New York Forex Report: Markets Rotate In Range Ahead of FOMC

New York Forex Report: Markets Rotate In Range Ahead of FOMC

New York Forex Report: The main focus of attention in the European session was the IFO survey with Business climate printing a robust 116 versus 114.9 expected, Current conditions 125.4 versus 123.8 and Expectations at 107.3 versus 106.5.This follows yesterday’s ‘flash’ PMI data for July, with German manufacturing and services PMI’s slipping to their lowest level since April and February respectively.Today’s CBI industrial trends survey for July provided an update on the UK manufacturing sector. The July reading disappointed with orders printing 10 versus 11 expected and 16 previous. This ahead of tomorrow’s Q2 UK GDP update.. With the AUDUSD racing to new highs out of the last years range, Q2 CPI data will be interesting overnight. The consensus forecast is for the annual headline rate to rise modestly to 2.2% from 2.1% in Q1. However, the ‘trimmed’ and ‘weighted’ means that the RBA watch more closely, are expected to remain below the bottom end of the RBA’s target band. Also worth noting is today’s potential vote on healthcare in the US Congress. If President Trump’s position prevails it may provide some support to the USD, but is unlikely to turn this year’s underlying trend ahead of tomorrow’s FOMC decision.

USD fell against 60% of its G10 peers as on-going political concerns amid investigation into Trump’s presidential campaign continue to pressure. The Dollar Index however, managed to inch 0.13% higher to 93.97 as major components EUR, CHF retreated. Manufacturing growth in the US quickened in July while the service sector steadied, according to Markit’s surveys. The PMI manufacturing climbed to 53.2 in Jul early print, up from 52.0 and beating the 52.2 estimated rise. The PMI services stood unchanged at 54.2. The housing sector still trends to a soft patch as existing home sales in June sliding 1.8% MoM after growing 1.1% in May

EUR In the Eurozone, Markit’s survey estimated that the manufacturing sector grew at a softer pace in July, while pace of growth in the services sector steadied. The PMI manufacturing slipped to 56.8 in July estimates, slowest in three months and down from 57.4. The PMI services was unchanged at 55.4 in July, staying at six month low. Though both PMIs remain at healthy levels, this could be a sign that growth may have peaked and is now moderating.

GBP The IMF pared its growth forecast for the UK economy after the soft Q1 outcome but markets have not paid too much attention to the report, participants preferring instead to wait for this week’s Q2 GDP report (+0.3% expected, after +0.2% in Q1). The UK Trade Secretary is visiting the US to lay the groundwork for a post-Brexit trade deal (nor formal talks can take place until Brexit is complete)

JPY The BOJ released its minutes of June meeting early this morning and revealed that policy makers mostly agreed that the target inflation of 2% is crucial for Japan’s economy. During the meeting, board members discussed about the “recent growing interest” from the markets about BOJ exiting its current policy stance. Some policy makers believed that it is important for the central bank to “thoroughly explain and gain better understanding” of BOJ’s thinking on policies. On this, a few board members opined that there is “a long way to go” before the target inflation is met, and thus “communicating uncertain information at too early a stage could cause confusion in the market”. Japan’s economic growth is expected to grow at a slightly slower pace going forward, according to the final print of May’s leading index; it eased from 104.7 in Apr to 104.6 in May, suggesting that a collection of indicators that include new job offers, new machinery orders, new housing construction, consumer confidence and manufacturing investment sentiment (among others) have turned softer.

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

Technical: 1-3 Day View – As 1.1580 acts as support bulls target 1.1713 only a daily close below 1.1480 concerns the near term bullish bias setting a top for a test of 1.1370

1-3 Week View – While 1.0830 supports 114.30 becomes the primary upside objective. The weekly close over 1.1450 sets upside focus on 1.1876. Weekly close below 1.08 neutralises bullish objectives.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – As 1.3060 now acts as resistance 1.2810 becomes the downside objective over 1.3070 resets focus on pivotal 1.3238, a daily closing breach of 1.2810 concerns the medium term bullish bias.

1-3 Week View – The weekly close above 1.3045 targets the broader symmetry swing objective sited at 1.3238 only a close back below 1.28 would jeopardise the bullish advance
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – Pull back extends and threatens reversal with the breach of 112.10 delaying the bullish target at 115.50 and opening a move back towards 109, 111.66 is the immediate upside hurdle.

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

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

Technical: 1-3 Day View – 128 provides platform for a move through 130.70/80 en-route to 133.36, below 129.40/20 resets 130/128 range trade

1-3 Week View – The weekly close above 118.50 arrested the immediate downside risk, 129.44 upside objective achieves as 128 supports bulls look for a move to test 133.36 as the broader upside objective.
Retail Sentiment: Bearish
Trading Take-away: Long