New York Forex Report: Cable Clobbered on CPI Miss

New York Forex Report: Cable Clobbered on CPI Miss

New York Forex Report: The USD traded another leg lower in response to the Republican failure to get the Healthcare Bill to the debate stage. Interestingly, we have not seen the associated moves in rates that might be expected to accompany such an aggressive sell off in the USD – 2y and 10y Treasury yields remain at mid-range levels at 1.36% and 2.30% respectively. Last night’s RBA minutes were interpreted as relatively ‘hawkish’. The reference to a neutral rate of 3.50% drew the market into extrapolating that policy makers may be ready to engage in tightening. However, the overnight rally in AUD does seem a little disproportionate given that the implied probability of a rate hike by the end of this year has only increased from 12% to 25%. Elsewhere, NZ Q2 CPI fell by more than expected, to 1.7%. UK CPI missed expectations 2.6% versus an expected 2.9%, likely prompting a walk back from recent Bank of England (BoE) speakers although inflation remains above the 2% target, GBP has witnessed a sharp reversal testing bids back towrds 1.30 after trading above 1.3120 prior to the print.

USD the Republican mission to repeal and replace the Affordable Care Act has failed again “Regrettably, it is now apparent that the effort to repeal and immediately replace the failure of Obamacare will not be successful,” McConnell said in a statement published on Twitter. Overnight the Dollar plumbed new ten month lows as Trumps Tax agenda also hangs in the balance now. The only US data overnight continued recent downsides as manufacturing sector in the NY Fed district grew slower in Jul. The index tumbled to 9.8 from 19.8, surpassing an expected drop to just 15.0.

EUR Inflationary pressures in the Eurozone eased to 1.3% YOY in Jun in the final print, dipping from 1.4% in May. The softest increase this year was within expectations. On the other hand, core inflation rose 1.1%, up from 0.9% in May, suggesting that price upticks continues to extend after ignoring impact of energy, food and alcohol.

GBP In the UK, there will be plenty of interest in today’s June inflation reports, especially given the impact the data has on expectations surrounding the BoE. Some members on the Monetary Policy Committee are more concerned over the inflation outlook and will push for higher interest rates at the August meeting. Other members are still uneasy surrounding demand trends and expect inflation gains to be temporary. Any increase in the headline inflation rate to above 3.0% would increase pressure for the BoE to raise interest rates. If inflation is flat expect a faster GBP retracement from last week’s late rally, markets doubt 0.2% is going to usher in the necessary change of stance at the MPC to produce tighter policy at the next meeting in August. The latest producer prices data will be released at the same time and will give insight into forthcoming pressures.

JPY Local markets are closed for holiday and domestic risk is limited ahead of Thursday’s BoJ policy decision. Interest rate differentials have narrowed in a JPYsupportive manner in the period since July 7th, the date of the BoJ’s last fixed rate operation. Market participants are likely to remain focused on BoJ policymakers’ efforts at yield curve control and will eye the central bank’s inflation outlook amid rumours of a markdown in the BoJ’s official forecast

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

Technical: 1-3 Day View – 1.1530 achieved as 1.1490/70 supports intraday the next upside objective is the pivotal 1.1591 equidistant swing objective, a daily close below 1.1330 concerns the near term bullish bias and open a test of 1.1280/60

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): Neutral – Medium Term (1-3 Weeks): Bullish

Technical: 1-3 Day View – 1.3048 achieved as 1.3030 supports on an intraday basis bulls target pivotal 1.3238, only a daily closing breach of 1.2810 concerns the near term bullish bias.

1-3 Week View – The weekly close above 1.3045 targets the broader symmetry swing objective sited at 1.3238 only a close back below 1.28 would jeopardise the bullish advance
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – Upside objective 114.35 achieved, profit taking pull back extends and threatens broader correction on a breach of 112.10 delaying the bullish target at 115.50 and opening a move back towards 109.

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: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – Failure below 129.30 concerns bullish bias and delays the target 133.36, only below 126.80 negates the medium term bullish bias. Bulls will look to 128 to terminate the correction.

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

Posted in Forex Analysis, New York Forex Report, tagged with on