Financial market research and analysis

EURUSD remains rangebound within the minor 23.6% and the major 38.2% retracement on Aug-Nov’15 decline (1.0805/1.0979). A breakout in either direction is necessary to assess a short-term direction with stronger conviction. The ADP employment report is the key macro data of the day. Soft expectations should keep the USD-bulls contained across the board. A read below 200K, in line with expectations, could underspin a bullish breakout in EURUSD. First line of resistance are eyed at 1.0985/1.1000 (January high / optionality) before the key mid-term resistance, 1.1053 (200dma). On the downside, 1.0805/1.0778 area (minor 23.6% on Aug-Dec’15 decline / post-Draghi low) should continue lending support.

As suspected, the broad-based USD weakness pulled out support at 120.31(major 38.2% retrace post-BoJ rally) and pulled the USDJPY below 120.00 mark in Tokyo. The daily Ichimoku conversion line has been broken shortly. The pair stepped in the bearish consolidation zone. The 200hma (119.43) acted as good support overnight, a break below this level could encourage the day traders to bet for a deeper correction to 119.19 (minor 76.4% retrace) before 118.50 (price before the BoJ announced negative rates). A reversal in USD appetite on ADP should first clear resistance at 120.31 (major 38.2%) for a sustainable extension through the 200dma (121.50). More resistance is eyed at the daily Ichimoku cloud (121.59/83).

GBPUSD tested 1.4463 amid services PMI came in better-than-expected in January. From a wider perspective the dovish Fed expectations also reduced divergence between Fed/BoE policy outlooks. The 1.4307 level, major 38.2% from Jan 21st low of 1.4080, should lend support before the ADP report in the US today. But offers pre-1.45 remain intact before the BoE verdict and the Quarterly Inflation Report due on Thursday. The key mid-term resistance is eyed at 1.4523 (major 38.2% on Dec-Jan decline). Below this level, traders are expected to remain seller on rallies. Below 1.4307, the possibility of a pullback to 1.4080, before the mid-term resistance zone 1.4000/40 will be back on the table.

Australian trade deficit unexpectedly widened to AU$ 3535mn in December as the iron ore were exchanged at record lows prices. AUDUSD legged down to 0.7003 whilst the 10-year Australian yield decreased 10bp, suggesting that carry traders cared little about the deterioration in trade terms. Strong resistance is eyed at 0.7139/46 zone (50 and 100 day moving averages respectively and minor 23.6% retrace on May’15-Jan’16 depreciation), and the break below the 0.7022 (major 38.2% on Jan 20 –to-date rise) suggests that the short-term bearish reversal could aim for deeper downside correction to 0.6985 (Fib 50%). The softening dollar is however expected to keep the downside limited and encourage carry traders to enter fresh long positions at this level.

The prospect of another prolonged plunge in both oil and equity markets helped drive the price of Gold to a three-month high yesterday. Following historic lows in December, the safe-haven metal has enjoyed a timely return to fashion amid recent global angst and elevated volatility. Gold tests the 1030/1036 (200dma / Fib 61.8% on Oct-Dec decline) on the upside. Failure to break above this level should confirm the formation of a bearish engulfing, indicating the possibility of a future bearish trend. Softer US dollar remains supportive of the yellow metal above $1101 (major 38.2% on January rebound) and should keep the trend and momentum indicators marginally positive. Only a significant break above 1136 could pave the way to 1150/60 mid-term resistance.

Oil has one leg below $30, where short-term buying interest has limited losses so far. Concerns of expanding global glut should keep the upside limited with technical resistance eyed at $32.50. Key mid-term resistance is eyed at $34.50/35.50.