New York Forex Report: Draghi & Data Give EUR Lift

New York Forex Report: Draghi & Data Give EUR Lift

New York Forex Report: G10 FX are quiet and generally range bound as we enter Wednesday’s New York session. NZD and GBP are the exception, both testing fresh lows on the back of weaker (New Zealand) Treasury forecasts and Brexit sentiment. CAD and AUD are flat, EUR up, and JPY is outperforming along with gold in a manner that is suggestive of mild risk aversion. Overnight comments from President Trump include threats of a government shutdown and NAFTA termination. The impact on CAD was relatively short-lived however MXN has failed to recover and is entering the US session around its lows with a near-0.8% decline from Tuesday’s close. Developed country bond yields are down marginally and European equity indices are soft. Oil prices are steady and copper prices are flat. There are no major U.S. releases scheduled for Wednesday’s session, with the Markit flash PMI’s and new home sales the only releases. Fedspeak is limited to Kaplan (voting 2017).

USD US President Donald Trump threatened on Tuesday to shut down the US government to put pressure on Congress to fund the border wall with Mexico. He said

that “If we have to close down our government, we’re building that wall. One way or the other, we’re going toget that wall.” Regarding the Nafta negotiations he said that “personally, I don’t think we can make a deal. So I think we’ll end up probably terminating Nafta at some point”. On the data front manufacturing activity in the Richmond Fed district grew at the same pace in Aug as it did in Jul with the index stabilising at 14, against expectations for a slide to 10.

EUR the crucial Germany-U.S. 10Y spread is pushing back toward -180bpts at the lower end of its range from mid-July. Risk is elevated into Friday’s Jackson hole speeches, given expectations for a steady tone from ECB President Draghi and given that bullish speculative CFTC positioning remains extended at record/multi-year highs (gross/net long, respectively). Risk reversals are neutral.

GBP The government recorded a budget surplus in July, as public sector net cash requirement (PSNCR) fell to -£ 3.9b, down sharply from £18.4b in Jun. Meanwhile, a survey by the Confederation of British Industry showed that balance of total orders at factories increased in Aug; the difference in percentage of respondents stating that total orders were above normal versus below normal rose to +13%, rising from +10% in July, a sign that demand remains firm..

JPY Spending in Japan showed no sign of improvement as data on supermarket sales indicated no growth in Jul. Annually, sales stagnated in July, but it was a relatively better figure from Jun’s 1.2% YoY decline. Purchases of household goods (July: +0.4% vs June: -2.0%) and other items (Jul: +4.7% vs Jun: -2.1%) helped lift the headline figure, while declines in clothing and services softened.

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

Technical: 1-3 Day View – Bullish consolidation continues tests of bids just below 1.17 attract buyers, as this level contains downside reactions bulls look for a retest of cycle highs en route to 1.20, near term upside hurdle sited at 1.1850, only a daily close below 1.1620 concerns the near term bullish bias setting a top for a test of 1.1440.

1-3 Week View – 1.1876 achieved focus shifts to 1.20 . Weekly close below 1.14 neutralises bullish objectives.
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 – Expect a retest of 1.28, near term resistance is sited at 1.2950, only a close over 1.3030 reestablishes near term bullish tone

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): Bearish – Medium Term (1-3 Weeks): Bearish

Technical: 1-3 Day View – Near term resistance sited 109.50 over this hurdle opens a move to test 110.60 ahead of pivotal 111.65 a close over here neutralises downside pressure, near term support sited at 108.73

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: Bullish
Trading Take-away: Short

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

Technical: 1-3 Day View – Support at 128.00 under pressure again the failure to recapture 1.30 on a closing basis sets up a retest of 126.90 and failure here sets a top for retest of 125.80. The daily close over 128.80 stabilises the pair and resets attention on upside objectives over 1.30

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