London Forex Report: FED Sidelined USD Slumps

London Forex Report: FED Sidelined USD Slumps

London Forex Report: The Fed as expected left rates unchanged at 0.25-0.50% at yesterday meeting in an unanimous vote, amid Brexit risks and mixed economic picture at home. While data showed growth is picking up, the labour market slowed. “In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realised and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation”. Growth forecast for the year has been downwardly revised to 2.0% (previous: 2.2%) and its outlook for 2017 from 2.1% to 2.0%. Inflation forecast for this year has been revised slightly higher to 1.4% from 1.2% but projection for next year remains unchanged at 1.9%. The Fed has obviously turned less hawkish and Fed Chair Janet Yellen gave no indication of the timing of the next hike and added that Brexit would have “consequences for economic and financial conditions in global financial markets” USD fell against 8 G10s as the Fed kept interest rate unchanged. The USD Index that was trending lower prior to the Fed decision tumbled as Fed officials turn less hawkish on the scope of interest rate rise, closing 0.33% lower at 94.61

FX Majors: EUR “Personally, I believe that without upheavals in the world economy we can reach a slightly higher level of inflation in 2018 than the ECB’s June forecast of 1.6%” , ECB Vice President Vitor Constancio says in text of speech in Utrecht, Nertherlands. He also commented “the full implementation of our policy package adopted last March is still going to produce effects in the forthcoming months and will contribute to achieve our mandate of delivering inflation below but close to 2%, over the medium-term”. GBP UK unemployment rate dropped 0.1ppt to 5.0% in the three months through April, the lowest in more than a decade as the number of jobs added rose by 55k to a record of 31.6 million. In sync, jobless claims continued to slide in May (-0.4k vs April: +6.4k) while claimant count was unchanged at 2.2%. Separately in the Euro zone, trade surplus rose to a record high of € 28.0 billion in April (March: revised to € 23.7billion) due to quicker MOM increase in exports (+4.9%) vs imports (+2.6%). JPY BOJ on hold across the board. JPY surges 200pips. BOJ seemed to have missed a trick today. They appear to be putting/drawing a line in the sand and putting pressure back on PM Abe to deliver. But surely their confidence in that is paper thin. Therefore, they should respond. They are after all there to do the best for the economy. Telling everyone the economy is recovering and inflation will rise is no more than optimistic guess work. BOJ must of course know what the impact on the JPY would be. However, caution on talk of intervention, as that is the responsibility of MOF.

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

Technical: Bids just below 1.12 keeps EUR supported only a sustained break of 1.12 resets attention on 1.1065, range resistance sited at 1.1310
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Pre Brexit referendum range of 1.4770/1.4330 expands to the downside, only a daily close above 1.4350 suggest false downside break. As 1.4330 contains upside reactions expect test of 1.40 next, over 1.4350 suggest return to range
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Downside ratchet breaks 105.55 lows the failure at 105 opens 103 as the next downside objective. 105.50 becomes the near term pivotal resistance
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Weekly equality objective at 117.36 achieved. 118.50 becomes near term resistance only over 120.50 eases bearish pressure
Retail Sentiment: Neutral
Trading Take-away: Neutral

Commodities FX: GOLD surges as FOMC remain sidelined with global risk sited as a primary challenge safe bids send Gold to new highs for the year. Oil fell for the sixth consecutive session following a lower than expected draw on US stockpiles. AUD weighted by falling commodity prices and the concerns of Britain pulling out the European Union. Australia’s May jobs data was rather muted, adding 17.9k, these come from the part times sector, revisions showed April’s employment up 0.8k versus 10.8k. CAD Loonie was weakened on Wednesday weighted by falling oil prices and other commodity prices.

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

Technical: 7450 rejects upside reactions expect rotation to test .7230 support next.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1.2910 is the upside objective achieved as 1.28 supports a break of 1.30 places focus on 1.3150 as the next upside objective.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1331 is the next upside objective while 1285 now acts as near term support.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: Only a close below 46 threatens medium term bullish bias, as 47.40 supports expect deep retest of prior 51.60 highs, potential double top.
Retail Sentiment: Bearish
Trading Take-away: Long

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