London Forex Report: Global Central Banks On Hold

London Forex Report: Global Central Banks On Hold

London Forex Report: Markets cheered as the Fed and BOJ kept monetary policy accommodative to support growth. RBNZ also paused and maintained a dovish bias, adding to signs major central banks remain committed to doing all they can to keep the economy going. In the US, a divided Fed held its benchmark Fed Funds rate unchanged as expected following a 7:3 vote. Policy makers however continued to signal that a rate hike remains on the table this year if the labour market continues to improve. The statement cited that the case for an increase in the Fed funds rate has strengthened and that the outlook on risk assessment was upgraded to “roughly balanced”, paving the way for a December hike. Nonetheless, the overall tightening path is more gradual. The latest Fed “dot plot” projection suggests policy makers expect only one rate hike by the end of the year and the pace of hikes in subsequent years was further scaled back. USD weakened against all G10FX over the Fed’s inaction on policy and perhaps even signalled increased doubts over future commitments to normalise policy as Fed officials scaled back on rate hike expectations for 2017. The USD Index that headed lower going into FOMC announcement fell further post-decision, closing 0.37% lower at 95.66

FX Majors: EUR greenback plummeted across the board after FOMC’s decision while the EUR/USD pair scored an intraday high of 1.1196 before retreating modestly ahead of the press conference given by Yellen. EUR traders attention turns to a speech by Mario Draghi scheduled for 1300GMT. GBP The UK fiscal deficit was declining more slowly than the government forecast as pressure built on the public finances following the decision to leave the European Union. The budget shortfall stood at 33.8 billion pounds in the first five months of the 2016-17 fiscal year, down 13 percent from a year earlier, the office for National Statistics said on Wednesday. JPY BOJ left its policy rate and annual rise in monetary base unchanged at -0.10% and ¥80t respectively. However, recognising the need to continuously combat deflation and revive growth, BOJ tweaked its policy to allow some fluctuations in the ¥80t increase of its monetary base in its bids to influence the yield curve by keeping 10-year bond yields at the current level of around 0%. Yesterday’s data out of Japan pointed to continued weaknesses on both consumption and investment fronts. Machine tool orders extended its decline for the 13th straight month although August decline was the smallest in a year. Nationwide departmental store sales also extended its 6th straight monthly fall amid broad-based declines across all main categories.

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

Technical: 1.1120 supports on the retest, near term resistance is sited at 1.13 removing this hurdle opens 1.1366. A break of 1.1120 support opens equidistant swing support at 1.1085.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: As 1.3150 rejects corrective advances bears target 1.2870 as the next downside objective. Only a close over 1.3130 eases bearish pressure
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Near term resistance is sited at 102.80 once again stalls the upside advance prompting a sharp intraday reversal. As 101.20 caps corrections bears target a retest of 99.50 lows
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Failure below 113 opens move back to 112 as the next downside objective, near term resistance is sited at 113.80 as this level survives on a closing basis bears target 110.80 next.
Retail Sentiment: Bullish
Trading Take-away: Short

Commodities FX: GOLD rallied 1.5% to end at an almost 2-week high of $1,335.17 an ounce after the Fed rate decision. Oil settled $1.29, or 2.39% higher, at $45.34 a barrel on Wednesday, with prices supported by a larger than expected drop in U.S crude inventories, falling by 6.2 million barrels (vs a 3.4 million expected) for the week ended 16-Sept. AUD hit one-week highs after the Bank of Japan (BoJ) overhauled its massive stimulus programme and the dollar index hit five-day low after Fed left rates unchanged. The Reserve Bank of Australia governor Philip Lowe gave an upbeat assessment of the economy in his first public appearance this morning and expected inflation to remain weak for some time, while the easing in monetary policy supporting jobs and economic activity .CAD strengthened to a one-week high against the US dollar as oil rose and the Federal Reserve held off from raising interest rates.

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

Technical: Near term resistance is sited at .7560/80 removed, breach has produced anticipated test of .7660 just ahead of symmetry swing resistance sited at .7685.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: As 1.3030 supports 1.3372 is the equidistant AB=CD corrective objective, only below 1.2960 threatens near term bullish bias.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1301 AB=CD equidistant swing support has provided anticipated base. Near term resistance now at 1357, near term support is sited at 1323
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Equidistant swing resistance sited at 47.36 as this level rejected the corrective advance 41.81 becomes the downside objective, near term resistance is sited 47.00 over 47.50 targets retest of 48.90 potential double top
Retail Sentiment: Bullish
Trading Take-away: Short

Posted in Forex Analysis, London Forex Report, tagged with on