London Forex Report: Markets Await Mario

London Forex Report: Markets Await Mario

London Forex Report: Markets were in risk-on mode despite uncertainty ahead of ECB policy meeting today where rhetoric on policy tightening will be closely scrutinised. Dataflow was decent with the US and Japanese indicators turning in a little rosier. US housing starts and building permits rebounded more than expected by 8.3% and 7.4% MOM respectively in June, somewhat alleviating concerns on recent softness in the housing market.

USD Macro releases from the US came in more optimistic, with both housing starts and building permits climbed more than expected for the month of June, by 8.3% and 7.4% MoM respectively, somewhat alleviating concerns on recent softness in the housing market. Renewed optimism for the US economy may warrant a stronger case for the Fed to continue with its rate normalisation cycle.

EUR In the Eurozone, construction output moderated to increase 2.6% YOY in May versus a prior print of 3.3%. All eyes on ECB policy meeting today, with a close watch on the rhetoric for further hints on signs of tapering measures.

GBP is quiet, consolidating around Tuesday’s close following the completion of a bearish outside reversal. Domestic developments have been limited, with an ongoing focus on fading rate hike expectations in the aftermath of Tuesday’s CPI. All eyes are on today’s retail sales, given BoE MPC members’ focus on the outlook for consumption in the post-Brexit environment.

JPY The Bank of Japan (BoJ) ended its two day monetary policy meeting today with the accompanying updated report on its Outlook for Economic Activity and Prices (The Bank’s View). These are challenging times for the BoJ, as the central bank continued to boost its JGB bonds purchases as it sought to cap recent yield increases so as to maintain its yield curve control. That said, market generally expected the BoJ to keep status quo in July and the BoJ delivered, keeping monetary policy steady, maintaining -0.1% rate and the JGB yield target.

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

Technical: 1-3 Day View – As 1.1490/70 supports near term the next upside objective is the pivotal 1.1591 equidistant swing objective ahead of 1.1616, 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: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – 1.3048 achieved as 1.3030/00 supports on a near term basis bulls target pivotal 1.3238, only 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: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – Failure below 129.30 concerns bullish bias and delays the target 133.36, only below 126.80 negates the medium term bullish bias. Bulls will look to 128 to terminate the correction.

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