London Forex Report: Brexit Weighed By Central Banks

London Forex Report: Brexit Weighed By Central Banks

London Forex Report: Markets continued to stay in risk-off mode amid looming event risks in the US and the UK. Major equities globally all ended in the red amid flight to safety. Dataflow was limited to just China data which did not offer any surprises, either on the upside or downside. Industrial production sustained a 6.0% YoY growth in May, signaling stabilization in the economy as the governments proceeds with its supply side structural reforms. Retail sales edged 0.1 ppt lower to 10.0% YOY in May and fixed asset investment from Jan-May was notably lower at 9.6% YoY (Jan-April: +10.5% YOY). Slowdown in investment was evidently due to gloomier economic prospect ahead, strengthening the case for the government’s shift from capital intensive and exports-based to a consumption-led economy which may be more sustainable in the long term although an abrupt slowdown driven by the shift still lay grounds for concerns. USD fell as risk aversion resumed with the FOMC heading into policy meeting. The USD Index that trended lower plunged just before US mid-day to close 0.22% lower at 94.36.

FX Majors: EUR bounced off one-week lows yesterday, as the greenback sentiment remained weak ahead of a highly-anticipated interest rate decision from the Federal Reserve, when the US central bank is widely expected to leave short-term rates unchanged. Other steps are needed to take advantage of current monetary policy in order to promote investments in euro area, ECB Governing Council member Carlos Costa said at panel discussion in Sopot, Poland . GBP volatile run up to Britain’s referendum is intensifying as anxiety about 23 June vote on staying or leaving the European Union continued to build. The currency swung between losses of 1% and gains of 0.5%, before resuming declines after an ICM poll for the Guardian showed a six-point lead for the ‘Leave’ campaign. Sterling has dropped about 4% this year, the worst performance among Group-of-10 currencies, as traders assess the risks of an exit. JPY The stronger yen is adding to headaches for BoJ, however, markets believe the central bank would prefer to keep the interest rate on hold this week as a possible British vote to leave the European Union is the biggest near-term concern for the BoJ policymakers.

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

Technical: Sharp Rejection by symmetry swing resistance sited at 1.140 Below 1.12 suggests false upside break and resets attention on 1.1065, interim resistance sited at 1.1310
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Pre Brexit referendum range of 1.4770/1.4330 expands to the downside, only a daily close above 1.4350 suggest false downside break. As 1.4330 contains upside reactions expect test of 1.40 next, over 1.4350 suggest return to range.
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Technical: Downside ratchet now targeting a retest of 105.55 lows with the potential for a daily double bottom pattern to develop. Failure at 105 opens 103 as the next downside objective. 108.50 is the near term pivotal resistance
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Technical: While 121.60 contains upside reactions expect a grind lower to breach last weeks lows enroute to a weekly equality objective at 117.36. A close over 122.70 suggests a broader recovery targeting 124.30 as the next upside objective
Retail Sentiment: Neutral
Trading Take-away: Neutral

Commodities FX: GOLD rose for the fourth straight session and hit its highest level since mid-May on Monday, driven by rising risk aversion before central bank meetings this week and the UK’s 23 June vote on whether to leave the EU. Oil fell a fourth day over mounting Brexit risks and renewed concerns of supply glut. According to data from Baker Hughes, shale drillers added 12 oil rigs in the US in the last two weeks which was the first consecutive weekly gains since August AUD held steady on Monday as traders avoided taking major positions amid Brexit fears and ahead of several key central bank meetings this week. CAD uncertainty over this week’s FOMC meeting has pressured oil although the Fed is widely expected to leave rates unchanged.The Canadian dollar surged to 1.2838 at early Asian session on Tuesday as oil prices were picked-up a little bit.

AUDUSD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish

Technical: Rejected by resistance sited at .7480/.7500 where fresh selling emerged as expected. As .7450 rejects upside reactions expect rotation to test .7230 support next.
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Fridays close 1 pip below 1.2760 suggested a potential false break of support, which was confirmed as anticipated by yesterdays close. While 1.2655 supports 1.2910 is the next upside objective.
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Pivotal 1280 resistance proves sticky while 1295 contains the current upside advance expect rotation back to 1260.. Failure at 1230 opens 1190 again.
Retail Sentiment: Bearish
Trading Take-away: Long

USOIL
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish

Technical: Anticipated AB=CD swing objective at 51.07 achieved and prompts sharp reversal, only a close below 46 threatens medium term bullish bias, as 47.40 supports expect deep retest of prior 51.60 highs, potential double top.
Retail Sentiment: Bearish
Trading Take-away: Long

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