New York Forex Report: Markets Quite Ahead of FOMC

New York Forex Report: Markets Quite Ahead of FOMC

New York Forex Report: A quiet data week saw muted USD flows though USD gained over the week amidst the broadly risk-off tone with commodities under pressure. Recent data keeps the US rate-path mildly supported with the possibility of a rate hike still looming. Focus now shifts to this week’s FOMC meeting with traders keenly waiting clues in the Fed’s language as to the likely rate-path over the months ahead.

FX Majors: EUR German IFO survey data looking at business climate, current assessment and expectations saw better-than-expected readings across the board in Jul. Eurozone’s Markit manufacturing PMI slipped to 51.9 in July (June: 52.8) which pointed to softer pace of expansion as concerns over Brexit loomed. A separate gauge on the services sector also nudged lower (July: 52.7 vs June: 52.8) as business expectations fell to the lowest level in 19 months. While both indicators moderated in July, the euro zone economy still showed surprising resilience in the face of Brexit and another terrorist attack in France. GBP dropped as reports suggesting the UK’s manufacturing and services industries contracted in July heightened speculation the Bank of England will cut interest rates as soon as next month. Sterling weakened against all of its 16 major peers on the purchasing managers’ surveys, which were the first major economic data to give an insight into the fallout from the UK’s decision to leave the European Union. Markit Economics said its composite gauge covering both sectors dropped to a seven-year low, the lowest since April 2009, and signaled a contraction. JPY had its first two-week decline since May amid speculation that further monetary stimulus to boost Japan’s struggling economy is inevitable, whether or not it comes at this week central-bank meeting. Yet speculation is building that currency-depreciating stimulus is on its way, with the government said to be discussing about 3 trillion-JPY of supplementary spending for the current fiscal year.

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

Technical: Bears look to challenge of 1.09 post Brexit reaction lows. Intraday resistance is sited at 1.10, while this area caps expect further downside.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1.3260 represents symmetry resistance while this area caps expect a retest of 1.30 base. Over 1.3330 shifts attention back to 1.3550 symmetry swing objective.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Only a close below pivotal 105.50 threatens near term bullish bias. While this area survives on a closing basis expect another test of 107.50 offers. Below 105 opens 103.50 as the next downside objective.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: As 116.40 supports bulls target 119.30 as the next upside objective.Only below 115 threatens near term bullish bias
Retail Sentiment: Bearish
Trading Take-away: Long

Commodities FX: GOLD eased off by 0.57% to $1,322.10 an ounce on Friday after chances for the Fed to tighten rates increased further after a string of strong U.S data this week. Oil settled 1.25% lower to $44.19 a barrel on Friday, weighed by persistently high U.S. crude inventories and potentially higher Iraqi production in July. Also, Baker Hughes reported a fourth straight week of increase in the number of operating rigs in the U.S, higher by 14 this week to 371 rigs AUD The economic calendar is rather light Monday, Tuesday, which will leave the Australian Dollar trading off broader macro flow. Perhaps attitude towards the US Dollar will also play a part in the early week, though on Wednesday things heat up in a big way for the Australian Dollar which will first digest a very important inflation report and then take in the highly anticipated Fed decision. CAD pair lost its upside momentum and reversed sharply to 1.3050s after the release of better-than-expected retail sales data and slightly higher CPI, however, the pair had then managed to recover to trade back above 1.3100 handle. Canadian retail sales advanced in May for a second month, as rising prices continued to fuel sales at gas stations. Retail sales rose 0.2% in May, after a gain of 0.8% a month earlier, Statistics Canada reported Friday, even as car sales slumped 2% during the month. Excluding autos, sales were up 0.9% while gasoline stations recorded a 2.3% gain.

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

Technical: Attention shifts back to .7430 as we continue to rotate in a broader .7660/.7340 range, with .7330 representing symmetry swing support. Intraday resistance is sited at .7550
Retail Sentiment: Bullish
Trading Take-away: Short

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

Technical: 1.2850 pivotal for carving out a potentially bullish base, with higher lows targeting a push higher to 1.32. Below 1.28 opens move back to range lows 1.2650.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Testing symmetry swing support sited at 1305, while this area attracts buyers will set a potential platform to challenge and breach 1360 highs en-route to 1391. Below 1300 opens 1270 as next downside objective.
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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

Technical: 44.50 continues to act as pivotal support while this level survives 48.30 become the upside objective. Below 44 opens 41.87 as the downside objective.
Retail Sentiment: Bullish
Trading Take-away: Sidelines