New York Forex Report: EUR Bid But Off The Highs

New York Forex Report: EUR Bid But Off The Highs

New York Forex Report: Markets may have overreacted somewhat to ECB President Draghi’s comments earlier in the week, the fact that the president himself chose not to try and push back against the market’s interpretation of his remarks yesterday suited the market’s USD-bearish disposition and galvanised the EUR bulls. Key rate spreads remain widely negative but have compressed in the EUR’s favour somewhat. Eurozone data today was supportive, economic and industrial confidence readings strengthened in June and German state CPI data tended towards the slightly stronger than expected side of things in aggregate this month. UK lending data was stronger than expected in May, net consumer credit rose GBP1.7bn (GBP1.4bn expected) and mortgage lending rose GBP3.5bn (GBP2.6bn expected). The market is more intently focused on BoE policy prospects after BoE Gov. Carney’s comments at the ECB forum yesterday, however, the surge in consumer credit in May underscore the BoE’s focus on macro prudential issues and supports the Bank’s decision earlier this week to boost bank capital buffers. JPY is weak, down 0.2% vs. the USD and underperforming all of the G10 currencies in an environment of mild risk appetite with limited movement throughout the Asian trading session and modest weakness from the European open. The disappointment in domestic retail sales had no discernible impact on JPY and the mild decline in JPY roughly coincided with comments from BoJ board member Harada as he underscored the need to maintain policy accommodation in a clear deviation from the recent G4 shift in policymakers’ tone toward policy normalization.

USD Mortgage applications in the US slipped 6.2% in the week ended 23 Jun, snapping a three week gain that was last recorded at 0.6%. Wholesale inventories inched 0.3% MoM higher in May’s preliminary gauge, overturning a 0.4% decline in April. Meanwhile, pending home sales fell 0.8% MoM in May after sales declined 1.7% in April, extending the decline to 3 months running.

EUR A Reuters report suggested the hawkish speech given by ECB Governor Draghi was over-interpreted by the markets. The ECB chief intended to signal tolerance for a period of weaker inflation, not an imminent policy tightening, according to sources familiar with Draghi’s thinking. Also, markets failed to take note of caveats in Draghi’s speech. According to the report, Draghi’s intention was to set up September as the earliest the bank would discuss rolling back stimulus although a decision may not be firm then.

GBP Survey from the Confederation of British Industry showed that retailers were expecting sales to surge higher in June despite concerns on Brexit negotiation. The gauge for sales volume climbed from 2 in May to 12 in June even as inflation rose to a multi- year high in May, indicating that retailers do not expect a significant cut in household purchases even as real wages were dampened by inflationary pressure.

JPY Japan’s small business confidence index ticked up to 49.2 in June, rising from 48.9 in May to its highest in three months, a sign businesses are anticipating pick up. There needs to be more convincing data as retail sales in May softened on an annual basis, growing just 2.0% YoY from 3.2% in April, while sales fell 1.6% MoM after rising 1.4% previously, and both measures were below market expectations

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

Technical: 1-3 Day View – 1.1430 upside objective achieved the weekly close will be key now as price is testing pivotal symmetry and trend line resistance, as 1.13 supports bulls target 1.1616 as the next upside objective only a daily close below 1.1160 concerns the near term bullish bias.

1-3 Week View – While 1.0830 supports 114.30 becomes the primary upside objective. A weekly close over 1.1450 sets upside focus on 1.1876. Weekly close below 1.08 neutralises bullish objectives.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – 1.2877 upside objective achieved as 1.2860 supports on an intraday basis 1.3048 is the next upside objective . Only a closing breach of 1.2710 concerns the near term bullish bias.

1-3 Week View – The weekly failure to close above 1.3045 ahead of the broader symmetry swing objective sited at 1.3238 suggest underlying weakness persists 1.2450 becomes pivotal for the medium term perspective.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – The daily closing breach of 111.80 level resets focus on upside objectives principally 114.35, near term support is now sited at 111.80/60, only below 111.20 would arrest the advance and return to 110/112 range.

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: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – Bullish expansion from consolidation targets 129.44 as the primary upside objective, support moves to 126.40/20, only below 124.30 concerns near term bullish bias.

1-3 Week View – The weekly close above 118.50 arrested the immediate downside risk, resetting focus on pivotal 124.40 the weekly breach of this level opens 129.44 as the broader upside objective.
Retail Sentiment: Bearish
Trading Take-away: Long

Posted in Forex Analysis, New York Forex Report, tagged with on