New York Forex Report: Dollar Down On Risk Aversion

New York Forex Report: Dollar Down On Risk Aversion

New York Forex Report: The USD is weakening broadly into the North American open, falling materially as market participants respond to Monday’s cautious commentary from San Francisco Fed President Williams in which he called for a critical reassessment of prevailing policy frameworks. The comments add to a chorus of caution from a range of policymakers including Dudley, Brainard, and Bullard. JPY is outperforming with a 1.3% gain while CAD is a relative under performer, up 0.8%. The broader tone hints to risk aversion as we note widespread weakness across global equity indices and softness in U.S. equity futures. Risk is elevated as the market look to the release of high level U.S. data including CPI, housing starts and building permits (8:30am ET) as well as industrial production (9:15am ET).

FX Majors: EUR Germany’s economy expanded by 0.4% in the second quarter that was considerably weaker than the 0.7% gain in the first quarter, but the figure was beating expectations. As the largest economy in the Eurozone, German data are often a bellwether for the Eurozone. GBP According to Rightmove – UK’s property listing website – house prices was up 4.10% YOY in August. Despite slowing down from average price growth of 4.50% YOY in July and increasing concerns that Brexit will weigh down on demand, housing market will still get a boost from lower interest rates and home supply shortages. JPY Japan’s economy barely expanded from 1Q to 2Q due to drag from net exports and business investment. Following a 0.5% QOQ growth in 1Q, economic momentum stalled as exports dropped 1.5% since the previous quarter while capital investment contracted for two straight quarters. The government’s 28 trillion yen ($276 billion) fiscal stimulus may provide some reprieve to the stagnant economy by spurring consumption later this year but it is likely that price pressure will remain well below the targeted 2.0% for a longer period of time.

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

Technical: Target 1.1330. Near term support is sited at 1.1150, only a failure below 1.11 would concern the near term bullish bias
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: Selling pressure removes 1.2950 equidistant swing support, with bears now targeting a retest of the 1.2770 lows, 1.2950 now becomes near term resistance.
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Retest of cycle lows below 100 is underway. Near term resistance is sited at 101.60, only a move over 102.80 will ease near term bearish bias
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: The breach of 113 opens 110.80 as the next downside objective. Near term resistance is sited at 114.
Retail Sentiment: Neutral
Trading Take-away: Neutral

Commodities FX: GOLD edged higher on Monday on the back of the weaker than expected Asian economic data and a broadly weaker US dollar. The gold price increased by US$3.43 to US$1,339.40 on Monday. Oil continued to climb higher to a one-month high on Monday (15 Aug) despite the lack of any key oil-related data but instead investors continued to be increasingly hopeful of producer action to control output lifted by remarks from Russian Energy Minister Alexander Novak saying that his country was working with Saudi Arabia to achieve oil market stability. This really looks like “buying the rumour” in action. AUD Australia’s central bank saw room for faster economic growth when it cut interest rates to record lows earlier this month, predicting inflation would still remain below target for another two years or more, according to meeting minutes released by RBA today. CAD strengthened to a one-month high against the USD as oil prices rose and poor US figures lowered expectations of a Federal Reserve interest rate hike this year.

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

Technical: The close over .77 shifts attention to broader range resistance sited at .7830, near term support is now sited at .7640.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: Failure below 1.2940 opens 1.2860 as the next downside objective. Near term resistance is sited at 1.30.
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: Bulls target 1391 as the next upside objective, near term support is sited at 1330. Below 1300 opens 1270.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: AB=CD equidistant swing objective completes at 45.43 expect expect prices to pause at this level. Near term support is sited at 43.30/60
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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