Morning Report: USD Holding Onto Gains, Gold Slides Again

Market Commentary  

Commodities were sold off again over night with a focus on the slide in gold prices before its rebound spot had tanked to a low of 1096.50 before recovering above the 1104-mark as we write. Lower commodity prices benefit US equities. The NASDAQ made a fresh high as earning season shifts into high gear. That said, net gains for the session were small with DJI and S&P up 0.1% each. Dollar retained its gains on Monday with USDJPY above the 124-figure. GBP slid as rate hike expectations adjust.

EURUSD traded a relatively quiet range of 1.0809 – 1.0870 overnight. Little news/dataflow overnight except that Greece made payment on about EUR6.8bn due to ECB and IMF; Greek banks re-opened to provide limited banking services. Focus on EUR is now back on monetary policy divergence – ECB still undergoing unconventional monetary policy (QE, negative deposit rate) while Fed and most recently BoE started talking about tightening.

GBPUSD eased overnight amid mild USD strength. US-UK 2y bond yield spread continues to widen in favour of US, and that could weigh on the GBP near term. While BoE’s Carney did say that rate hike decision could come into “sharper relief at the turn of the year”, the BoE is unlikely to hike sooner than the Fed. Furthermore Carney noted that rate normalisation has traditionally been more modest in the UK than in US; and highlighted that current account deficit remains large and the right policy mix could be for monetary policy to remain accommodative amid tighter fiscal policy.

USDJPY appears to be in consolidation mode around the 124-handle as Japanese markets re-opened after a public holiday yesterday,helped by firmer dollar. The pair continues to hold an upward trajectory post BoJ’s minutes, according to minutes of June 18-19 meeting, many BoJ members see Japan inflation trend continuing to improve. Momentum in Japan’s recovery would slow temporarily in 2Q due to sluggish exports, inventory adjustments, according to some members.

Technical  Commentary 

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

  • While 1.0915 caps intraday upside expect a test of pivotal trendline support at 1.0760/40, failure here opens 2015 lows, downside pressure only reduced on a break above 1.1050.
  • Daily Order Flow bearish; OBV down, Linear Regression and Psychology bearish
  • Monitoring intraday price and Order Flow indicators on a test of 1.13 or 1.0760/80

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

  • While 1.57 caps upside a break back below 1.5550 suggests bearish symmetry target at 1.5285 remains in play a close above 1.57 negates near term bearishness and resets focus on the 1.60 upside psych objective.
  • Daily Order Flow bullish; OBV sideways, Linear Regression and Psychology pierce midpoints from below
  • 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): Bullish  – Medium Term (1-3 Weeks) Bullish

  • Bulls target 125.85 next and 128 in extension, expect intraday downside reactions to be supported at 123.50 a failure at 122.50 again opens 120 in retest of ascending triangle trend line.
  • Daily Order Flow bullish; OBV sideways to up, Linear Regression and Psychology bullish but lack momentum,  Linear Regression retesting midpoints from above.
  • Monitoring intraday price action and Order Flow indicators on a test of 128 or 120

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

  • Range trade persists, 133/34 range support a breach of 133 opens retest of 2015 lows while above 138 range resistance, opens 143
  • Daily Order Flow bearish; OBV sideways to up, Linear Regression and Psychology bearish but attempting midpoint test from below
  • Monitoring intraday price action and Order Flow indicators at 138 and 133

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