New York Forex Report: Buck Takes A Breather But Still Buoyant

New York Forex Report: Buck Takes A Breather But Still Buoyant

New York Forex Report: Major currencies are trading marginally firmer against the USD into the end of the week. The AUD and NZD are out-performing on the session while the JPY is broadly weaker after the BoJ left policy settings unchanged. The USD is poised to close out the week somewhat stronger overall at the moment but it is not obvious that the stronger USD tone is sustainable as markets remain to be persuaded that the Fed will deliver on a third rate increase this year while breakeven rates are falling, suggesting that weak inflation trends are expected to persist. US political risks remain high and will hamper the Trump team’s efforts to push through growth supportive measures. Commodities are closing the week mostly off lows but longer run trends here look soft, which supports the “lowflation” outlook (and reflects the firmer USD undertone to some extent). It all looks and feels a bit consolidative for the major currencies today; US releases include, housing starts, building permits, the Labour Market Conditions index and University of Michigan sentiment.

USD The slew of US data suggest that recovery in the manufacturing sector was patchy although a strong labor market continue to pave way for more sustainable growth in the broad economy. Empire manufacturing index rebounded strongly to 19.8 in June, the highest since September 2014, after an unusually weak -1.0 reading in May. On the contrary, Philadelphia fed business outlook slipped to 27.6 in June (May: 38.8) but affirmed healthy level of factories expansion. The NAHB housing market index was also softer (June: 67 vs May: 69) but hovered around a ten-year high as demand in the housing market was buoyed by a solid labor market and low mortgage rates.

EUR Euro zone’s trade surplus dropped to euro 19.6 billion in April (March: revised to euro 22.2 billion) due to the 2.10% decline in exports which outpaced the 0.70% MoM drop in imports. Eurozone finance ministers are also gathering in Luxembourg to discuss debt relief for Greece.

GBP BOE maintained bank rate at 0.25% and asset purchase target at £435 billion on Thursday. Policy makers Ian McCafferty and Michael Saunders joined Kristin Forbes in voting for a rate hike at yesterday’s meeting, citing stronger than anticipated inflationary pressure. CPI rose to a four-year high of 2.90% YoY in May amid a weak Sterling, increasing speculation that a rate hike might happen sooner rather than later despite downside risks on Brexit negotiation on GDP growth. Reflecting a decline in spending appetite amid political risks and Brexit negotiation, retail sales slumped 1.20% MoM in May followed a 2.50% MoM increase in April.

JPY BOJ keeps policy unchanged, revising up views based on consumption, as expected maintains short-term interest rate target unchanged at -0.1% the Central Bank believe consumption shows “increasing resilience” in the domestic economy, leaving their economic assessment unchanged the bank note a positive view on global growth

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

Technical: 1-3 Day View – Breach of 1.12 from above reaffirms range trade delaying attempts at equidistant swing objective of 1.1291 en-route to a test of broader symmetry swing objective at 114.30. As 1.12 caps upside the near term downside objective is sited at 1.1125 symmetry swing support.

1-3 Week View – While 1.0830 supports 114.30 becomes the primary upside objective. A weekly close over 1.1450 sets upside focus on 1.1876. Weekly close below 1.08 neutralises bullish objectives
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – Retest of 1.2639 post election low survives and the subsequent short squeeze is testing pivotal resistance at 1.2785 ahead of symmetry swing resistance sited at 1.2842, price action appears corrective for now, leaving 1.2639 vulnerable to another test.

1-3 Week View – The weekly failure to close above 1.3045 ahead of the broader symmetry swing objective sited at 1.3238 suggest underlying weakness persists 1.2450 becomes pivotal for the medium term perspective
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – Over 110.50 opens the first test of 111 symmetry swing resistance a daily closing breach of this level would reset focus on upside objectives principally 113.78.

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: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – Bullish consolidation targets 129.44 as the medium term upside objective, near term upside objective of 126.84 equidistant swing objective, only below 122 concerns near term bullish bias, opening a move to test 121.36.

1-3 Week View – The weekly close above 118.50 arrested the immediate downside risk, resetting focus on pivotal 124.40 a weekly breach of this level opens 129.44 as the broader upside objective
Retail Sentiment: Bearish
Trading Take-away: Long

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