Morning Report: Dudley Casts Further Doubt On September Move

Market Commentary  

Fed’s Dudley commented that an interest rate increase in September is “looking increasingly in doubt”. Equity investors might have taken heart as Wall Street continued its yo-yo with another 4% rise overnight. Data was also supportive with a stronger than expected US durable goods order at 2.0%y/y. Excluding military component, the print was an even stronger 2.2%y/y. That lifted the USD above the 95-figure.

This morning it is ECB’s Coeure’s turn to speak. Executive Board member Praet warned last night that the central bank will increase QE if necessary. Praet said there “should be no doubt ECB will act if needed”; “downside risks to ECB’s inflation goal have risen, as a result of recent development in world economy and commodity markets”. There could be more jawboning from Coeure to temper recent EUR’s strength.

GBP took a turn and head lower towards 1.5453 overnight amid broad USD strength. The pair hit fresh two week lows, breaking below the 1.5500 level. If the second revision of Q2 GDP and pending home sales out of US beat expectations, the pair looks set to challenge stops below 1.54.

The USDJPY rebounded overnight as risk aversion waned, touching a intraday high of 120.37 this morning. Pair has slipped back below the 120-handle, possibly on comments by BOJ governor Kuroda in New York that there are no plans for now for further easing as the BOJ board continues to believe that the 2% inflation target would be achieved with the current QQE. He however added the caveat that if necessary, the BOJ would “certainly make necessary adjustment of QQE”.

Technical  Commentary 

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

  • The descent from this weeks 1.17 highs appears to be corrective while 1.1250 survives on a closing basis the 1.18 symmetry objective remains in play if bulls can recapture 1.15 on a closing basis. Failure at 1.12 would suggest a false upside break.
  • Daily Order Flow bullish; OBV sideways to up, Linear Regression pierces midpoint from above, Psychology bullish but rolling over to test midpoint from above
  • Monitoring intraday price and Order Flow indicators on a test of 1.18 or 1.12

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

  • The breach of 1.55 refocuses bears on the 1.5285 bearish symmetry objective, while 1.5630 caps upside reaction expect a test of stops below 1.54 next
  • Daily Order Flow bearish; OBV sideways to up, Linear Regression and Psychology bullish but stalling
  • Monitoring intraday price action and Order Flow indicators on a test of 1.5285 or 1.5650

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

  • While 120.50 contains upside reaction a retest of the spike lows a 116 remains in play. Only a close back above 122 would ease the immediate bearish pressure
  • Daily Order Flow bearish; OBV sideways to up, Linear Regression and Psychology pierce midpoints from below
  • Monitoring intraday price action and Order Flow indicators on a test of 116 or 122

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

  • The breach of ascending trendline support at 136 opens a retest of range support at 134/33. A snapback above 137 today would suggest the 141 symmetry objective remains in play
  • Daily Order Flow bearish; OBV sideways to up, Linear Regression and Psychology bearish
  • Monitoring intraday price action and Order Flow indicators at 141 and 133

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