4660/1.4797 (Fib 50%/61.8% respectively).

AUDUSD losses support of carry trades. Trend and momentum indicators turned flat. The MACD on daily chart is about to step in the bearish territory. Solid resistance is eyed at 0.7180/0.7200 area. On the downside, the near-term support is eyed at the 0.7016-30 area marked by the November 10 low and the 38.2% Fibonacci expansion. A daily close below this barrier opens the door for a challenge of the 0.6947-64 zone (horizontal pivot, 50% level).

Gold was better bid in Asia; the risk-off sentiment increased appetite in gold and sent the yellow metal to $1212. Despite the deterioration in the latest bullish momentum, technicals remain in positive territory. The next short-term support is eyed at $1180 (major 38.2% retracement on Dec’15 – Feb’16 rally) and should shelter risk averse buyers given the hectic market environment. A slide below this level should suggest a short-term bearish reversal and could encourage a further sell-off to $1155 (Fib 50%), before $1130 (200-day moving average).

WTI failed to surpass the $32 (4-month downtrend channel top) as yesterday’s agreement is seen as insufficient to narrow the gap between demand and supply in the oil market. Failure to break above $32 keeps the WTI within the down-trending channel, paving the way toward $25.

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