London Forex Report: Merkel Win Marred

London Forex Report: Merkel Win Marred

London Forex Report: The weekend brought no real surprises, albeit inconclusive election outcomes as the German Chancellor Merkel won a fourth term but saw six parties entering the Bundestag for the first time since 1953 (with projections for CDU/CSU 32.5%, SPD 20%, AfD 13.5%, FDP 10.5% and Greens 9.5%), and this weighed on the EUR. Meanwhile, New Zealand PM English’s ruling National Party also fell short of a majority at 46% versus 35.8% for the Labour Party, which leaves New Zealand First leader Winston Peters as a kingsmaker amid negotiations to form a government that may drag on for weeks if not months

NORTH AMERICA Kansas City Fed President Esther George stated that muted market reaction meant that the Fed had done well in communicating its plan for balance sheet reduction. San Francisco Fed President John Williams expects rate hikes to be gradual, and stated that there could be “another rate increase this year and three next year”, assuming that the US economy and inflation remains on an upward path. Meanwhile, Dallas Fed President Robert Kaplan sounded more cautious, pointing out that FOMC members continue to discuss if tighter job market would push inflation higher, but remains “open-minded on one more rate increase” this year.

EUROPE PMIs were mixed from the US but improved in the Eurozone, while the UK saw a dip in factory orders. Sept estimates revealed that manufacturing sector in the US picked up pace, but services sector grew slightly slower. As for the Eurozone, both sectors were estimated to have grown at quicker paces. In the UK, CBI’s survey on total orders at factories yielded softer figures. UK PM Theresa May in her much anticipated speech in Florence on Friday called for a Brexit transition period of around 2 years. She affirmed that UK will honour budget commitments during period of EU membership. Moody’s downgraded UK rating to Aa2 from Aa1, matching those of S&P and Fitch. Outlook is revised to ‘Stable’ from ‘Negative.

ASIA Japan’s manufacturing sector also grew at a quicker pace in Sept, according to early estimates. The PMI inched higher to four month high of 52.6 from 52.2 in Aug, lifted by improved output and new orders. Reuters reports comments from BoJ Kuroda stating there is still some distance to achieving price target will continue with powerful monetary easing to achieve price target at earliest date possible

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

Technical: 1-3 Day View – Bullish consolidation appears to be playing out current range resistance is sited at 1.2030 with range support at 1.1830 a break of the former opens a move to 1.2230 only below 1.18 concerns the bullish bias

1-3 Week View – 1.2130 the next upside objective. Weekly close below 1.16 neutralises bullish objectives opening a test of 1.14
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – 1.3660 achieved and profit taking pull back underway as 1.3450 supports 1.38 become the next upside objective, a breach of 1.3440 opens a corrective move to test 1.3250 before higher on below 1.31 concerns the bullish bias opening 1.2910.

1-3 Week View – 1.3263 achieved as this acts as support 1.3836 is the next upside objective only a close back below 1.2770 would jeopardise the bullish advance.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – Close over 111 stabilises the pair near term support is sited at 110.70 as this area attracts bids 113 becomes the next upside objective, below 109 opens retest of 108.30

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: Bearish
Trading Take-away: Long

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

Technical: 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

1-3 Day View – 133.60 achieved , as 133 supports anticipate a test of 136.10 only below 131 concerns the bullish bias opening a move back to 129 base
Retail Sentiment: Bearish
Trading Take-away: Long

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