Morning Report: Ranges Defined Ahead Of This Week’s NFP Release

Market Commentary  

US equities ended Friday’s session slightly weaker as earnings disappointed. European equities were modestly firmer. US Treasuries rallied across the curve, with 10Y yield at 2.19% this morning. Commodity prices, led by oil and copper were broadly weaker. CRB index is down to fresh 12-year lows. Monetary tightening-bias currencies USD and GBP continued to firm against most currencies. USD initially fell in New York trade Friday off the back of weak July sentiment and 2Q employment cost data, but reversed most of its losses on better than expected Chicago PMI and Fed’s Bullard’s comments that he was open for a September rate move.

EURUSD rose to an intra-day high of 1.1114 (Friday) on better than expected July core CPI amid broad USD weakness but reversed fortunes to close 1.0984. EUR was last at 1.0976 levels this morning. Expect EUR to consolidate in the range of 1.0860 – 1.1060 until it breaks out of this consolidation phase.

GBPUSD closed firmer above the 1.56-handle overnight. GBPUSD was around 1.5620’s levels at time of writing. Medium term outlook remains positive in UK outlook and still favors GBPXXX amid ongoing economic recovery setting the stage for BoE to hike possibly as soon as 2Q 2016. But near-term, many positives appear to have been priced in and that exposes GBP to the downside. There needs to be further impetus for follow-through moves higher. July PMI on tap later; data disappointment could see some vulnerability on the downside.

USDJPY tested offers at 124.50 briefly last week before heading back below the 124-handle Pair is back above the 124-handle to start the week, likely on the back of a sell-off in the JPY against the EUR and GBP. Lacking fresh impetus for most of the week, market is likely to remain cautious ahead of the US NFP print on Friday. While BOJ meets on Friday, it is likely a non-event given BOJ Governor Kuroda’s recent reiteration that there was no immediate need for additional monetary easing though the central bank stood ready to adjust policy if the need arises

Technical  Commentary 

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

  • Range trade persists within support at 1.0880/60 and resistance at 1.1140/60. A downside break targets stops below 1.08 an upside break targets stops above 1.12.
  • Daily Order Flow bullish; OBV sideways, Linear Regression and Psychology bearish
  • Monitoring intraday price and Order Flow indicators on a test of 1.1140/60 or 1.0880/60

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

  • A fourth failure toward 1.57 frustrates bulls a close below 1.55 would suggest bearish symmetry target at 1.5285 remains in play. While intraday downside reactions are contained by pivotal 1.5550 another assault on 1.57 is possible.
  • Daily Order Flow bullish; OBV sideways, Linear Regression and Psychology continue to rotate around midpoints with bullish bias
  • Monitoring intraday price action and Order Flow indicators on a test of 1.5285 or 1.5750

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

  • Bulls target 125.85 and 128 in extension, intraday downside reactions remain supported towards 123 only a failure at pivotal 122.50 concerns medium term bullish view, failure here opens 120 in retest of ascending triangle trend line.
  • Daily Order Flow bearish; OBV sideways, Linear Regression and Psychology pierce midpoints from below
  • Monitoring intraday price action and Order Flow indicators on a test of 128 or 122.50

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

  • 133/34 range support continues to hold while intraday downside reaction remain supported at the 1.35 trendline this suggests a retest of 138, advance above here opens 143.
  • Daily Order Flow bullish; OBV sideways to up, Linear Regression and Psychology attempting midpoint test from below.
  • Monitoring intraday price action and Order Flow indicators at 138 and 133

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