New York Forex Report: EURUSD Buoyant Above 1.20

New York Forex Report: EURUSD Buoyant Above 1.20

New York Forex Report: Geopolitical tensions remain the focus with North Korea firing a missile over Japan. However, with the US saying it posed no threat to them, the market impact has been relatively muted. Safe havens like JPY, US Treasuries and gold benefited, leaving USDJPY testing medium term range supports in the 108.00 region. UK PM May heads to Japan tomorrow for three-days of meetings. The Fed’s economic symposium in Jackson Hole yielded little insight from Fed Chair Yellen in regard to Fed policy or from ECB President Draghi in regard to recent EUR strength, the July ECB minutes had previously highlighted concern about the EUR overshooting. In reaction, EURUSD has rallied strongly out of its recent range to set new highs towards 1.21, dragging a number of other cross rates with it, most notably GBPUSD. We have a quiet data day ahead, but the rest of the week is busy with the latest US employment reports, starting tomorrow with the independent ADP reading ahead of official numbers Friday. We also get the latest European inflation report, which is expected to show a slight rise due to energy prices, but outside of that and food prices, a more muted outt urn. In Asia, China releases its latest PMIs, while we also get business sentiment updates in the UK via the Lloyds Business Barometer.

USD US wholesale inventories softened less than expected, increasing 0.4% MoM in July, as slower stock increase in non-durable goods offset faster gain in durable goods inventories. Continued rise in inventories signalled wholesalers are building up inventories on optimism over future demand. In a separate release, Dallas Fed manufacturing index inched up for a second straight month to 17.0 in August as expected, suggesting manufacturing activities have gained further traction in the district.

EUR fresh multi-year closing high above 1.20, with upside risk in the aftermath of Jackson Hole as both Draghi and Yellen avoided comments on the outlook for monetary policy. EUR has ignored the release of softer than expected money supply data and appears to be finding support from a modest narrowing in the 10Y Germany-U.S. yield spread. Risk reversals are showing a slight rise in the premium for protection against EUR strength, and Friday’s CFTC data showed a modest rise in the extended bullish EUR net long.

GBP EU Brexit Chief Barnier said (28 August) that he is concerned that time is passing quickly and it needs UK positions on all issues, must start negotiating ‘seriously’. He opined that the sooner UK and EU remove ambiguity, the sooner they can discuss future UK-EU relationship. He reiterated that the EU will not accept not addressing divorce issues. Meanwhile, Brexit Minister Davis said that the UK wants this week’s talks to make progress on all issues while progress requires flexibility and imagination on both sides

JPY Japan jobless rate held steady at 2.8% in July as expected but overall household spending decelerated and fell 0.2% YoY in July, proving last month’s gain (its first since February) as just a blip. Consumers continued to spend less on essentials including food, housing, utilities, healthcare, and education, raising concerns of the underlying health of the consumer sector despite recent signs of an uptick in the Japanese economy.

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

Technical: 1-3 Day View – Bullish consolidation pattern plays out 1.20 achieved, as 1.11980/60 supports near term bull target 1.2110 as the next upside objective.

1-3 Week View – 1.1876 achieved focus shifts to 1.20 . Weekly close below 1.14 neutralises bullish objectives below 1.1910 opens move back to test support at 1.1850
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – Expected retest of 1.28 plays out, near term resistance is sited at 1.2910 removed opening a test of 1.3030 a close over 1.3060 reestablishes a more 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: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – Near term resistance sited 109.85 contains upside reactions and next leg lower targets 108.13 as 109.10 restricts upside intraday

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 – Daily breach of 128.80 stabilised the pair as anticipated and resets attention on upside objectives at 133 near term support is sited at 129.50

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