New York Forex Report: CPI Potential Volatility Catalyst

New York Forex Report: CPI Potential Volatility Catalyst

New York Forex Report: Movement in the G10 FX is relatively limited so far today, though the backdrop for the markets in general is taking something of a “risk off” look as European stocks slide, pulling US futures lower, developed markets bonds rise and commodities trade mostly lower (crude off more than 1% from last night’s close but recovering a little from a test of $43/bbl, weighing on the CAD. European bank shares have taken another clobbering. Deutsche Bank is trading nearly 8% lower on the day having received a USD 14bn claim from the US DoJ to settle a probe into the bank’s sale of MBS. The JPY is finding a modest safe haven bid as a result and is the top-performing major currency on the session. The USD remains well-supported overall despite fading rate expectations following this week’s data releases; US CPI, U. Michigan Sentiment and TIC flows are due today and may not move the needle that much for USD sentiment if results match consensus calls. With the Fed and the BoJ looming on the horizon, markets are liable to keep positioning relatively light and job positioning in the USD, EUR and JPY around headline flows and technical breaks.

FX Majors: EUR rallied in the aftermath of softer US retail sales and industrial production, though the solid initial jobless claims and Philly Fed survey and a general lack of conviction ahead of next week’s Fed and BOJ event risk. GBP August retail sales data were better than expected and July was revised sharply higher to +1.9% m/m (+1.4%). In August retail sales fell 0.2% m/m but rose 6.2% y/y. Despite the August data, the trend in sales remains up and the 3m/3m volume of sales rose by 1.6%. The data confirms little dislocation before, during, or after the EU referendum by consumers. The MPC voted 9-0 to leave policy unchanged but still keeps its easing bias “if the August outlook is confirmed”. Virtually every piece of data since the August inflation report and policy easing has contradicted the forecast of a near term slowing in the economy. The MPC is hedging its bets by qualifying its forward guidance JPY continues to get caught between flows, and as a result, hasn’t been able to go anywhere. On the one side, market preparation for higher rates in the US and concurrent speculation the BOJ could add further stimulus next week, have been weighing on the JPY and pushing USDJPY higher. But on the other side, broad based risk off flow on fear of monetary policy reaching its limits, has inspired safe haven bids, benefiting the correlated JPY and weighing on USDJPY.

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

Technical: As 1.12 supports 1.1366 is the next upside target with a further equidistant symmetry swing objective sited at 1.1530. Below 1.1190 opens 1.1120 and suggests potential early reversal.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: As 1.32 supports 1.3470 is the next upside objective, the near term upside hurdle is sited at 1.3280. Failure below 1.3130 suggests early reversal to downtrend.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Offers ahead of 103.50 stall advance A close over 103 opens 106 equidistant swing objective. A break of 101.90 opens 101.20 next.
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: As 113.80 supports potential for another leg higher to target equidistant swing objective at 117.87. Failure below 113.60 opens move back to 112.
Retail Sentiment: Neutral
Trading Take-away: Neutral

Commodities FX: GOLD The disappointing US data saw gold pull back from its intra-day lows, but still ended the day weaker. Oil The delayed restart of a damaged pipeline which feeds gasoline into the east coast helped support crude oil prices. This was somewhat negated by continued speculation of a recovery in exports from Libya and Nigeria. Libya’s state oil company lifted curbs on sales from three ports on Wednesday. AUD The Australian Dollar’s recovery in Thursday trade was in direct response to the rebound in US equities, with the improved risk sentiment propping the correlated commodity currency. CAD ended up stronger into the close despite another noticeable drop in the price of OIL. It seems the Loonie was more focused on disappointing US retail sales and industrial production readings given the implication of the Fed holding off on any rate hikes and maintaining a more dovish stance next week.

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

Technical: The next downside objective is symmetry swing support sited at .7412. Near term resistance is sited at .7500 under pressure, expect stronger offers .7560/80
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: 1.32 upside objective achieved. As 1.3030 supports 1.3372 is the equidistant AB=CD corrective objective, only below 1.2960 threatens near term bullish bias
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1301 AB=CD equidistant swing support has provided anticipated base. Near term resistance now at 1357, below 1320 opens move back 1301 base. Only below 1300 concerns near term bullish bias.
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Equidistant swing resistance sited at 47.36 as this level rejected the corrective advance 41.38 becomes the downside objective over 47.50 targets retest of 48.90 potential double top.
Retail Sentiment: Bullish
Trading Take-away: Short