London Forex Report: Yellen Keeps Markets Guessing

London Forex Report: Yellen Keeps Markets Guessing

London Forex Report: All eyes and ears were on Fed Chair Yellen’s speech overnight in the absence of major economic releases. Fed Chair Yellen did not shed any more light on the timing of the Fed rate hike, highly anticipated by markets especially after last Friday’s disastrous non farm job data. Although Yellen reiterated that a Fed rate hike is on the cards and remained fairly confident on US growth prospects, she stopped short of commenting on the timing, vis-à-vis earlier reference to “in the coming months”. USD closed mildly higher, rebounding after last Friday’s sharp decline. The USD Index opened higher dipped going into US session and closed 0.13% lower at 93.90 as rate hike outlook dims.

FX Majors: EUR Euro zone’s investors’ confidence climbed to the highest level this year in June amid brighter outlook in the next few months. While immigration crisis and Brexit continued to bog down on the single currency nation, investors’ sentiments gauge showed that their assessment of business activities and conditions after this month’s EU referendum turned more upbeat. GBP Polls published on Monday, ahead of the referendum, gave the “Leave” campaign a lead. According to the YouGov poll, the “Leave” campaign heads the “Stay” campaign 4 points. The one-month implied volatility stood at 22 percent, its highest since December 2008, showing the markets are very nervous. JPY traded its intraday low after Federal Reserve Chair Janet Yellen suggested that the rates hike are likely on the way, but few hints on when. Markets believe that worse-than-expected US job data last week erased the prospect of a June or July Federal Reserve rate hike and this could force the Bank of Japan to consider further easing sooner than it had intended.

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

Technical: As 1.1290 symmetry supports expect a break of last weeks highs targeting 1.14 as the next upside objective ahead of stronger symmetry swing resistance sited at 1.140. Below 1.12 suggests false upside break and resets attention on 1.1065
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: Volatility pervades GBP trading, avoid positioning mid pre Brexit referendum range of 1.4770/1.4330, play the edges with tight stops
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Anticipated trend resistance at 111.30 attracts sellers with downside ratchet now targeting a retest of 1.5.55 lows with the potential for a daily double bottom pattern to develop. Failure at 1.05 opens 103 as the next downside objective. 108.50 is the near term pivotal resistance
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Bears came within 20pips of the much anticipated 120.60 level before witnessing a sharp intraday reversal . While 122.60 contains upside reactions expect a grind lower to breach last weeks lows enroute to a weekly equality objective at 117.36. A close over 122.70 suggests a broader recovery targeting 124.30 as the next upside objective.
Retail Sentiment: Neutral
Trading Take-away: Neutral

Commodities FX: GOLD price extended its gains even after Yellen’s speech instilled confidence that the US economy will continue to improve to warrant further rate increases. The gold price rose higher by US$4.50 to US$1240.10 on Monday Oil prices jumped higher on Monday (6 Jun) after the news about Nigerian oil facing potentially lengthy disruptions. The US Nymex WTI futures increased by US$1.07 to US$49.69. AUD Australia’s performance of construction index slipped to 46.7 in May after a brief climb to 50.8, signaling April’s expansion was short lived. While selling prices rose, new projects were slow to come by, underscoring sluggishness in domestic demand. RBA remained on hold over night keeping a bid under the Aussie near term CAD strengthened to a three-week high against the USD as oil prices rose, while expectations for a US interest rate hike this month remained low after the speech by Federal Reserve Chair Yellen. The Bank of Canada said it expect damage from the wildfires in Alberta to shave 1.25 percentage points off economic growth in the second quarter.

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

Technical: While .7300/.7280 contain downside reactions AUD has a window to recover and test symmetry and structure resistance sited at .7480/.7500 where fresh selling is expected to emerge. Failure at .7210 suggest early reversal with bears targeting .7140 lows and stops below.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1.2760 base support under threat, a close below here eases bullish pressure and suggests a grind back to test bids at 1.2459 and stops below.
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Bids ahead of 1190 proved sufficient to see a sharp reversal from sub 1200 to test offers ahead of 1250. While this level stems the upside expect a rotation back towards 1225, over 1250 opens pivotal 1280 resistance. Failure at 1190 opens 1140/50 symmetry targets
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: As 46.70 continues to support expect a test of the larger AB=CD swing objective at 51.07, only a close below 43.00 threatens bullish bias.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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