Morning Forex Report: Fed Hawks & ECB Doves Pressure EUR Bulls

Market Commentary  

USD bulls were given some support yesterday with hawkish comments by Fed speakers rekindling hopes that the long awaited rate hike could still come in Q4 this year. St Louis Fed’s Bullard (non-voter) mentioned that October rate rise is still a possibility while Atlanta Fed’s Lockhart (voter) acknowledged that although he voted to keep rates unchanged last week, he thinks it is still likely to commence tightening by year-end. By the end of the session, USD was higher across board and UST 10-year yield was back above 2.20%.

Eyes will be on every Fed speaker this week especially Chair Yellen and Fed Bullard on Friday. Fed Lockhart speaks again tomorrow and again on Thursday.

ECB QE talk, equities out performance weighing on EUR strength. EUR fell amid broad USD bid. ECB Praet reiterated ECB’s Draghi and Coeure’s comments that ECB could do more to expand or extend QE if need be and reiterated the monetary policy divergence between US and Europe.

GBPUSD bulls trying to defend the 1.55 handle. Despite the fact that BOE Governor stated that UK rates are very likely to be tightening, the policy decision would still be determined by domestic factors into the end of the year.

USDJPY back above 120 buoyed by the firmer USD tone. Domestic markets are closed until Wednesday for a series of public holidays and will re-open on Thursday, trade remains quiet as a result.

Technical  Commentary 

EURUSD Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bearish

  • As 1.1250 acts as intraday resistance expect a test of bids at 1.11 a failure at 1.11 opens a full test of three month range support towards 1.08
  • Daily Order Flow bearish; OBV sideways to down, Linear Regression and Psychology pierce midpoints from above
  • Monitoring intraday price and Order Flow indicators on a test of 1.11 or 1.1250

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GBPUSD: Short Term (1-3 Days): Bullish  – Medium Term (1-3 Weeks) Bearish

  • Bids at 1.55 under pressure a failure here opens a move back to 1.54 and eases immediate upside pressure. A hold of 1.55 sets base to retest 1.57 offers.
  • Daily Order Flow bullish; OBV sideways to down, Linear Regression and Psychology rejected at initial midpoint test from below
  • Monitoring intraday price action and Order Flow indicators on a test of 1.55 or 1.58

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USDJPY: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bullish

  • Retest of 119 support attracts buyers but as 121 caps upside reaction expect a test of stops sub 119.
  • Daily Order Flow bearish; OBV sideways, Linear Regression and Psychology rotating at midpoints.
  • Monitoring intraday price action and Order Flow indicators on a test of 119 or 122

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EURJPY: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bearish

  • Rejected at range resistance 137. While 137 contains upside expect a rotation back to test 132 bids, failure at 132 sets a bearish tone and targets 2015 lows next
  • Daily Order Flow bullish; OBV sideways to down, Linear Regression and Psychology pierce midpoints from above
  • Monitoring intraday price action and Order Flow indicators at 137 or 132

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