London Forex Report: USDJPY Prints Six Week Highs

London Forex Report: USDJPY Prints Six Week Highs

London Forex Report: Softer US macro releases, and to a lesser extent persistent geopolitical risks, continued to weigh on traders sentiments. Expect markets to stay cautious ahead of upcoming FOMC policy announcement this evening. While the Fed is widely expected to stay pat, markets will scrutinise Fed comments for hints of a June rate hike and further guidance on balance sheet reduction. Markets are currently pricing in over a 70% chance of a hike in June, so any comments that further the notion that the Fed remains on track for two or possibly three interest rate hikes this year could support the dollar. Oil prices sharply extended losses just before Tuesday’s settlement, with US crude breaking below $48/bbl for the first time in more than a month. Gold also declined to a new three-week low, bringing losses this week to more than one percent, as demand for riskier assets drove stocks and US treasury yields higher and the USD hit a six-week hight against the JPY.

USD US auto sales rebounded to 16.83m from 16.53m in March. This was a weaker than expected outcome and left sales still well below that seen in February (17.47m) and down 3.7%YoY

EUR final Markit manufacturing PMI for April was revised down 0.1pp from the flash reading to 56.7. This still left the index up 0.5pts for the month and at a six-year high. Meanwhile, Germany finished with a 0.1pt decline for the month but still led the euro area at 58.2. The Eurozone unemployment rate of 9.5% for March was unchanged from February’s figure and compared with consensus expectations of a further small decline to 9.4% for the month. There was still a significant decline from the 10.2% rate in March 2016 and the latest reading equalled the lowest rate for close to eight years.

GBP UK’s Markit PMI manufacturing index strengthened to 57.3 for April from 54.3 the previous month and compared with an expected reading of 54.0. The index has been above the 50.0 level for nine months in a row and the latest reading was the strongest for three years.

JPY has also succumbed to some selling pressure as traders tentatively abandoned the relative safety of yen assets in favour of higher yielding investments. JPY stands to benefit from any increase in trader risk aversion associated with geopolitical uncertainty. Japan’s Golden Week holidays staring tomorrow and running for the rest of the week, could keep activity in the JPY somewhat subdued

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

Technical: 1-3 Day View – As 1.0850 supports expect a grind higher to test 1.0982 as the next upside objective. Only below 1.0820 concerns near term bullish bias.

1-3 Week View – While 1.10 contains corrective attempts higher focus remains on a retest of 1.03 ahead of 1.0118 extension objective form 2015/17 consolidation. Only over 1.14 sets upside focus on 1.1876
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – As 1.2860 supports bulls will focus on a test of psychological 1.30 magnet , only below 1.2750 concerns near term bullish bias.

1-3 Week View – The weekly closing breach of 1.2880 opens 1.30 as the next upside objective ahead of symmetry swing objective sited at 1.3238
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – As 1.1080 supports potential to retest 113 descending trend line resistance pivot, only back below 110 would concern the near term 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): Bearish

Technical: 1-3 Day View – Near term support sited at 120.35 as price prepares to test pivotal trend line resistance at 122.35 a close over this level opens 124.40.

1-3 Week View – The weekly close below symmetry swing support sited at 117.69 sets a bearish tone with 113.70 the medium term downside objective , a weekly close above 118.50 would arrest the immediate downside risk, resetting focus on pivotal 124.40.
Retail Sentiment: Bearish
Trading Take-away: Long

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