Midday Forex Report: Global Growth Concerns Fuel Dollar Drive

Market Commentary

Main focus today is on the US PCE data at 12.30GMT1 expected unchanged from the previous print at 1.2%. This data is a key indicator used by the Fed to gauge inflation and so caution is advised heading into the release. We also have two Fed members speaking today, Evans & Williams which will draw plenty of attention following a recent raft of Hawkish comments from Fed members.

USD broadly stronger over the European session supported by safe haven flows and markets optimism over upside potential across this key data week

EUR remains supported by risk-off flows with European equity markets lower as global growth concerns once again make headlines with Chinese industrials reporting their biggest fall in profits since 2011.

GBP strengthened initially at the London open but gains were quickly reversed in the face of USD strength in line with the broad GBP sell-off we saw last week. Global growth concerns continue to weigh on investor expectations for a GBP rate cut with the latest Chinese data adding pressure.

JPY strengthened across the European session supported by safe-haven flows driven by global growth concern fears.

Options:Expiries for today’s NY cut 1000ET
EURUSD: $1.0985/00(E2.5bn), $1.1080(E600mn), $1.1200(E1.21bn), $1.1225-35((E615mn), $1.1270(E441mn)
USDJPY: Y119.00($1.25bn), Y120.00($710mn)
EURJPY: Y135.50(E443mn)
Technical Commentary

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

Buyers and profit takers emerge ahead of the 1.11 handle as suggested. While 1.1150 caps intraday upside look for a test of stops below the figure and ultimately a test of pivotal support at 1.1050

Daily Order Flow bearish; OBV sideways to down, Linear Regression pierces midpoint from below, Psychology bearish but lacking downside momentum attempting to recapture midpoints from below

Monitoring intraday price and Order Flow indicators on a test of 1.1050 or 1.13

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

1.52 bids give way as we now explore stops below the figure. Without a headline risk reversal Cable looks set to test key 1.5150 support failure here opens psychological 1.50 support next

Daily Order Flow bearish; OBV down , Linear Regression and Psychology bearish

Monitoring intraday price action and Order Flow indicators on a test of 1.5150 or 1.5350

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

Bids towards 119 hold strong and a sharp 150 pip bounce refocuses attention on 121.50 range resistance. A close above 121.50 today cements bullish sentiment and target 122.50 next.

Daily Order Flow bullish; OBV sideways to up, Linear Regression and Psychology rotating around midpoints, Psychology pierces midpoint from below

Monitoring intraday price action and Order Flow indicators on a test of 119 or 122

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

135 offers contained the upside reaction suggesting a rotation back to 132 through interim support at 134. A close above 135 opens a retest of offers at 137 next.

Daily Order Flow bearish; OBV sideways to up, Linear Regression and Psychology pierce midpoints from below

Monitoring intraday price action and Order Flow indicators at 135 or 132

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