Morning Report: US Q2 GDP Keeps Risk Rally In Tact

Market Commentary  

The second print of the US GDP came in at a solid 3.7%y/y vs consensus of 3.2%, quickening from the pace of 2.3%. Initial jobless claims also improved to 271K from 277K. Equities extended gains with benchmark indices above 2% each. Oil rebounded on the back of lower crude stockpiles as well as the better growth number out of the US. The usual inverse correlation between oil and USD broke down as there was also broad USD strength at one point. The DXY is now back above 95.50. Elsewhere, ECB Coeure said that “Euro is irreversible” and that “monetary policy can only support growth, not create it”. In addition, he views that the euro area needs more productivity instead of competitiveness. This might pare expectations of further easing from the central bank but overnight focus was clearly more on the stellar GDP print out of US and so, EUR was still dragged towards 1.12.

EURUSD continued to slide trading with an inverse correlation to the recovering risk sentiment in global equity markets, the pair hit 1.1202 low. The Greek government has appointed the country’s top Supreme Court judge, Vassiliki Thanou, as its first female interim prime minister until the election on September 20.

GBP remains on a back foot amid broad USD strength. GBP traded an overnight low of 1.5370 its lowest level in the past six weeks. Recent UK data has sent mixed signals to the rates market, the housing market and core inflation have rebounded strongly whereas retail sales data still fell short of expectations. All eyes will be on todays GDP release and then attention will shift to BOE’s Carney is due to speak at Jackson Hole Symposium on Saturday.

USDJPY held onto its three-day gains owing to the better-than-expected US GDP data and a rally in global stocks damping the demand for haven assets. Japanese Economy Minister Amari said that a consistent policy is required when overcoming economic challenge

Technical  Commentary 

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

  • While 1.12 survives on a closing basis anticipate a correction to the current decline to retest 1.14 from below as 1.1450 stems upside reaction expect a retest and break of 1.12 en route back to 1.10. A break above 1.1450 opens key test of 1.1510.
  • Daily Order Flow bullish; OBV sideways to up, Linear Regression bearish Psychology pierces 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 1.5550 caps upside reaction expect a test of stops below 1.53 next
  • Daily Order Flow bearish; OBV sideways to up, Linear Regression and Psychology bullish but stalling to retest midpoints from above
  • Monitoring intraday price action and Order Flow indicators on a test of 1.5285 or 1.5550

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

  • While 121.50 contains upside reaction a retest of the spike lows a 116 remains in play. Only a close back above 122 would ease the bearish pressure
  • Daily Order Flow bearish; OBV sideways to up, Linear Regression and Psychology bullish
  • Monitoring intraday price action and Order Flow indicators on a test of 116 or 122

uj2015-08-28 07_37_51-

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 as 137 caps upside reactions expect retest of pivotal 134/33.
  • Daily Order Flow bearish; OBV sideways to up, Linear Regression and Psychology bearish but attempting to retest midpoints from below
  • Monitoring intraday price action and Order Flow indicators at 141 and 133

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