The Central Bank shell game continues with Fed Chair Yellen speaking after the U.S close, stating that the Federal Reserve will raise rates before the end of the year. Yellen said that most FOMC participants expect market conditions to require a rise in federal funds rate “followed by a gradual pace of tightening” though she did not rule out “surprises” in the economy that could change the course of monetary policy. Post Yellen comments risk sentiment remained cautious overnight with flows favouring safe havens again.
EURUSD traded a high of 1.1296 amid the slump in risk sentiment (equities were broadly lower yesterday), before reversing its move to trade below 1.12 -handle following Fed Chair Yellen ’s speech (which came after US markets closed when markets were less liquid).
With the UK inflation remaining subdued and the Fed keeping rates on hold for now, markets push BOE rate hike bets into the second half of 2016.GBP continued to lose ground against the USD in response to the expected delay in BOE rate hikes. The main focus today will be on U.S. Final GDP data. If data surprises the market to the upside, expect further downside in Cable .
After slipping to an overnight low of 119.23 and then bouncing higher thereafter in the run -up to Fed Chair Yellen’s speech. The pair bounced even higher after the speech, climbing to a high of 120.38 following Yellen’s speech which lifted the dollar higher. It also did not help that the government’s outlook for the economy in August was more downbeat than in July. Helping to keep the pair elevated as well is the increased likelihood of a BOJ move in Oct given that inflation continues to come in way below the BOJ’s target of 2%. These data points reinforce the view that the BOJ is likely to ease monetary policy further by the end of October.
EURUSD Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bearish
Sharp reversal from 1.13 test and as suggested we have rotated back to test bids towards 1.11 support a breach of the 1.11 level opens a pivotal test of 1.1050 support.
Daily Order Flow bearish; OBV sideways to down, Linear Regression pierces midpoint from below, Psychology bearish but lacking downside momentum attempting to recapture midpoints from below
Monitoring intraday price and Order Flow indicators on a test of 1.1050 or 1.13
GBPUSD Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bearish
Pressuring bids at 1.52 while 1.5250 acts as intraday resistance expect a move back to test bids towards September lows in the 1.5150’s
Daily Order Flow bearish; OBV down to sideways, Linear Regression and Psychology rejected from initial midpoint test from below
Monitoring intraday price action and Order Flow indicators on a test of 1.5150 or 1.5350
USDJPY Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bullish
Bids towards 119 hold strong and a sharp 150 pip bounce refocuses attention on 121.50 range resistance.
Daily Order Flow bullish; OBV sideways to up, Linear Regression and Psychology rotating around midpoints, Psychology pierces midpoint from below
Monitoring intraday price action and Order Flow indicators on a test of 119 or 122
EURJPY Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bearish
Retesting 135 offers, while these contain the upside reaction expect a rotation back to 132. A close above 135 opens a retest of offers at 137 next
Daily Order Flow bearish; OBV sideways to down, Linear Regression pierces midpoint from below, Psychology bearish but lack downside momentum
Monitoring intraday price action and Order Flow indicators at 135 or 132