New York Forex Report: Markets Getting Back Into Gear

New York Forex Report: Markets Getting Back Into Gear

New York Forex Report: Markets are slowly getting back up to speed after the long weekends in the UK and US. The USD is broadly mixed but ranges are relatively contained in the G10 space on the day so far. The JPY has caught a modest bid on safe haven demand, the GBP has improved as the domestic political backdrop steadies while stronger than expected building approvals data lifted the AUD of its early low. US data run picks up today (personal income and spending, PCE, house price data and the Dallas Fed manufacturing index) and the calendar remains fairly busy through Friday’s NFP release. Signs that the US economy has steadied and improved after the Q1 dip in growth momentum should help support the USD and keep the market targeting a June rate tightening from the Fed, in contrast with the still dovish-leaning ECB

USD San Francisco president John Williams said that unwinding the balance sheet may start as soon as later this year and will probably be “much smaller” than it is today in five year. Earlier comments from other officials and FOMC meeting minutes indicate that the central bank is looking into shrinking its balance sheet size on top of raising rates this year amid sustained economic recovery. The central bank is considering to reduce the size of its $4.5 trillion balance sheet and hopefully prevent a repeat of 2013 “taper tantrum” by preempting the market way ahead of the actual implementation. There was no data from the US amid Memorial Day holiday.

EUR ECB’s Draghi said Euro area economic outlook is improving and downside risks are moderating. However, underlying inflation pressures have remained subdued. He remains firmly convinced that an extraordinary amount of monetary policy support, including through our forward guidance, is still necessary. He added that the central bank will be able to formulate its judgement on the distribution of risks around the most likely outlook for growth and inflation in its next meeting in June.

GBP An U.K Times/Survation poll showed a narrowed support for U.K Conservatives at 43% vs 37% for Labour ahead of the elections next week. The lead was more than 9% a week ago. U.K PM May said there will be no delay in Brexit negotiations and talks will start on 19 June, 11 days after the elections. She added ‘we are prepared to leave EU without a deal’.

JPY Japan’s unemployment rate stayed pat at 2.80% last month, the lowest since 1994. Despite tighter labour market, inflation is still way below the central bank’s target as household spending remained sluggish. Spending dropped 1.40% YoY in April according to statistics bureau after a drop of 1.30% YoY in March. On the other hand, retail sales figure provided some reprieve and advanced 1.40% MOM in April, its sixth straight back to back increase (March: +0.20% MoM)

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

Technical: 1-3 Day View – Breach of 1.1160 support opens the potential for a pullback to test 1.1025 pivot, over 1.12 refocuses bulls on equidistant swing objective of 1.1291 en-route to a test of broader symmetry swing objective at 114.30. Only below 1.10 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

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

Technical: 1-3 Day View – Symmetry swing objectives at 1.3060 & 1.3118 are targeted a close below 1.2750 concerns near term bullish bias and opens a move back to test the 1.26 pivot, the near term upside hurdle is sited at 1.2880

1-3 Week View – The weekly closing breach of 1.2880 opens 1.30 as the next upside objective ahead of the broader symmetry swing objective sited at 1.3238.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Week View – The weekly closing breach of 1.2880 opens 1.30 as the next upside objective ahead of the broader symmetry swing objective sited at 1.3238.

1-3 Day View – 115 becomes the next upside objective only back below 110.20 would concern the near term bullish bias, near term 112.30 is the next upside hurdle.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 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

1-3 Day View – Close over 124.40 opens 129.44, near term support is sited at 122.50, near term upside objective of 126.84 equidistant swing objective, only below 121.30 concerns near term bullish bias.
Retail Sentiment: Bearish
Trading Take-away: Long

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