Morning Report: ‘Yuan’tervention Continues To Spark Volatility

Market Commentary  

The surprise Yuan devaluation has continued to change the market dynamics with mixed impact on the G10 space. EURUSD continues its 1 week upside trend hitting a high of 1.1089 overnight. In Asia, EURUSD trades bid upon the China fixing release due to continuing demand on the crosses. Key event today is Fed’s Dudley speech and market will be watching for hints of September rate hike as well as his view on PBOC’s recent move on Fed policy.

USDJPY grinds higher as well, in spite of the selloff in equities and US yields, and price action should remain encouraging for those holding bullish views. Anticipate the grind higher to continue in this 125 handle, where momentum should increase through 126, a level Japanese retail players will start to take notice.

GBPUSD  gained 1.9 percent since the Yuan devaluation, as the move  should boost demand for British exports to China in the long run. Short Sterling interest rate futures rallied, especially across 2016 contracts and further out, showing that markets expect the Bank of England to raise interest rates slowly. A fair bit of data coming out today as we have Job numbers on the slate while CPI and PPI is due next Tuesday. Data points while important will need to be a lot more impressive than recent reports to move the needle on rate expectations.

Technical  Commentary 

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

  • While 1.10/1.0980 supports intraday downside reactions expect retest and break of 1.1130 a close above here threatens another attempt at 1.12 below 1.0950 open retest of 1.08.
  • Daily Order Flow bullish; OBV sideways to up, Linear Regression and Psychology bullish
  • Monitoring intraday price and Order Flow indicators on a test of 1.11 or 1.08

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

  • While 1.55/15480 support intraday downside reactions expect retest and break of 1.56 en route for another assault of 1.57 offers, below 1.5460 open retest of bids towards pivotal 1.54 failure opens 1.5285
  • Daily Order Flow bearish; OBV sideways to up, Linear Regression and Psychology bearish but lack downside momentum
  • 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 and 128 in extension, intraday downside supported moves to 124 only a failure at pivotal 122.50 concerns medium term bullish view
  • Daily Order Flow bullish; OBV sideways, Linear Regression supported at midpoint, Psychology pierces midpoint from above
  • Monitoring intraday price action and Order Flow indicators on a test of 125.85 or 123

uj2015-08-12 07_37_25-

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

  • While 137.40 caps intraday downside reactions bulls now target a retest of 138.80 ahead of the initial symmetry objective at 141.70
  • Daily Order Flow bullish; OBV sideways, Linear Regression and Psychology bullish
  • Monitoring intraday price action and Order Flow indicators at 138.80 and 137.40

ey2015-08-12 07_40_08-

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