London Forex Report: Draghi Drives EUR To Two Year Highs

London Forex Report: Draghi Drives EUR To Two Year Highs

London Forex Report: Global financial markets ended mixed after ECB President signalled tapering discussion could begin in autumn. EUR was the biggest gainer among the majors in the FX space, advancing 1.01% to 1.1631 at close, after hitting an intraday high of 1.1658. The Dollar Index plunged to 94.30 as a result, diving further driven by US Prosecutor Muller’s expansion of his investigation to include business associates and transaction prior to the Presidency of Donald Trump further heightening political risk in the US.

USD US data continued to come in on a more upbeat note, save for the pullback in Philly Fed business outlook to an eight month low dragged by lower new orders, shipment, and employment. Initial jobless claims fell more than expected by 15k to 233k in the week ended July15 reaffirming steady recovery in the labour market. Forward looking leading index picked up to increase 0.6% MoM in June, its best in five months adding to signs of quicker growth in the US economy in 2Q

EUR ECB left its main refinancing rate and all other benchmark interest rates unchanged as expected. There was also no change to its monthly asset purchase target of €60bn as policy makers were cautious over subdued price pressure. While there was no discussion on tapering, ECB President Draghi did imply that discussion could begin in autumn, hence putting September in the radar when ECB could begin outlining some tapering plans before actually implementing it well into next year, in our view. Despite improving growth prospects in the region recently, consumer confidence has indeed taken a slight beating, sliding to -1.7 in July but remaining near its best level since the global financial crisis.

GBP The UK reported stronger than expected retail sales date for last month, rising 0.9% against expectations of a 0.5% advance. The numbers represented something of a rebound after the weak May report (-1.5%), however, and were driven by summer clothing sales. Deutsche Bank’s CEO said the bank is preparing for a “hard Brexit” and will move the “vast majority” of assets and some jobs to Frankfurt

JPY In a 7-2 vote (unchanged from the previous MPC meeting), BOJ kept its policy rate unchanged at -0.1% as expected and maintained its bond yield target unchanged at near zero percent amid moderate growth prospects that would still require the support of an accommodative monetary policy. In addition, BOJ has trimmed its inflation forecasts for the next two years to 1.1% and 1.5% respectively (prior: 1.4% and 1.7%). On the data front, all industry activity index reversed course and fell 0.9% MOM in May while convenience store sales also took a turn and contracted 0.1% YOY in June, adding to softness in domestic activities.

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

Technical: 1-3 Day View – 1.1591 equidistant swing objective and 1.1616 achieved, as 1.1580 acts as support bulls target 1.1713 only a daily close below 1.1370 concerns the near term bullish bias setting a top for a test of 1.1280/60

1-3 Week View – While 1.0830 supports 114.30 becomes the primary upside objective. A weekly close over 1.1450 sets upside focus on 1.1876. Weekly close below 1.08 neutralises bullish objectives.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – As 1.3030 former support now acts as resistance 1.2810 becomes the downside objective over 1.3050 resets focus on pivotal 1.3238, a daily closing breach of 1.2810 concerns the near term bullish bias.

1-3 Week View – The weekly close above 1.3045 targets the broader symmetry swing objective sited at 1.3238 only a close back below 1.28 would jeopardise the bullish advance
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – Upside objective 114.35 achieved, profit taking pull back extends and threatens broader correction on a breach of 112.10 delaying the bullish target at 115.50 and opening a move back towards 109, 113 is the immediate upside hurdle.

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: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – 128 provides platform for further push higher near term as 129.60/80 supports expect a move through 130.70/80 en-route to 133.36, below 129.40 resets 130/128 range trade

1-3 Week View – The weekly close above 118.50 arrested the immediate downside risk, 129.44 upside objective achieves as 128 supports bulls look for a move to test 133.36 as the broader upside objective.
Retail Sentiment: Bearish
Trading Take-away: Long

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