New York Forex Report: EUR Dips On Inflation Forecast Fears

New York Forex Report: EUR Dips On Inflation Forecast Fears

New York Forex Report: FX volatility has picked up a little but broader market risk aversion has dissipated somewhat despite tomorrow’s event risk trifecta of the UK general election, Comey testimony and the ECB meeting. The UK election will go right down to the wire but the base case scenario remains a Conservative win, with a slightly increased majority which should be modestly GBP supportive in the short run (before “hard Brexit” concerns re-emerge). Headlines yesterday suggesting that the former FBI director would not say that President Trump obstructed justice reflects the fact that he will not take a legal view of the conversations he had with the President; the content of his testimony remains a risk for the markets. Headlines this morning suggesting that the ECB will revise its inflation forecast lower through 2019 suggests that the hawks will struggle to make the case for an early normalisation of the ECB’s policy settings. The EUR is under-performing in the wake of the news, while the AUD has gained strongly on better than expected GDP data overnight.

USD US job openings surged to a record high in April, according to the Labor Department’s monthly Job Openings and Labor Turnover Survey, or JOLTS. Job opening increased 259k to a seasonally adjusted 6.0mn in April, the highest since the government started tracking the series in 2000. The monthly increase was the largest in just over a year and pushed the jobs openings rate to 4.0%, the highest since last July, from 3.8% in March. Hiring, however, decreased by 253k jobs to 5.1mn. That lowered the hiring rate to a one-year low of 3.5% from 3.6% in March.

EUR Sentix Investor Sentiment Index rose another 1pt to 28.4 in June, which is the highest reading since July 2007. Meanwhile, retail sales in the Eeuro area rose 0.1% MoM in April to be up 2.5% YoY. The markets are keeping a close eye on the ECB, as policymakers meet on Thursday. The central bank is expected to hold the benchmark interest rate at a flat 0% with no change at the upcoming meeting. With that being said, the markets would still want to see the ECB acknowledge a stronger Eurozone economy and will be looking for a more hawkish tone from the rate statement with follow-up comments from ECB head Mario Draghi. The ECB has been cautious and is not expected to taper its stimulus program that will end in December.

GBP The UK’s BRC retail monitor pointed to like-for-like sales falling 0.4% YoY in May. Total store sales rose 0.2% YoY, with the three-month average growth rate edging down to 1.9% YoY. Polling shows the UK election remains very tight; a Survation survey reported the Conservative lead over Labour was just 1% (unchanged from Sunday) and a YouGov survey today indicated the risk that the Tory party could emerge short of an overall majority from the vote

JPY The broader tone remains key, however stronger domestic labor cash earnings data and narrowing interest rate differentials are also delivering JPY support. Options markets are suggestive of a broad, albeit mild, uptick in measures of implied volatility. Risk reversals are steady, pricing a premium for protection against JPY strength

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

Technical: 1-3 Day View – Breach of 1.12 refocuses bulls on equidistant swing objective of 1.1291 en-route to a test of broader symmetry swing objective at 114.30. Only below 1.11 concerns near term bullish bias opening a move back to test 1.1020.

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

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

Technical: 1-3 Day View – Symmetry swing objectives at 1.3060 & 1.3118 are targeted a close below 1.2750 concerns near term bullish bias and opens a move back to test the 1.26 pivot, the near term upside hurdle is sited at 1.2920

1-3 Week View – The weekly closing breach of 1.2880 opens 1.30 as the next upside objective ahead of the broader symmetry swing objective sited at 1.3238.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – 110.20 breach negates near term upside prospects opening a retest of 1.0940, near term as 110.30 contains upside reactions 108 will be a key downside objective.

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): Neutral

Technical: 1-3 Day View – 129.44 is the medium term upside objective, near term support is sited at 123.10 being eroded, near term upside objective of 126.84 equidistant swing objective, only below 122 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 a weekly breach of this level opens 129.44 as the broader upside objective
Retail Sentiment: Neutral
Trading Take-away: Neutral

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