Weaker than expected U.K. inflation data wasn’t much of a surprise. Many investors were anticipating that the headline CPI will fall to record lows. In fact, the British pound barely sold off after the release and even managed to advance against the euro and the dollar. Some analysts debate that record low inflation could actually be good for the UK. After all, lower prices of goods means that consumers have more purchasing power, which might then lift spending and growth later on.
(Today’s video is in Japanese language)
Besides, the U.K. is in much better shape compared to the euro zone, as employment and trade numbers have shown continuous improvements. , At this rate, wage growth might actually have a chance at overtaking inflation. You never know!
Thanks to continued signs of a slowing global economy (weaker inflation, commodity demand) and a downgrade of the global outlook for 2015 and 2016 by the World Bank, the London session dance moves on the forex dance floor were pretty much those of typical risk-off/ safe haven.
With the idea that more help may be on the way for the global economy in the form of easy money, it looks like fear flows have waned, and we even saw a bounce higher in the comdolls. After a drop down to .8070 on falling copper prices, AUD/USD rebounded to around .8140 in European trade. The USD/JPY bottomed out around 116.60 before rebounding back to the 117.00 to be down -0.8% on the session, and down from the 119.20 Monday high.
And of course, with a higher probability of QE coming, the euro took a hit against most major currencies.
Coming up in the economic events list, Thursday’s Aussie employment change data at 1:30 am GMT could set the direction for the Aussie dollar for the remaining days of January. For the month of December, a mere 5.3K increase in hiring is expected, far weaker compared to November’s 42.7K gain and October’s 13.7K rise. In this case, the report would indicate a sharp downturn in employment, which could weigh on Australia’s spending and growth figures later on. Also, with a weak pickup in hiring expected, Australia’s jobless rate is unlikely to budge from its 12-year high of 6.3%. Friday we’ll hear the US CPI data at 2:30 PM followed by Prelim UoM Consumer Sentiment at 3:55 PM.
Intraday Forex Technical Levels
EUR/USD 4-hour: Consolidating.
Invest Diva positioning: Short positions below 1.1782 with targets at 1.1663 and 1.1536 in extension.
Technical reasons why: The pair is consolidating the bottom level at 1.1782 below the Ichimoku’s cloud. A break below this level would give a further drop. The RSI is at the neutrality area.
Alternative Scenario: Above 1.1782 look for further upside towards 1.1875 and 1.1970.
Where I’m setting my stops and limits:
Support Levels Turning Point Resistance Levels
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.1663 | 1.1782 | 1.1970 |
| 1.1536 | 1.1875 |
GBP/USD 4-hour: Entering the Ichimoku’s cloud.
Invest Diva positioning: Long positions above 1.5173 with targets at 1.5273 and 1.5375 in extension.
Technical reasons why: The pair surpassed the key resistance level at 1.5173 and entering the Ichimoku’s cloud. The RSI is above the neutrality area.
Alternative Scenario: Below 1.5173 look for further downside towards 1.5052 and 1.4954.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.5052 | 1.5173 | 1.5375 |
| 1.4954 | 1.5273 |
USD/JPY 4-hour: Broke below the key support level.
Invest Diva positioning: Short positions below 117.98 with targets at 115.59 and 113.66 in extension.
Technical reasons why: The pair broke below the key support level at 117.98 below the Ichimoku’s cloud. The RSI reached the over-sold zone.
Alternative Scenario: Above 117.98 look for further upside towards 119.30 and 120.63.
Where I’m setting my stops and limits:
Support Levels Turning Point Resistance Levels
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 115.59 | 117.98 | 119.30 |
| 113.66 | 120.63 |
USD/CAD 4-hour: Reached our target.
Invest Diva positioning: Long positions above 1.1996 with targets at 1.2090 and 1.2215 in extension.
Technical reasons why: The pair reached our bullish target at 1.1996 and is still on the uptrend above the Ichimoku’s cloud. The RSI is above the neutrality area.
Alternative Scenario: Below 1.1996 look for further downside towards 1.1880 and 1.1795.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.1880 | 1.1996 | 1.2215 |
| 1.1795 | 1.2090 |
AUD/USD 4-hour: Consolidating.
Invest Diva positioning: Short positions below 0.8145 with targets at 0.8036 and 0.7879 in extension.
Technical reasons why: The pair is still consolidating at our pivot level at 0.8145 above the Ichimoku’s cloud. The RSI is also moving around the neutrality area.
Alternative Scenario: Above 0.8145 look for further upside towards 0.8250 and 0.8322.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 0.8036 | 0.8145 | 0.8322 |
| 0.7879 | 0.8250 |
USD/CHF 4-hour: Broke above the pivot level.
Invest Diva positioning: Long positions above 1.0162 with targets at 1.0307 and 1.0426 in extension.
Technical reasons why: The pair broke above our pivot level at 1.0162 above the ichimoku’s cloud. The RSI is above the neutrality area.
Alternative Scenario: Below 1.0162 look for further downside towards 1.0052 and 0.9963.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.0052 | 1.0162 | 1.0426 |
| 0.9963 | 1.0307 |
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