New York Forex Report: Dollar Looking To Print First Monthly Gain In Six

New York Forex Report: Dollar Looking To Print First Monthly Gain In Six

New York Forex Report: The USD is trading moderately firmer on the day as markets broadly reverse from early week extremes generated by the latest developments in North Korea. Positive US data has helped lift sentiment to some extent while market flow may also represent positioning ahead of month end (which is expected to generate modest net USD buying against the majors for portfolio re-balancing). On the day so far, the USD is trading broadly higher versus its G10 peers, with the NZD under-performing on negative RBNZ rhetoric (down nearly 5% on the month versus the USD); the MXN is weaker on the day despite positive data and positive sentiment as NAFTA risks linger. Global stocks are mostly firmer while developed market bonds are broadly, if only slightly weaker, on the day; US Treasury bonds are under performing. The early week bounce in the USD broadly may represent a near-term low point for the market for the moment; better US data reports today (weekly claims, personal income and spending, PCE deflator Chicago PMI, pending home sales) may lift sentiment a little ahead of tomorrow’s NFP report.

Rating agency S&P warned that failure [of the US] to raise debt ceiling would be ‘more catastrophic’ than Lehman collapse. It noted that the ceiling already has been breached, but the Treasury Department has been using extraordinary measures to keep the government open. He also warned that if no agreement is reached, the government will shut down and the economy will suffer

USD rallied on Wednesday thanks to easing geo-political tensions and that US had a good set of data releases overnight with a higher than expected ADP jobs number and a robust upward revision to 2Q GDP growth (from 2.6% to 3%, strongest since 1Q 2015). US 2Q 2017 GDP growth was revised higher to 3%QoQ (from the prelim print of 2.6% and better than the Bloomberg median forecast of 2.7%), on the back of more robust personal consumption spending, growing at 3.3% (up from 2.8% in prelim estimates).

EUR has already shed two cents since Tuesday’s peaks in the boundaries of 1.2070 to current levels, all on the back of the already mentioned USD recovery and the logical profit taking mood in light of the recent and strong upside. Data wise in the euro bloc, advanced Spanish inflation figures tracked by the HICP is expected to rise above estimates at an annualised 2.0% in August. Further data in the region saw business climate at 1.1 for the current month while consumer confidence came in at -2.0, matching consensus.

GBP Domestic lending and mortgage approvals figures were largely in line with expectations as we note the absence of any significant response to this week’s round of Brexit negotiations. There are no major domestic releases scheduled ahead of Friday’s manufacturing PMI. The 2Y spread has been steady since Friday, consolidating around -115bpts

JPY Japan’s prelim July industrial production contracted more than expected by -0.8%MoM (from +2.2%MoM in June and worse than the Bloomberg median forecast of -0.3%). Compared to the same period a year ago, IP grew by a slower 4.7%YoY in August, from 5.5% in June).

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

Technical: 1-3 Day View – Breach of 1.1920 opens the anticipated move back 1.1865 as 1.1960 caps upside attempts 1.18 is the next downside objective. Over 1.20 opens the way to to 1.2070 and 1.2130

1-3 Week View – 1.1876 achieved focus shifts to 1.20 . Weekly close below 1.14 neutralises bullish objectives below 1.1910 opens move back to test support at 1.1850
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – Near term resistance is sited at 1.2910 removed opening a test of 1.3030 a close over 1.3060 reestablishes a more bullish tone, however, failure below 1.2910 opens a move back to 1.2850

1-3 Week View – The weekly close above 1.3045 targets the broader symmetry swing objective sited at 1.3263 only a close back below 1.28 would jeopardise the bullish advance.
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: 1-3 Day View – Breach of near term resistance levels stabilises the pair over 110.35 opens pivotal 110.95 near term support sited at 109.80, below 109 suggest short squeeze exhaustion and refocuses players on downside objectives

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

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

Technical: 1-3 Day View – Daily breach of 128.80 stabilised the pair as anticipated and resets attention on upside objectives at 133 near term support is sited at 131, only below 129.50 concerns near term bullish bias

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