New York Forex Report: Dollar Looking To Data To Stay Afloat

New York Forex Report: Dollar Looking To Data To Stay Afloat

New York Forex Report: The USD tumbled and US yields retreated in response to the FOMC statement yesterday; markets were perhaps a little disappointed that the Fed was not more optimistic on the outlook and possibly concerned about the concession that inflation would stay below 2% in the near term. However, the Fed suggested that it was sticking with its base case (gradual rate increases remain warranted, balance sheet unwind will start “relatively soon”) and we rather think the market overreacted somewhat to a policy statement that largely conformed to expectations. The USD has steadied this morning, with the DXY rising from a 13 month low. US Treasury bonds are under-performing other developed market bonds, nudging spreads a little further back in the USD’s favour and headline US data should be supportive. US capital goods orders are expected to surge 3.5% in June, mainly reflecting gains in transportation; under the hood, the details of the report are not expected to be as robust, with the street looking for just a 0.3% gain in core capital goods orders and a similar rise in shipments—not really too far off the flattish levels seen for these components of the report over the past two months

USD focus was on the two day FOMC meeting, with the Fed Fund Target Rate being kept unchanged at 1.00%-1.25%. Meanwhile US policymakers narrowed the implementation window for tapering plans from an earlier phrase “this year” to “relatively soon”, suggesting that balance sheet reduction plans may be announced as soon as the next FOMC meeting scheduled in September. In terms of growth assessment, the FOMC committee commented that labour market in the US has continued to strengthen and that economic activity has been rising moderately so far this year. In terms of inflation outlook, on a 12-month basis, overall inflation (excluding food and energy prices) have declined and are running below the 2% target. On the data front, growth in new home sales moderated to 0.8% MOM in June, versus a prior gain of 4.9%.

EUR France and Italy reported stronger than expected consumer confidence data this month but EURUSD printing above 1.17, the highest since 2015 and through the EUR’s “IPO” price in 1999 (1.1736). Germany’s economy has been the locomotive behind the EU economy, as growth improves and unemployment drops. The marked improvement in economic conditions in the EU has sent the EUR soaring, as the currency is up 9.8% since March.

GBP The UK economy expanded 0.3% QOQ in 2Q as expected, marking a modest increase from a prior level of 0.2%. Growth in the 2Q was led by services which rose 0.5%. Production and construction meanwhile were a drag to overall growth prospects, declined by – 0.4% and -0.9% respectively during the same period. Overall the 2Q growth reading was lower than the 0.4% predicted by the BOE

JPY Japan’s small business confidence edged up to 50.0 in Jul from 49.2 in the previous month, suggesting that sentiment amongst small business owners improved. Amongst the industries that implied better sentiment include textile, chemical, iron & steel, general machinery, real estate and truck transport.

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

Technical: 1-3 Day View – Expected retest of offers and stops above the cycle high plays out overnight as 1.1680 supports near term bulls target 1.1860/80 , only a daily close below 1.1480 concerns the near term bullish bias setting a top for a test of 1.1370

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

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

Technical: 1-3 Day View – Breach of 1.3080 resets focus on pivotal 1.3238, a daily closing breach of 1.2810 concerns the medium 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): Bearish

Technical: 1-3 Day View – Pull back extends and threatens reversal with the breach of 112.10 delaying the bullish target at 115.50 and opening a move back towards 109, 112.40 is the immediate upside hurdle with 110.60 the near term support.

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 magnett
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 – 128 provides platform for a move through 130.70/80 en-route to 133.36, below 129.40/20 resets 130/128 range trade

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