London Forex Report: Event Risks Eyed

London Forex Report: Event Risks Eyed

London Forex Report: North Korea warned on Sunday that the upcoming US-South Korea military exercises are “reckless behaviour driving the situation into the uncontrollable phase of a nuclear war.” It said the military exercises will be “adding fuel to the fire” due to the heightened tensions and declared that its army can target the US anytime.The market risk is that of further destabilisation of the Trump administration, further lessening Congress’s willingness to cooperate with the broad agenda including lowered prospects for tax reform. This may be an ongoing near-term market risk that dominates others. The Federal Reserve’s annual Jackson Hole symposium may nevertheless become a more dominant global and domestic source of near-term risk.

USD President of the Dallas Fed Robert Kaplan has stated that there needs to be more signs that inflationary pressure will climb to the Fed’s 2% target in the medium term before he supports another rate hike. In his speech last Friday, Kaplan expressed concerns about recent weak inflation gauges and remarked that Fed members “have to be very patient and judicious in the next moves” on interest rate. Kaplan later clarified that he would like to “see evidence, or belief” that inflation target will be met in the medium term instead of near term. On the data front, University of Michigan’s gauge on US consumer confidence rose to 97.3 in Aug preliminary print, climbing from 93.4 in Jul and suggest that sentiment has improved. The reading was the highest in 7 months.

EUR Eurozone output from the construction sector contracted on a monthly basis, but picked up annually. Output fell 0.5% MoM in Jun, deepening from a 0.2% decline but rose 3.4% YoY in Jun, up from 2.7%.

GBP Rightmove survey indicate that house prices in the UK rose 3.1% YoY in Aug, picking up from 2.8% in July. On a monthly basis, however, prices fell 0.9% compared to the soft 0.1% gain previously, a sign that price momentum is slowing.

JPY The broader tone remains crucial in the aftermath of last week’s White House drama and the subsequent market reaction to terrorism in Spain. Markets appear tentative and JPY remains vulnerable with extended net short speculative positioning. Narrow spreads are delivering fundamental support and risk reversals are suggestive of renewed demand for protection against JPY strength.

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

Technical: 1-3 Day View – Bullish consolidation continues tests of bids just below 1.17 attract buyers, as this level contains downside reactions bulls look for a retest of cycle highs en route to 1.20, intraday upside hurdle sited at 1.1850, only a daily close below 1.1620 concerns the near term bullish bias setting a top for a test of 1.1440.

1-3 Week View – 1.1876 achieved focus shifts to 1.20 . Weekly close below 1.14 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 – Expect a retest of 1.28, near term resistance is sited at 1.2950, only a close over 1.3030 reestablishes near term bullish tone

1-3 Week View – The weekly close above 1.3045 targets the broader symmetry swing objective sited at 1.3263 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): Bearish – Medium Term (1-3 Weeks): Bearish

Technical: 1-3 Day View – 108.93 downside objective achieved anticipated profit taking pull back on the initial test of this level playing out, near term resistance sited 109.50, a daily close over 111.65 neutralises downside pressure, near term support sited at 108.73

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): Neutral – Medium Term (1-3 Weeks): Bullish

Technical: 1-3 Day View – Support at 128.00 under pressure again the failure to recapture 1.30 on a closing basis sets up a retest of 126.90 and failure here sets a top for retest of 125.80. A daily close over 128.80 stabilises the pair and resets attention on upside objectives over 1.30

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: Neutral
Trading Take-away: Neutral