New York Forex Report: Fed Speakers In Focus

New York Forex Report: Fed Speakers In Focus

New York Forex Report: G10 currencies are quiet with no major movement and no clear theme heading into Monday’s New York session. CHF, GBP, are up modestly, EUR, NZD and SEK are flat, while CAD, AUD, JPY and gold are soft. The broader tone appears to be one of mild risk appetite, with rising equity indices across Asia and Europe. U.S. equity futures are up and U.S. yields are steady. Commodities are rising, with notable gains in both copper and oil. The week’s U.S. data schedule is relatively limited, however market participants will remain focused on the evolution of Fedspeak in the aftermath of last week’s FOMC with a heavy speech calendar including Dudley and Evans on Monday. Fischer, Rosengren, Kaplan, Bullard and Mester are scheduled to speak later this week. Their tone will be crucial given that market participants are currently only pricing 11.5bpts of tightening for the second half of 2017. A reminder that the U.S. data surprise index has reached a fresh low at levels last seen in 2011.

USD US data on housing and consumer confidence clouded the Fed policy tightening outlook, and heightened concerns further Fed rate hikes and balance sheet reduction could have negative implications on the already softening US economic recovery. Fed speeches over the weekend appeared cautious and contradicted the Fed stance at the last meeting; with Fed Kashkari saying the Fed should have waited to raise rates and Fed Kaplan cautioning against further rate hikes..

EUR Softer CPI print in the Eurozone that showed a more moderate increase of 1.4% YoY in May reaffirmed the case of softening inflationary outlook, which may not be limited to the Euro area but globally. More subdued inflation outlook shall leave rooms for major central banks to hold on to current policy stance

GBP lifted by last weeks vote on interest rates at the Bank of England (BOE). Three policy makers surprisingly voted for a hike, with the outgoing Kristin Forbes the only one to have done so recently. While this doesn’t necessarily mean we’ll see another hike any time soon, it clearly suggested that policy makers are more hawkish than markets anticipated. Today marks the opening of the negotiations between the EU and the UK on the withdrawal of the UK from the European Union by Michel Barnier, the European Commission’s Chief Negotiator, and David Davis, UK Secretary of State for Exiting the European Union.

JPY BOJ voted by a 7-2 majority to hold policy rate unchanged at -0.10% and purchase JGB to maintain 10 year yield close to zero percent. Economic outlook has improved and the central bank now expects GDP to expand 1.60% for fiscal year 2017-18 and core inflation to increase 1.40%

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

Technical: 1-3 Day View – Breach of 1.12 from above reaffirms range trade delaying attempts at equidistant swing objective of 1.1291 en-route to a test of broader symmetry swing objective at 114.30. As 1.1210 caps upside the near term downside objective is sited at 1.1125 symmetry swing support.

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

Technical: 1-3 Day View – Retest of 1.2639 post election low survives and the subsequent short squeeze is testing pivotal resistance at 1.2785 ahead of symmetry swing resistance sited at 1.2842, price action appears corrective for now, leaving 1.2639 vulnerable to another test.

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

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

Technical: 1-3 Day View – Over 110.50 opens the first test of 111 symmetry swing resistance a daily closing breach of 111.80 level would reset focus on upside objectives principally 113.78.

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: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – Bullish consolidation targets 129.44 as the medium term upside objective, near term upside objective of 126.84 equidistant swing objective, only below 122 concerns near term bullish bias, opening a move to test 121.36.

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: Bearish
Trading Take-away: Long