New York Forex Report: Columbus Day Calm

New York Forex Report: Columbus Day Calm

New York Forex Report: After an initial surge post US employment data on Friday, the USD and yields reversed their gains to finish the day back near their lows. While one-day reversals are to be taken with a ‘pinch of salt’, we have reached USD levels which should provide at least more two-way action in the USD. One market where this hasn’t been the case is the Turkish Lira which plummeted overnight, as relations with the US deteriorated. We have very little on the calendar today, with parts of the US markets offline celebrating Columbus Day likely a quite afternoon ahead. The fifth round of Brexit talks starts this week, with fading hopes that there will be “sufficient progress” in separation issues in time for the EU leaders’ meeting later this month. As such, the next stage of negotiations on the future relationship seems unlikely to start until December at the earliest. UK political uncertainties have raised concerns about the outcome of complex and time-limited Brexit negotiations. Political risks remain elevated in Spain, with events potentially coming to a head today. The Catalan Parliament may convene to evaluate the independence vote, despite the special session being suspended by the Spanish courts. Political analysts believe PM Rajoy will have to use constitutional powers to suspend the region’s autonomy if it declares independence. Meanwhile, economic pressure has risen, with some large companies considering moving their headquarters to other parts of Spain.

NORTH AMERICA Fed speaks were mixed; key officials sounded less upbeat on inflation and more cautious on communicating a Dec hike. Summarising the key points; New York Fed President Dudley said that “it is still appropriate to continue to remove monetary policy accommodation gradually” even as inflation is below the Fed’s target. Dallas Fed President Kaplan was more cautious, stating that he was “open minded about Dec (hike)” though not fully committed to one. St. Louis Fed President Bullard went further to suggest that Dec meeting will be “too early to “make a determination on whether inflation is coming back”, adding that he was concerned that the Fed “might make a policy mistake” in its “zeal to normalise” policy.

EUROPE This week, expect central bank/official rhetoric to potentially guide the markets all thorough the week. ECB-speakers kick off today with Lautenschlaeger and includes Praet on Wednesday and Draghi on Thursday. UK house prices bested estimates with a 0.8% MoM increase in Sept though overall remains a slowdown from 1.5% gain in August, affirming recent data that showed cooling in the hot UK property sector.

ASIA The leading index of Japan climbed to 106.8 in August preliminary release, up from 105.2, indicating an improving outlook going forward amid quicker growth in a collection of indicators that include new job offers, new machinery orders and consumer confidence. Meanwhile, the coincident index also climbed in August early print, rising to 117.6 from 115.7 in July, adding to signs of pick-up in growth amid firmer industrial production, large industrial power consumption, retail sales value, and operating profits across industries, amongst others.

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

Technical: 1-3 Day View – Range support 1.1830/60 now becomes resistance the break below 1.18 concerns the bullish bias and opens the way for a test of pivotal 1.1660, near term upside hurdle sited at 1.1794

1-3 Week View – 1.2130 the next upside objective. Weekly close below 1.16 neutralises bullish objectives opening a test of 1.14
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – Price now testing trend support at 1.3060 , near term resistance is sited at 1.3160 the break below 1.31 concerns the broader bullish bias opening the potential for a test of 1.2910.

1-3 Week View – 1.3263 achieved as this acts as support 1.3836 is the next upside objective only a close back below 1.2770 would jeopardise the bullish advance.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – Near term support is sited at 112.30 as this area attracts bids expect a test of offers over 113.50 the next upside objective expect profit taking on the first test, only below 109 concerns near term bullish bias.

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

Technical: 1-3 Day View – Breach of 133 supports delays a test of 136.10 as 133 now acts as resistance, expect a retest of 1.32/1.3150 support zone only below 131 concerns the bullish bias opening a move back to 129 base.

1-3 Week View – 136.10 is the principle upside objective as this area caps the current advance expect a retest of 131.50 to set a base for the next leg higher, only a closing breach of 127 concerns the bullish basis.
Retail Sentiment: Bearish
Trading Take-away: Long

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