Morning Forex Report: ECB Jaw boning Expected To Cap Euro

Market Commentary  

The USD was lower yesterday with funding currencies well bid after U.S equities posted just shy of three percent losses. The popular theme of “sell stocks buy euro” re emerged but on a smaller scale compared to last week. The ECB meeting tomorrow capped an enthusiastic Euro as traders are wary of the potential for official verbal intervention. Currencies continue to trade in tandem to risk sentiment which did not really offer a great deal, as PMI and ISM releases were generally a shade disappointing as well. The US data slate is much slimmer today, though it does feature the ADP private payroll numbers as a curtain raiser before NFP on Friday. Factory orders for July may also shed further light into the manufacturing sector. The Fed will release its Beige Book but there are likely no monetary policy implications.

EURUSD edged higher to 1.1331 on risk aversion as concerns about China deepened on poor data. Markit Eurozone manufacturing PMI was revised down to 53.3 in the August final reading where the consensus forecast has no revision. Eurozone unemployment rate is encouraging, the data dropped to 10.9% in July against 11.1% expected

GBPUSD  traded heavily and hit a fresh low of 1.5297 on poor UK manufacturing data, added to arguments for another prolonged hold of UK interest rates. Markit UK manufacturing PMI dropped to 51.5 in August, slightly weaker than expected, the manufacturing average costs declined at its steepest rate in the past 16 years and the selling prices were almost stagnant

USDJPY dropped the most in more than a week on Tuesday as Chinese equity markets extended their slump, boosting demand for haven assets. The US non-farm payrolls data due Friday is the key focus, the release may set the tone for potential Fed interest rate hikes this year ahead of the critical September 17th FOMC meeting

Technical  Commentary 

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

  • While 1.1250 supports intraday expect a test of 1.1350, while this area caps the upside bears target at retest of Friday’s low. A breach of 1.1350 opens a run to 1.1440/60. Expect ranging price action ahead of headline risk event Thursday/Friday.
  • Daily Order Flow bearish; OBV sideways to down, Linear Regression pierces midpoint from below, Psychology attempting midpoint test from below
  • Monitoring intraday price and Order Flow indicators on a test of 1.12 or 1.1450

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

  • While 1.55 caps upside reaction expect a stops below 1.53 to be exposed, bears now target a corrective symmetry objective of 1.5210
  • Daily Order Flow bearish; OBV down, Linear Regression and Psychology bearish
  • Monitoring intraday price action and Order Flow indicators on a test of 1.52 or 1.55

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

  • While 121.50 contains upside reaction a retest of 119 is the primary downside objective. Buyers emerge at 119 as 121 caps retracements bears now target a retest of last weeks spike lows towards 116
  • Daily Order Flow bearish; OBV sideways to up, Linear Regression pierces midpoint from above, Psychology rolling over to test midpoint from above
  • Monitoring intraday price action and Order Flow indicators on a test of 119 or 122

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

  • The breach of ascending trendline support at 136 opens a retest of pivotal 134/33 range support a failure here would open 2015 lows.
  • Daily Order Flow bearish; OBV sideways to up, Linear Regression and Psychology rotate around midpoints
  • Monitoring intraday price action and Order Flow indicators at 141 and 133

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