New York Forex Report: EUR Prints 12 Month Highs

h2>New York Forex Report: EUR Prints 12 Month Highs

New York Forex Report: Central banker comments continue to be the main driver of markets at the moment. While BoE Governor Carney’s comments yesterday were very much in-line with current known policy, the market has latched onto more hawkish comments from ECB President Draghi and valuation comments from Fed Chair Yellen. In regards to the former, President Draghi said that while current policy is correct, “reflationary forces” suggest potential room to pare stimulus, very gradually. The market has interpreted this as tapering the QE programme next year, driving German yields higher and EURUSD up towards 1.14 printing one year highs. While the bond move is key to supporting the EUR, the broader USD has played its part coming back under pressure. The IMF cut their US growth forecasts for 2017 and 2018, as it seems less likely President Trump will be able to push through his fiscal programme. His US Healthcare bill being delayed again somewhat testament to this. Fed Chair Yellen suggested that the market is well priced for a very gradual rise in rates, but echoed earlier comments by Vice Chair Fischer that some asset valuations were a little frothy. US equities came under pressure on this and must be watched closely if this develops into a broader correction, weighing on sentiment and therefore “risk-off” FX moves. With no important data today, all eyes and ears are going to be on today’s Policy Panel at 14:30BST, which includes Draghi, Carney, Kuroda and Poloz. The focus of attention will very much be on whether Draghi tries to reign in the market reaction to yesterday’s comments and also Poloz, after he and Deputy Governor Wilkin’s turned more hawkish a couple of weeks ago. The market is looking for clues as to whether they will increase rates at next month’s meeting.

USD Comments from fed speakers suggest that further monetary policy tightening agenda remain on the table this year. Fed chair Janet Yellen reiterated that “it will be appropriate to raise interest rates very gradually” and the stockpile of bonds would be shrunk “gradually and predictably”. In addition, vice chair Stanley Fischer said there will be “notable uptick” in risk appetite but “has not lead to increase leverage across the financial system”, suggesting that risks remained well balanced at this juncture

EUR It was all about Mario Draghi yesterday his comments were interpreted as hawkish despite there being dovish undertones following the first sentence. While there was an acknowledgement the euro area recovery is strengthening and broadening, there was still concern around the durability of inflationary pressures. This is expected to keep monetary policy very stimulatory for some time. But the first acknowledgement that “as the economy continues to recover, a constant policy stance will become more accommodative, and the central bank can accompany the recovery by adjusting the parameters of its policy instruments – not in order to tighten the policy stance, but to keep it broadly unchanged” was enough for yields and the EUR to snap higher

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 underperforming most of the G10 currencies in an environment of broad-based USD weakness. Yield spreads are widening in a JPY-negative manner, and options markets are suggestive of a moderation in the premium for protection against JPY weakness

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

Technical: 1-3 Day View – As 1.1330/00 now acts as interim support bulls will be focused on the primary weekly 1.1430 upside objective, only a daily close below 1.1260 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 – As 1.2760/80 now acts as interim support, 1.2977 is the immediate 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: Bearish
Trading Take-away: Long

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 medium term 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

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