New York Forex Report: EUR Prints Three Week Highs

New York Forex Report: EUR Prints Three Week Highs

New York Forex Report: Market risk appetite has improved, driving Asian and European equity markets mostly higher and supporting US equity futures on the session so far. Developed market bonds are slightly softer overall but US Treasury bonds are outperforming modestly versus European sovereign debt, driving a further, slight narrowing in yield differentials against the USD. The EUR is relatively firm on the day while the JPY is the session’s main under-performer, reflecting the more pro-risk sentiment in the market. GBP post-election call gains are moderating. Polling shows PM May’s Conservatives well ahead of Labour (a YouGov poll in the Times today shows a 48-24% split in support), implying that she will win a significant majority in the June 8th election. Yield spreads have steadied, measures of implied JPY volatility have softened, and risk reversals have relinquished some of the recent build in the premium for protection against JPY strength. JPY appears vulnerable to near-term weakness

USD The Fed Beige Book maintained that the US economy expanded at a modest to moderate pace and that inflationary pressure remained in check over mid-February to end-March. The report also noted difficulties in hiring and retaining workers in some districts. In a separate release, MBA mortgage applications took a turn and fell 1.8% WoW in the week ended 14-Apr, dragged by a 3.4% decline in new purchases which more than offset the minute 0.2% increase in refinancing. The Dollar Index climbed steadily higher to close 0.24% firmer at 99.49.

EUR Eurozone CPI pulled back to 1.5% YoY in March (Feb: +2.0%) as initially estimated, as a result of smaller increases in food and energy prices. The smallest price gain in three months were largely in line with our observation that upside inflationary pressure is turning more muted as the base effect in oil prices adjustment wanes. In a separate release, trade surplus widened more than expected to €19.2bn in February, driven by marginal 0.4% MoM increase in exports and a 1.7% MoM decline in imports

GBP The U.K Parliament voted 522 to 13 in favor of snap election on 8 June. Meanwhile, EU’s Juncker said Brexit talks to start after the U.K elections. To be sure, he clarified that there was no discussion on postponing Brexit talks as negotiations were meant to start in June.

JPY The broader tone remains dominant and is pressuring JPY amid signs of a moderate shift toward risk appetite. Debt yields are mostly higher in the US today with the 2 year up 2 bp to 1.18%. The bell weather 10 year yield is back above 2.20% to 2.208% (up 4 bps), while the 10 year JGB yield returns to zero (last time it was at zero was five months ago). The BoJ conducted its regular bond buying program showing lack of intention to stem the drop in yields.

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

Technical: 1-3 Day View – 1.0620 becomes support as this contains corrections 1.0760 becomes the next upside objective ahead of 1.0860, below 1.06 resets focus on downside objectives 1.05 should be tested next.

1-3 Week View – While 1.10 contains corrective attempts higher focus remains on a retest of 1.03 ahead of 1.0118 extension objective form 2015/17 consolidation. Only over 1.14 sets upside focus on 1.1876
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – Testing 1.2880 equidistant swing resistance as 1.2770 supports bulls will focus on a test of psychological 1.30 magnet , only below 1.2560 concerns near term bullish bias.

1-3 Week View – While below 1.2880 bears set sites on 1.10 as the broader downside objective, a weekly closing breach of 1.2880 opens 1.30 as the next upside objective ahead of 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 108.43 equidistant swing objective to the achieved, near term resistance is sited at 109.58, only over 112 stems selling pressure

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): Bearish

Technical: 1-3 Day View – , 114.65 becomes the next downside objective as 117.50 contains upside reactions. Only over 120.50 arrests near term selling pressure.

1-3 Week View – The weekly close below symmetry swing support sited at 117.69 sets a bearish tone with 113.70 the medium term downside objective , a weekly close above 118.50 would arrest the immediate downside risk.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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