New York Forex Report: Eyes On FOMC

New York Forex Report: Eyes On FOMC

New York Forex Report: The USD is trading broadly higher before the conclusion of the Fed’s two-day meeting at 14.00ET. No change in policy is expected but the Fed’s messaging on the outlook will be important in framing the risks around June’s rate setting meeting, where investors are leaning towards the risk of an additional 25bps tightening. Eurozone GDP rose 0.5% in Q1 (1.7% YoY), in line with expectations. PPI fell a larger than expected 0.3% in March. German unemployment fell a slightly larger than expected 15k in April, maintaining the unemployment rate at 5.8%. Eurozone growth data is positive but has little or no implication for ECB policy makers in the near-term as inflationary impulses remain weak. GBP during London trade on press reports that the EU might serve the UK with an even larger “divorce bill” than it had originally suggested would be the cost of the UK leaving the Union. Reports indicated that the EU would seek EUR100bn from the UK to complete the exit, pressuring sterling, before UK ministers rejected the claim, helping the GBP stabilise.

USD US auto sales rebounded to 16.83m from 16.53m in March. This was a weaker than expected outcome and left sales still well below that seen in February and down 3.7%YoY

EUR final Markit manufacturing PMI for April was revised down 0.1pp from the flash reading to 56.7. This still left the index up 0.5pts for the month and at a six-year high. Meanwhile, Germany finished with a 0.1pt decline for the month but still led the euro area at 58.2. The Eurozone unemployment rate of 9.5% for March was unchanged from February’s figure and compared with consensus expectations of a further small decline to 9.4% for the month. There was still a significant decline from the 10.2% rate in March 2016 and the latest reading equalled the lowest rate for close to eight years.

GBP UK’s Markit PMI manufacturing index strengthened to 57.3 for April from 54.3 the previous month and compared with an expected reading of 54.0. The index has been above the 50.0 level for nine months in a row and the latest reading was the strongest for three years.

JPY has also succumbed to some selling pressure as traders tentatively abandoned the relative safety of yen assets in favour of higher yielding investments. JPY stands to benefit from any increase in trader risk aversion associated with geopolitical uncertainty. Japan’s Golden Week holidays staring tomorrow and running for the rest of the week, could keep activity in the JPY somewhat subdued

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

Technical: 1-3 Day View – As 1.0850 supports expect a grind higher to test 1.0982 as the next upside objective. Only below 1.0820 concerns near term bullish bias.

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

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

Technical: 1-3 Day View – As 1.2860 supports bulls will focus on a test of psychological 1.30 magnet , only below 1.2750 concerns near term bullish bias.

1-3 Week View – The 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

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

Technical: 1-3 Day View – As 1.1080 supports potential to retest 113 descending trend line resistance pivot, only back below 110 would concern the near term bullish bias

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): Bearish

Technical: 1-3 Day View – Near term support sited at 120.35 as price prepares to test pivotal trend line resistance at 122.35 a close over this level opens 124.40.

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, resetting focus on pivotal 124.40.
Retail Sentiment: Bearish
Trading Take-away: Long

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