London Forex Report: Dollar Dives on Russia Probe

London Forex Report: Dollar Dives on Russia Probe

London Forex Report: The latest episode of US political upheaval continued to intensify, rattling market confidence and heightening concerns that this will have negative implications on the “much-hoped-for” Trump trade and tax reforms policies. Political jitters and fading optimism on talks of impeachment of President Trump prompted massive selloffs in risk assets and flight to safety globally. The Dow and S&P 500 fell nearly 2% while 10-year UST yields fell 10bps to 2.22%. The Dollar Index plunged to 97.57, erasing all gains since the Trump victory.

USD US MBA mortgage applications took a turn and fell 4.10% WoW in the week ended 12-May, dragged by declines in applications for both new purchases and refinancing, adding to signs of lacklustre appetite in the housing market. The risk-off sentiment also hurt the prospects of US Fed rate hikes. Market rate hike expectations for a June Fed hike eased lower to 82.5% on 17 May (from 97.5 in the previous day) based on CME fed funds probability pricing.

EUR Eurozone’s consumer prices picked up to 1.90% YoY in April (March: +1.50% YoY), as quicker rise in energy and services offset smaller increases in food, alcohol and tobacco. A separate release showed construction output expanded at a slower pace of 3.60% YoY in March and February’s gain was revised sharply lower from 7.10% to 5.50%, as a result of slower growth in building and civil engineering. There will be several senior ECB officials speaking in public forums today including Weidmann, Mersch, Lautenschlaeger and Nowotny while the ECB will also release the account of the latest May ECB monetary policy meeting.

GBP UK job data came in positive although lower real wage growth as a result of rising inflation raised concerns UK consumers are in worse shape. Jobless claims increased at a lower rate of 19.4k in April while the UK labour market added more than expected jobs of 122k in March. Unemployment rate improved a notch to a 4-decade low of 4.60% while average weekly wages grew at a slightly faster pace of 2.40% YoY in the three months to March led by faster wage gains from the private sector.

JPY The Japanese economy quickened to 0.50% QoQ in 1Q17, driven by more robust demand stemming from both the private and public sector, suggesting no urgency for the central bank to act. Other reports were nonetheless weak. Industrial production extended its decline, slipping 1.90% MoM in March while machine orders unexpectedly fell 0.70% MoM in March followed a 5.60% MoM increase in February, pointing to weak business spending.

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

Technical: 1-3 Day View – Offers above Interim symmetry swing resistance at 1.1130 stall advance near term as 1.1040 supports bulls seek a test of broader symmetry swing objective at 114.30. Only below 1.0830 concerns near term bullish bias.

1-3 Week View – While 1.0830 supports 114.30 becomes the primary upside objective. A weekly close over 1.14 sets upside focus on 1.1876. Weekly close below 1.08 neutralises bullish objectives
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – Psychological 1.30 magnet remains the upside objective for now with weekly symmetry swing objective at 1.3060 , only below 1.2750 concerns near term bullish bias.

1-3 Week View – The weekly closing breach of 1.2880 opens 1.30 as the next upside objective ahead of symmetry swing objective sited at 1.3238
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – 115 becomes the next upside objective only back below 110.80 would concern the near term bullish bias, near term 112 is the upside hurdle that must be removed to rejuvenate bullish spirits.

1-3 Week View – As 108.40 equidistant swing support survives on a weekly closing basis bulls will look for a grind higher to retest 115, a close below 108 negates the broader bullish theme and opens the psychological 100 magnet
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: 1-3 Day View – Close over 124.40 opens 129.44, near term support is sited at 123.30, only below 121.30 concerns near term bullish bias. Intraday bulls need to recapture 124.60 to infuse further upside momentum near term

1-3 Week View – The weekly close above 118.50 arrested the immediate downside risk, resetting focus on pivotal 124.40 a weekly breach of this level opens 129.44 as the broader upside objective
Retail Sentiment: Neutral
Trading Take-away: Neutral

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