Morning Report: USD Bid On Better Data

Market Commentary  

USD caught a bid as Fed Gov Powell talks higher rates, sees two hikes this year; FX reaction exceeds debt market interpretation of the same headlines as FX markets remain very sensitive to headline driven price action in the current environment; US Durable Goods misses, Street drops Q2 GDP call on smaller inventories. Asset markets extend higher; stocks up, spreads tighter; currency correlates inversely with equities; Athens up 6% as optimism builds for a debt deal.

EURUSD sold off over 200 pips and hit 1.1134 low amid the positive news from yesterday’s Eurozone meetings. The ECB has raised the ELA for the fourth time in a week for the Greek banks, taking the total to EUR89 bln. The Eurozone Composite PMI came in surprise, rose to 54.1 in June from the previous 53.6, the highest level since May 2011.

GBPUSD fell sharply to 1.5700 level on the upbeat of US new home sales which bolstered the rate hike expectations of Fed. BoE policy maker Martin Weale said that since Britain’s labour market is “fizzing away nicely” and wages are growing faster than expected, believed the central bank should be ready to raise rates soon.

USDJPY retreated to below 124 handle after reaching the high of 124.19 overnight. The BoJ minutes indicated that many board members said easing is exerting intended effects; BoJ is committed to the intended 2% inflation target and expects it to be reached around the first half of the year in 2016 and will keep easing until the target is achieved and becomes stable; and will adjust the policy if necessary.

Technical  Commentary 

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

  • 1.1150 survives on firs test as 1.1260 stems upside reactions, expect a test of  pivotal 1.1050 a failure here would reverse the current bullish structure and really give bears the ball. Above 1.1260 expect retest of 1.1330/40
  • Daily Order Flow bearish; OBV down to sideways, Linear Regression and Psychology bearish
  • Monitoring intraday price and Order Flow indicators on a test of 1.16 or 1.1050/1.1150

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

  • 1.57 survives on first test but as 1.5830/50 caps upside reactions expect test of primary trendline support at 1.5550, above 1.5850 opens retest of highs and 1.60 beyond, below 1.5550 opens 1.5350 next
  • Daily Order Flow bearish; OBV sideways to up , Linear Regression and Psychology bullish but starting to roll over
  • Monitoring intraday price action and Order Flow indicators on a test of 1.57 or 1.6010

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

  • 122 pivotal support while 122.50 contains downside expect test of 125, failure at 122.50 opens pivotal 122 and the 121 corrective equality target below, while 125 caps upside expect test of 122, above 125 targets 127/128 next
  • Daily Order Flow bullish ; OBV sideways to down, Linear Regression and Psychology rotate around midpoints
  • Monitoring intraday price action and Order Flow indicators on a test of 128 or 122/21

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

  • While 141.75 area caps the advance look for a retest of 137 as potential base for next leg higher for symmetry swing objective at 143.60’s. Failure at 137 opens a retest of 134/133
  • Daily Order Flow bullish; OBV sideways to up, Linear Regression and Psychology pierce midpoints from above but lack momentum
  • Monitoring intraday price action and Order Flow indicators at 141.75 or 137/36

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