London Forex Report: Profit Taking Ahead of Yellen

London Forex Report: Profit Taking Ahead of Yellen

London Forex Report: Focus firmly on Fed Chair Yellen today markets anticipate her addresses to to echo June’s FOMC rhetoric: improving growth outlook, imminent balance sheet reduction as well as downplaying recent softness in inflation. In addition, email revelation by Trump Junior somewhat spooked markets, reviving geopolitical concerns.

USD Fed Williams expressed his support for one more rate hike this year and for the Fed to begin tapering its balance sheet in the next few months but Fed Brainard differed with regards to the case for one more rate hike unless inflation picks up even though she concurred that balance sheet reduction should begin soon. US small business optimism retreated more than expected to 103.6 in June, a seven month low, as small businesses timed hiring plans amid dampened optimism over economic growth outlook. A separate release also showed job openings disappointed, coming in at a 3- month low of 5.67m in May, but this was somewhat cushioned by a higher hiring rate of 3.7% (Apr: 3.5%).

EUR Spreads are stable and Eurozone stocks have perhaps lost a little of the lustre that helped support the EUR in the immediate aftermath of the French presidential election. Italian industrial production data showed output rising a stronger than expected 2.8% in the May year, however, and Eurozone data trends have generally held up better than US numbers (in terms of outcomes versus expectations) over the past few weeks, supporting the fundamental improvement in the EUR.

GBP Given BoE Deputy Governor Broadbent didn’t feel the need to say anything regarding rates, seems unlikely he has a strong disagreement with the consensus on the committee that now is not the time for hike. At the margin this plays into the view that BoE won’t hike rates. But obviously need to watch the data this month very carefully, starting with today’s employment report.

JPY Japan machine tool orders picked up to increase at a faster pace of 31.1% YoY in June, extending its 4th straight month of double-digit gains given continuous hefty increases in overseas orders (+51.5%) as domestic orders showed more moderate gains (+7.8%), a sign business spending is still forthcoming.

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

Technical: 1-3 Day View – 1.1430 resistance removed as 1.1400/20 supports bulls target 1.1530 as the next upside objective, a daily close below 1.1330 concerns the near term bullish bias and open 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): Bearish

Technical: 1-3 Day View – 1.3048 is the next upside objective, ahead of the pivotal 1.3238, the immediate upside hurdle sited at 1.2925 rejected the advance, a daily closing breach of 1.2810 concerns the near term bullish bias.

1-3 Week View – The weekly failure to close above 1.3045 ahead of the broader symmetry swing objective sited at 1.3238 suggest underlying weakness persists 1.2450 becomes pivotal for the medium term perspective
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – Upside objective 114.35 achieved, potential for profit taking pullback to test near term support toward 113.40 as this contains corrections bulls target 115.50 next, only below 112.10 would concern the immediate bullish bias.

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 Day View – Bullish expansion targets at 129.45 achieved as 129.30 contains corrections bulls target 133.36 as the next upside objective, only below 126.80 concerns near term bullish bias.

1-3 Week View – The weekly close above 118.50 arrested the immediate downside risk, resetting focus on pivotal 124.40 the weekly breach of this level opens 129.44 as the broader upside objective.
Retail Sentiment: Bearish
Trading Take-away: Long

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