New York Forex Report: ECB Minutes Mute EUR Upside

New York Forex Report: ECB Minutes Mute EUR Upside

New York Forex Report: The ECB account of the last monetary policy meeting was the major mover in the European session, overall, financial conditions remained supportive of the economic expansion, although the repricing in some financial market segments, in particular in foreign exchange markets and the bond markets, had led to some deterioration since the previous meeting. Regarding exchange rates, while it was remarked that the appreciation of the EUR to date could be seen in part as reflecting changes in relative fundamentals in the euro area vis-à-vis the rest of the world, concerns were expressed about the risk of the exchange rate overshooting in the future. the tone is more direct than usual and than what markets were expecting. Negative for the EUR for now, but not necessarily a game changer, with Jackson Hole off the table for policy announcements markets will have to wait for the September meeting.

USD FOMC minutes revealed that decision to keep rates unchanged at the July meeting was unanimous, as expected. Policy makers were however divided on the timing to announce balance sheet reduction, with some intended to announce it at the last meeting while some preferred to wait. While the minutes continued to reiterate concerns over the below target inflation, markets believe this will only push back the case for further rate hike this year but tapering plans are still intact, with an announcement expected at the upcoming September FOMC meeting. Housing market data turned in on the soft side, adding to signs of a softening US housing market.

EUR Eurozone 2Q GDP sustained a 0.6% QoQ growth but YoY basis, growth staged a surprised pick-up to 2.2% YoY, thanks to continued growth in Germany, and a pick-up in Spain. While growth outlook is improving, below target inflation will continue to keep a lid on ECB policy moves in the near term.

GBP UK job reports was positive bolstering hopes of improvement in the employment market that would eventually help support consumer spending in the UK. ILO jobless rate fell 0.1ppt to 4.4% while the labour market added 125k jobs in June, more than expected. Jobless claims also declined 4.2k in July and wage growth picked up to print a 2.1% YoY increase.

JPY Japan trade surplus narrowed less than expected to ¥418.8bn in July, as exports rose 2.8% MoM while imports fell 1.2% MoM. Exports to China, US and the Asian regions continued to take the lead stemming from improving global demand.

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

Technical: 1-3 Day View – Retest of bids just below 1.17 , as this level contains downside reactions bulls look for a retest of cycle highs en route to 1.20, intraday 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): Neutral – Medium Term (1-3 Weeks): Bearish

Technical: 1-3 Day View – 108.93 downside objective achieved anticipated profit taking pull back on the initial test of this level playing out, near term resistance sited 111, a daily close over 111.65 neutralises downside pressure, near term support sited at 109.50

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

Technical: 1-3 Day View – Support at 128.00 survives as this holds there is potential for a retest and breach of cycle high at 131.39, however failure to recapture 1.30 sets up a retest of 128 and failure here sets a top for retest of 125.80.

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