New York Forex Report: Buck Bid, German Data Underwhelms

New York Forex Report: Buck Bid, German Data Underwhelms

New York Forex Report: The USD is strengthening into Tuesday’s New York open, rising broadly vs. all of the G10 FX. There does not appear to be any major catalyst with USD gains picking up in early Asian trading and accelerating from the European open. The relative performance of the G10 currencies is not suggestive of any clear risk on/off move, however particpants note signs of renewed fragmentation in European bond markets with Italian 10Y yields up over 9bpts on the day. The U.S. 10Y yield is up a modest 2bpts, U.S. equity futures are up slightly, and global equity indices are showing gains across Asia and Europe. Commodities are mixed with copper hitting fresh multi-year highs as oil prices consolidate Monday’s decline. Iron ore has surged to a fresh five month high. Tuesday’s U.S. release schedule is relatively limited, with no Fedspeak and only the Richmond Fed manufacturing index. EUR is weak, down 0.5% vs. the USD and underperforming all of the G10 currencies with the exception of GBP, weakening into and through the release of softer ZEW expectations data for both the euro area and Germany.

USD fell against all G10 FX yesterday amid continued downsides on Trump’s administrative woes, softer US data as well as lack of buying interest ahead of Jackson Hole. The Dollar Index tumbled through European session but declines halted in US afternoon, closing 0.36% lower at 93.09. The Chicago Fed’s national activity index retreated more than expected into negative territory in July, registering a -0.01 print from 0.16 in June. This means that overall growth of national economic activity was just below the historical average rate.

EUR all eyes are on this week’s pair of speeches from ECB President Draghi on Wednesday and Friday. Draghi’s Jackson Hole speech (Friday) had been highly anticipated however expectations have moderated on the back of rumours suggesting no major shift in tone. The 10Y Germany-U.S. spread is steady around the mid-point of its range from mid-July and risk reversals are neutral. CFTC positioning remains bullish EUR with gross longs near record highs. The net long is close to a multi-year high. This week’s major releases are limited, with ZEW figures today and flash PMI’s on Wednesday.

GBP U.K published ‘position paper’ on goods and services on Monday. The intention is to ensure goods placed on market before Brexit can continue to be sold in UK and EU. It also seeks to avoid unnecessary duplication of compliance activities for businesses post-Brexit.

JPY activity across all industries grew at a slightly softer pace in June, while spending at departmental stores contracted in July. The all industry index rose 2.2% YoY in June compared to 3.2% in May, though the overall trend remains upward bound in the last 6 months. There were moderation across sub-sectors, with industrial production, tertiary industry and construction all recording softer gains. A monthly basis, the all industry activity rose 0.4% MoM after contracting 0.8% in May

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

Technical: 1-3 Day View – Bullish consolidation continues tests of bids just below 1.17 attract buyers, as this level contains downside reactions bulls look for a retest of cycle highs en route to 1.20, near term upside hurdle sited at 1.1850, only a daily close below 1.1620 concerns the near term bullish bias setting a top for a test of 1.1440.

1-3 Week View – 1.1876 achieved focus shifts to 1.20 . Weekly close below 1.14 neutralises bullish objectives.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – Expect a retest of 1.28, near term resistance is sited at 1.2950, only a close over 1.3030 reestablishes near term bullish tone

1-3 Week View – The weekly close above 1.3045 targets the broader symmetry swing objective sited at 1.3263 only a close back below 1.28 would jeopardise the bullish advance.
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: 1-3 Day View – Near term resistance sited 109.50 over this hurdle opens a move to test 110.60 ahead of pivotal 111.65 a close over here neutralises downside pressure, near term support sited at 108.73

1-3 Week View – As 108.40 equidistant swing support survives on a weekly closing basis bulls will look for a grind higher to retest 115, a close below 108 negates the broader bullish theme and opens the psychological 100 magnet
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: 1-3 Day View – Support at 128.00 under pressure again the failure to recapture 1.30 on a closing basis sets up a retest of 126.90 and failure here sets a top for retest of 125.80. The daily close over 128.80 stabilises the pair and resets attention on upside objectives over 1.30

1-3 Week View – The weekly close above 118.50 arrested the immediate downside risk, 129.44 upside objective achieves as 128 supports bulls look for a move to test 133.36 as the broader upside objective.
Retail Sentiment: Bearish
Trading Take-away: Long