New York Forex Report: Markets Eye Weekend Respite
New York Forex Report: With a relatively empty calendar today and after a tumultuous week, the markets may calm down a little into the weekend. Despite US equities staging a recovery rally, which supported the USD and US yields, we are not out of the woods yet. Further evidence that this week’s moves are just corrective and over is still needed, so, for now, risks remain greater to the downside. US President Trump heads to the Middle East, but this does not mean the controversy will go away, despite seemingly early wins in regards to substantial arms contracts the US has won from Saudi Arabia. More importantly for the US, in the short-term, will be whether this week’s news around the President will affect the Fed’s decision making process. The market has reduced its conviction of a June hike and will be listening closely to the Fed speakers, starting with Bullard and Williams today.
USD The number of first time unemployment benefits applications in the US unexpectedly dropped 4k to 232k last week. Data from the Labor Department reflected a healthy job market, strengthening the case for the US central bank to tighten its interest rates for a second time this year. Ahead of FOMC meeting next month, growth in the manufacturing sector has remained broadly resilient. Philadelphia Fed business outlook index, a gauge of factories activities in the mid-Atlantic region, surged from 22.0 in April to 38.8 in May
EUR The strong economic growth rates currently being seen across Europe is apparently seeing markets re-rate their views on the EUR. Eurozone Q1 GDP released in May showed welcome geographic broadening of growth with the long-underperforming peripheral countries starting to see activity pickup. Some analysts say we should expect the EUR to outperform by re-assessing whether it needs to stay so under-valued, preparing for a change in ECB rhetoric at the June 8th meeting and use it as a safe haven to hedge Trump political risk.
GBP UK retail sales beat all market expectations on the upside and sent GBP rallying in early European trade. The closely watched year-on-year figure rose to 4%, against expectations of 2.1%, while last month’s figure was revised up to 2.0% from 1.7%. On a MoM basis, sales rose by 2.3%, versus 1.1% expected, while March’s monthly figures were upgraded to -1.4% from a prior -1.8%.While today’s figures are set to help improve UK Q2 GDP, analysts point to warm weather and a late Easter as possible drivers behind the rise.
JPY lacklustre response against its major counterparts after preliminary first quarter GDP figures crossed the wires. Japan’s economy grew 2.2 % compared to the same period the year before versus 1.7 % expected. Relative to the prior quarter, the nation’s output gained 0.5% as expected. The lack of market reaction was due to the data’s implication for BOJ policy.
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Neutral
Technical: 1-3 Day View – Offers above Interim symmetry swing resistance at 1.1130 stall advance near term as 1.1040 supports bulls target stops above 1.12 en-route to a test of broader symmetry swing objective at 114.30. Only below 1.0830 concerns near term bullish bias.
1-3 Week View – While 1.0830 supports 114.30 becomes the primary upside objective. A weekly close over 1.14 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): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: 1-3 Day View – Psychological 1.30 magnetachieved as 1.2880 supports interim symmetry swing objectives at 1.3060 & 1.3118 are targeted next, 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
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
Technical: 1-3 Day View – 115 becomes the next upside objective only back below 110.80 would concern the near term bullish bias, near term 112 is the upside hurdle that must be removed to rejuvenate bullish spirits.
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 – Close over 124.40 opens 129.44, near term support is sited at 123.30, only below 121.30 concerns near term bullish bias. Intraday bulls need to recapture 124.60 to infuse further upside momentum near term
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: Neutral
Trading Take-away: Neutral