New York Forex Report: CPI Data To Decide Dollar Direction

New York Forex Report: CPI Data To Decide Dollar Direction

New York Forex Report: The USD is under modest pressure with the DXY hovering just above Thursday’s fresh multi-month low. U.S. releases are front and centre as market participants look to CPI, retail sales, industrial production, and the University of Michigan consumer sentiment index, and consider their implications for Fed policy into yearend. The CPI data will be crucial, given that a range of policymakers have expressed concern about the recent softening of inflation. AUD is leading the G10 into Friday’s US open, and GBP is leading the G4. EUR is rising moderately, while CAD is flat. The broader tone is one of risk appetite with notable gains in equity indices across Asia and Europe. Developed country bond yields are steady. In terms of commodities, note the rise in WTI pushing to a fresh one week high. Gold is rising moderately. Fedspeak is limited to voting hawk Kaplan, the last scheduled speaker ahead of the blackout period into the July 26 policy decision.

USD The June PPI (final demand) increased at a pace on 0.1%MoM, 2.0%YoY from (0%MoM, 2.4%YoY in May) slightly above the forecast of 0.0%MoM, 1.9%YoY. The US monthly budget statement for June showed a bigger than expected deficit of –US$90bn (from a small US$6bn surplus in May), well above the forecast for a US$38bn deficit. Bloomberg’s overall measure of consumer comfort dropped to 47 (from 48.5 in the previous week), the lowest reading since January (2017) suggesting a sudden downturn in American households’ optimism about the economy and less-favourable views of personal finances. Despite slightly firmer UST yields, USD weakness (higher than expected initial claims at +247k and mixed June PPI readings) continued to linger on Thursday with no new cues from Yellen (although she did reiterate her belief that soft inflation would prove transitory – too little too late) as she appeared before the Senate Banking Committee

EUR Wall Street Journal reported that ECB President Mario Draghi is to attend and address Jackson Hole conference in August (the first time in 3 years) and that the ECB is likely to signal at its 7 Sep meeting that QE will be gradually wound down in 2018. Note that Draghi’s last speech in Aug 2014 Jackson Hole is widely seen as heralding the start of ECB’s QE. However, ECB Governing Council member Ilmars Rimsevics said on Latvian radio on Thursday that “the ECB’s medium-term inflation target of 2% is not met, which means that this programme could continue for at least a couple of years.”

GBP Bloomberg reported that UK PM Theresa May unveiled a landmark draft law to take UK out of the European Union, sparking a furious backlash from Scotland and Wales and fueling political opposition that could derail her plans for Brexit. The latest 66-page bill will transfer EU laws onto the British statute book for when the UK leaves the bloc in March 2019

JPY Media rumors are hinting to a potential downgrade to the BoJ’s CPI forecasts. Relative central bank policy favours JPY weakness as market participants consider the BoJ’s recent efforts at enforcing its yield curve control policy. The 10Y yield appears soft with a steady retreat from last week’s highs following the fixed-rate operation

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

Technical: 1-3 Day View – 1.1430 resistance removed as 1.1400/1.1380 supports bulls target 1.1530 as the next upside 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): Bullish – Medium Term (1-3 Weeks): Bearish

Technical: 1-3 Day View – 1.3048 is the next upside objective, ahead of the pivotal 1.3238, the immediate upside hurdle moves to 1.2985, a daily closing breach of 1.2810 concerns the near term bullish bias.

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

Technical: 1-3 Day View – Upside objective 114.35 achieved, potential for profit taking pullback to test near term support toward 113.40 as this contains corrections bulls target 115.50 next, only below 112.10 would concern the immediate 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: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – Bullish expansion targets at 129.45 achieved as 129.30 contains corrections bulls target 133.36 as the next upside objective, only below 126.80 concerns near term bullish bias.

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

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