London Forex Report: BoE Warn On Brexit Risks

London Forex Report: BoE Warn On Brexit Risks

London Forex Report: April import prices fell 5.7% y/y compared to a 10.5% drop a year earlier. The drag on import prices from USD strength and energy price weakness continues to fade. Initial claims climbed 20k to 294k in the week ended 7 May, their highest levels since end-February 2015. There were no special factors behind the rise. The FOMC’s Mester said inflation has moved higher and he is cautious about taking inflation expectations from market measures. USD climbed against amid extended risk-off in the FX space and equities. The USD Index recovered from a tumble in US morning to close 0.35% higher at 94.15.

FX Majors: EUR Industrial production in the Eurozone fell 0.8% MOM in March, steeper than the 1.20% MOM pace in Feb. The rebound in output of energy related industries was offset by extended declines in other categories. Production of durable consumer goods, capital goods and intermediate goods dropped from Feb to March, underscoring the sluggish recovery in the 19 bloc economy as demand stayed subdued. GBP BOE took center stage. While there were no surprises on rate and QE decisions, the BOE warned the increasing downside risks associated with the EU referendum, citing that a vote to leave “could materially alter the outlook for output and inflation, and therefore an appropriate setting of monetary policy”. “Sterling is likely to depreciate further, perhaps sharply” which could lead to lower growth projection and notably higher path for inflation set out in the May inflation report. BOE is cautioning on softer growth outlook that could tilt policy bias from that of a hike to a cut should there be a vote to exit. JPY lost ground against the USD yesterday amid speculation that BoJ could expand its monetary stimulus as soon as next month.

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

Technical: A failure at 1.1350 failure opens a return to retest 1.1240 support. While 1.1350 survives as support expect a test of 1.1487 en route to a retest of 1.1616 highs
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: The failure at 1.4470 opens a deeper correction to 1.4280 next. Downside momentum loss suggest a base attempt to test resistance is now sited at 1.4590/1.46 before lower. Below 1.4369 suggests an early reversal.
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: 105.50 weekly swing objective achieved, 107.50 resistance now becomes support as the corrective move aims to retest 110 from below
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Bears now target weekly symmetry objective at 120.60. Intraday resistance at 124.65 only a close above 126.80 eases immediate downside pressure.
Retail Sentiment: Neutral
Trading Take-away: Neutral

Commodities FX: GOLD struggled to hold the gains achieved yesterday. A World Gold Council report showed that investor interest remains strong, with Q1 2016 demand jumping to its second highest level on record, driven by holdings in ETFs. OIL was one of the few commodities to end the day higher due a fall in US oil production. AUD was pressured by the cooler Australian consumer inflation expectations along with falls in gold and iron ore which slid to a two month low. CAD strengthened to a one-week high against the USD, though some gains were pared as oil pulled back from its highest levels.

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

Technical: The failure at.7300 threatens medium term bullish bias, below .7240 establishes a bearish medium term stance
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Technical: 1.30 upside objective achieved expected correction to retest 1.2740/60 from above as this level should now act as support for further upside corrective action.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Gold has tested and held the 1260 symmetry swing level, 1283 is now resistance for a further leg of corrective price action to set up a test of the pivotal 1240. Over 1285 suggests early upside reversal targeting a retest of 1303 next.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: Oil breaches prior cycle highs at 46.76 with 47.78 the next upside objective. Intraday support is sited at 45.60 only a close below 43.00 threatens bullish bias
Retail Sentiment: Bearish
Trading Take-away: Long

Posted in Forex Analysis, London Forex Report, tagged with on